MoD writes off £118m on ditched IT system

The Ministry of Defence (MoD) has overhauled project management procedures after writing off £118m on a ditched IT system.

The Defence Logistics Organisation (DLO) – the MoD's internal buying arm – canned a single common inventory project called Defence Stores Management Solution (DSMS), which would have enabled more accurate tailoring of stock holdings, after executives found the benefits did not outweigh the costs.

The department estimates £130.5m was incurred on DSMS, although £12.2m of hardware was retained for future use, leaving £118.5m written off without the system ever seeing the light of day.

DSMS was approved in June 2000 with an initial budget of £133.6m and the through-life 10-year cost estimate was £605m, with a target go-live date of October 2002. But the deadline slipped and the scope was reduced as department executives became increasingly concerned about the cost and priority of the system, until it was eventually suspended in November last year.

At the time, the MoD said the project's future was in the balance, but the National Audit Office's review of the department's resource accounts reveals that the project has been officially canned and that procedures have been overhauled as a result. IBM Global Services had been leading a consortium of systems integrators, including KPMG and EDS, to implement DSMS, using the Indus PassPort off-the-shelf software package.

The NAO report said: "The change initiatives affecting the DLO were highly challenging and potentially clashing. But at Departmental level there was no framework within which the impact of major change initiatives could be tested for deliverability and managed once launched."

A post project evaluation review identified poor financial governance, weak benefits management, poor communications, poor risk management and weaknesses in the scrutiny and approvals process.

But the NAO report acknowledges that the MoD has put in place new initiatives to address those weaknesses, including a department-wide 'Defence Change Programme' to cover the delivery and management of all major projects, and a greater focus on accountability and benefits management.