2 Several factors contributed to cause the original problem of a shortfall in planned capacity to process passports, and to the unforeseen upsurge in demand. Together these supply and demand factors interacted to produce a crisis in public confidence in the Agency.
3 The initial cause was the introduction of a new computerised passport processing system in two of the Agency's six offices – Liverpool and Newport. The new system was intended to replace an ageing computer system and to introduce a more secure passport. Siemens Business Services is responsible for developing and providing the new computer system and for undertaking the initial processing of applications. Security Printing & Systems Ltd is responsible for printing and despatch of a new passport with a digital image of the passport holder. The Agency had planned to roll-out the new processing system to all its offices within a tight timetable before its busy season, but this was postponed following difficulties at the first two sites. Had that worked to plan, and had the new system delivered the planned level of output, the Agency might just have been able to cope with demand during 1999.
4 Important factors were:
■ A failure to assess and test adequately the time needed by staff to learn and work the new passport processing system, which involved some changes in clerical and administrative processes as well as computerisation.
■ Insufficient contingency planning in the event that implementation of the new passport processing system might not go according to plan. Extending the pilot from Liverpool to Newport before problems were fully overcome compounded the problem.
■ A failure to communicate effectively with the public, both at a personal level in dealing with calls from the public to its telephone enquiry bureaux, and more generally via the media.
5 The strategy adopted by the Agency in early 1999 to get through the busy season rested on its past experience that it would be able to increase output by increasing overtime, hiring casual staff and sorting out the processing problems with the two offices that had the new system. This strategy can now be seen to be based on a number of mistaken assumptions:
■ Demand grew higher than forecast exacerbated by higher volumes of child passports than the Agency expected.
■ It did not prove possible in the two offices for the Agency and Siemens to raise output to target levels.
■ The Agency did not plan to take significant steps to increase its capacity to answer promptly enquiries from the public, which it should have expected to rise as processing times lengthened.
The Agency did not appreciate at the start of the year the instability of their strategy. As backlogs grew, the Agency in March submitted a recovery plan to the Home Office for further measures, including recruitment of extra staff, which was agreed.
6 The Agency did not foresee the loss in public confidence, which led to a sharp increase in applications and enquiries about them, once the delays attracted publicity. In the second half of April demand started to rise very sharply. Although in May monthly output was 619,000 compared to a peak of 564,000inthe previous year, maximum processing times continued to lengthen. This prompted a cycle of even more enquiries from an increasingly concerned public that the Agency could not handle. Applications for travel later in the season surged as the public reasonably 'aimed off' for the expectation of having to wait longer for delivery, fuelling a rush of applications into June. Between April and June the number of applications exceeded forecasts by around 29 per cent.
7 In the face of mounting pressure the Home Office and the Agency concluded at the end of June that conventional measures to increase output would not act quickly enough to restore public confidence. As a result, in July the Home Office introduced emergency measures, including free two-year extensions to passports available at post offices, 100 extra staff at passport offices, and a call centre to deal with telephone queries. Steps were also taken to manage better the arrangements for members of the public queuing at passport offices. The Agency had been set a service level target of meeting 99.99 per cent of travel dates. Taking the period October 1998 to August 1999 as a whole, performance was at or around that level. However, that still meant almost 500 missed travel dates and a great deal of anxiety and inconvenience for many more customers waiting for delayed passports. The Home Office accepts that this target did not reflect a meaningful standard of quality of service for the public.
8 A longer term factor was that, during the 1990s, the focus of Home Office target setting was on cost reduction and efficiency, while maintaining reasonable standards of customer service. The Home Office considered that the Agency had performed well - improving both its services and its efficiency - and that it compared well with its counterparts in other countries (for example, in the price of a passport). However, both the Department and the Agency acknowledge that they had failed to appreciate, against a background of rising demand, that the Agency was operating close to its capacity. As a result, when output at the Liverpool and Newport offices fell short of expectations and demand rose unexpectedly the Agency found itself unable to respond quickly and effectively.
9 The Agency had experienced difficulties before, in 1989, when it computerised some of its clerical procedures. On that occasion, the Agency had implemented the new system in its Liverpool office, despite initial problems and lower productivity in its pilot office, Glasgow. There were severe backlogs of passport applications and deteriorating relations with staff that culminated in industrial action. A subsequent report by Coopers and Lybrand (Appendix 4) concluded that the Agency had been optimistic to press ahead with implementation before problems had been resolved; noted that there were inadequate contingency arrangements to deal with a surge in applications; emphasised that computer-based systems must not impede their users; and concluded that more might have been done to manage risks better within resource constraints. Whilst the Agency believed that it had identified the lessons from the earlier project - for example, the Agency involved its examiners in the design of the new examination process - its plans for implementation of the new system, a more complex project, did not take sufficient account of these lessons.
10 Many of the risks associated with implementation of the new passport processing system in 1998-99 had been identified by the Agency at the planning stage, including delay and lower productivity. But the risks and the response required had not all been realistically assessed, and when things began to go wrong the Agency's plans proved insufficient. Whilst the Agency took action to make up for lost production in Liverpool and Newport it was not able to make up for the increase in applications. The Agency was too reliant on using routine solutions, such as staff and managers working longer and longer hours, to cope. The Agency told us it was slow to bring in other measures early, such as recruiting new staff, because of concerns about the impact on unit costs and a failure to appreciate how rapidly the situation could deteriorate. The Agency was trying to do too much too quickly for the resources available to it, and it had not fully recognised the significance of the risks it was running and laid off for them.