By Tony Collins
The Financial Times reported this week that UK companies are nervous over a deadline next year for the introduction of a new customs system three months before Brexit.
HMRC’s existing customs system CHIEF (Customs Handling of Import Export Freight) copes well with about 100 million transactions a year. It’s expected a £157m replacement system using software from IBM and European Dynamics will have to handle about 255 million transactions and with many more complexities and interdependencies than the existing system.
If the new system fails post-Brexit and CHIEF cannot be adapted to cope, it could be disastrous for companies that import and export freight. A post-Brexit failure could also have a serious impact on the UK economy and the collection of billions of pounds in VAT, according to the National Audit Office.
The FT quoted me on Monday as calling for an independent review of the new customs system by an outside body.
I told the FT of my concern that officials will, at times, tell ministers what they want to hear. Only a fully independent review of the new customs system (as opposed to a comfortable internal review conducted by the Infrastructure and Projects Authority) would stand a chance of revealing whether the new customs system was likely to work on time and whether smaller and medium-sized companies handling freight had been adequately consulted and would be able to integrate the new system into their own technology.
The National Audit Office reported last year that HMRC has a well-established forum for engaging with some stakeholders but has
“significant gaps in its knowledge of important groups. In particular it needs to know more about the number and needs of the smaller and less established traders who might be affected by the customs changes for the first time”.
The National Audit Office said that the new system will need to cope with 180,000 new traders who will use the system for the first time after Brexit, in addition to the 141,000 traders who currently make customs declarations for trade outside the EU.
The introduction in 1994 of CHIEF was labelled a disaster at the time by some traders, in part because it was designed and developed without their close involvement. CHIEF was eventually accepted and is now much liked – though it’s 24 years old.
Involve end-users – or risk failure
Lack of involvement of prospective end-users is a common factor in government IT disasters. It happened on the Universal Credit IT programme, which turned out to be a failure in its early years, and on the £10bn National Programme for IT which was dismantled in 2010. Billions of pounds were wasted.
The FT quoted me as saying that the chances of the new customs system CDS [Customs Declaration Service) doing all the things that traders need it to do from day one are almost nil.
The FT quotes one trader as saying,
“HMRC is introducing a massive new programme at what is already a critical time. It would be a complex undertaking at the best of times but proceeding with it at this very moment feels like a high stakes gamble.”
HMRC has been preparing to replace CHIEF with CDS since 2013. Its civil servants say that the use of the SAFe agile methodology when combined with the skills and capabilities of its staff mean that programme risks and issues will be effectively managed.
But, like other government departments, HMRC does not publish its reports on the state of major IT-related projects and programmes. One risk, then, is that ministers may not know the full truth until a disaster is imminent.
In the meantime ministerial confidence is likely to remain high.
Learning from past mistakes?
HMRC has a mixed record on learning from past failures of big government IT-based projects. Taking some of the lessons from “Crash”, these are the best things about the new customs project:
- It’s designed to be simple to use – a rarity for a government IT system. Last year HMRC reduced the number of system features it plans to implement from 968 to 519. It considered that there were many duplicated and redundant features listed in its programme backlog.
- The SAFe agile methodology HMRC is using is supposed to help organisations implement large-scale, business-critical systems in the shortest possible time.
- HMRC is directly managing the technical development and is carrying out this work using its own resources, independent contractors and the resources of its government technology company, RCDTS. Last year it had about 200 people working on the IT programme.
These are the potentially bad things:
- It’s not HMRC’s fault but it doesn’t know how much work is going to be involved because talks over the post-Brexit customs regime are ongoing.
- It’s accepted in IT project management that a big bang go-live is not a good idea. The new Customs Declaration Service is due to go live in January 2019, three months before Britain is due to leave the EU. CHIEF system was commissioned from BT in 1989 and its scheduled go-live was delayed by two years. Could CDS be delayed by two years as well? In pre-live trials CHIEF rejected hundreds of test customs declarations for no obvious reason.
- The new service will use, at its core, commercially available software (from IBM) to manage customs declarations and software (from European Dynamics) to calculate tariffs. The use of software packages is a good idea – but not if they need large-scale modification. Tampering with proven packages is a much riskier strategy than developing software from scratch. The new system will need to integrate with other HMRC systems and a range of third-party systems. It will need to provide information to 85 systems across 26 other government bodies.
- If a software package works well in another country it almost certainly won’t work when deployed by the UK government. Core software in the new system uses a customs declaration management component that works well in the Netherlands but is not integrated with other systems, as it would be required to do in HMRC, and handles only 14 million declarations each year.
- The IBM component has been tested in laboratory conditions to cope with 180 million declarations, but the UK may need to process 255 million declarations each year.
- Testing software in laboratory conditions will give you little idea of whether it will work in the field. This was one of the costly lessons from the NHS IT programme NPfIT.
- The National Audit Office said in a report last year that HMRC’s contingency plans were under-developed and that there were “significant gaps in staff resources”.
HMRC has an impressive new CIO Jackie Wright but whether she will have the freedom to work within Whitehall’s restrictive practices is uncertain. It seems that the more talented the CIO the more they’re made to feel like outsiders by senior civil servants who haven’t worked in the private sector. It’s a pity that some of the best CIOs don’t usually last long in Whitehall.
Meanwhile HMRC’s top civil servants and IT specialists seem to be confident that CDS, the new customs system, will work on time. Their confidence is not reassuring. Ministers and civil servants publicly and repeatedly expressed confidence that Universal Credit would be fully rolled by the end of 2017. Now it’s running five years late. The NHS IT programme NPfIT was to have been rolled out by 2015. By 2010 it was dismantled as hopeless.
With some important exceptions, Whitehall’s track record on IT-related projects is poor – and that’s when what is needed is known. Brexit is still being negotiated. How can anyone build a new bridge when you’re not sure how long it’ll need to be and what the many and varied external stresses will be?
If the new or existing systems cannot cope with customs declarations after Brexit it may not be the fault of HMRC. But that’ll be little comfort for the hundreds of thousands of traders whose businesses rely, in part, on a speedy and efficient customs service.