2.29 It is fundamental to the philosophy of the partnership that there should be close, co-operative working between the Department and EDS at most stages in the commissioning, development and implementation of new work. It is also important that there should be a clear distinction of roles at critical phases in the appraisal process to ensure independent and objective scrutiny by the Department of the solutions proposed by EDS.
2.30 The Information Technology Technical Consultancy and, more recently, the operational research specialists have co-located with their EDS counterparts. An increase in joint working was a planned aspect of the partnership and demonstrates that it is developing at an operational as well as a strategic level. There is a risk, however, that joint working could blur roles and responsibilities and reduce the ability of these important Inland Revenue units to evaluate EDS proposals objectively.
2.31 Our interviews, and reviews of documents relating to evaluations, indicated that this risk had not crystallised, evidenced by the fact that EDS solutions are regularly questioned, resulting in amendments to the business design and consequential technical solutions and reductions in cost. For example:
■ A reconsideration of EDS estimates for the infrastructure 2000 project resulted in business design changes leading to a reduction of over £17 million over two years in the EDS estimate. The agreed baseline cost for the project was over 11 per cent lower than the original EDS estimate.
■ The Department secured reductions of almost £2 million in the estimated cost of the integrated debt management system by probing staffing estimates and the cost of software and hardware requirements.
■ Within the package of services to be provided by EDS in support of processing centre business continuity, it was originally intended that the Department would be required to pay additional charges in the event of an invocation of the disaster recovery facility. Negotiations by the Contract Management Team secured an agreement that EDS would obtain insurance cover for the first £3.5 million of costs for any invocation.
2.32 Although we found that the Department does challenge EDS on proposed solutions, there are longer-term risks associated with the partnership approach which need to be managed carefully. In particular:
■ closer working could, in the longer term, lead to the loss of objectivity and independence of Inland Revenue staff, particularly as former Information Technology Office staff in the Inland Revenue are replaced with people with less experience of information systems and information technology in the Department;
■ it may also make it difficult for the Department to extract itself from the partnership in the event of contract termination or of a future contract being awarded to a different supplier. This is because areas of expertise essential to the Department's ability to evaluate the work of any contractor may no longer be held by Inland Revenue staff but may have passed to EDS.
Part 3 of the report examines how the Department maintains and develops the skills needed to maintain an independent perspective.