The Child Support Agency (CSA) IT system has been branded one of the "worst public administration scandals in modern times" after it was revealed the cost will now rise to £1.1bn.
A National Audit Office (NAO) report this week has found that the CSA spends 70 pence for every £1 it collects and has a backlog of 300,000 cases, with each case taking an average of nine months to process instead of the six-week target.
At the heart of the problems is the CS2 IT system developed by EDS, which has cost £539m to roll out to date. That is expected to rise to £768m by 2010 plus a £321m rescue plan announced recently, which takes the total cost to £1.1bn.
EDS has received £152m in payment for the IT system to date and that is expected to rise to a total of £381m — £46m less than the original contract value when the deal was signed in 2000.
An estimated 36,000 new cases have become "stuck" in the system due to IT failures and are currently unable to progress without manual intervention by the CSA staff.
Around 19,000 of these are now being progressed clerically, outside CS2, where the customer has made an official complaint to the CSA, and the NAO said this number is likely to increase until new software is released that enables the stuck cases to progress through the system.
Despite the "substantial" amount of work undertaken to resolve defects in CS2 since it went live in 2003, the NAO found that some 600 manual workarounds still exist and a large number of cases are experiencing technical problems.
The NAO report also found that although all the software fixes in the last year have been delivered successfully and on time, there are still 500 faults with CS2 that have to be dealt with, three years after the system went live.
The CSA said the IT system won't be running at the originally expected level until the end of next year.
Sir John Bourn, the head of the NAO, said in a statement: "These problems will have caused genuine hardship and distress to many parents and their children. From design to delivery and operation, the programme to reform the Agency has been beset with problems which the Department for Work and Pensions, the Agency and its IT supplier EDS have struggled to deal with."
Edward Leigh, chairman of the Public Accounts Committee, branded the fiasco one of the "worst public administration scandals in modern times" and said the facts "beggar belief".
He said in a statement: "Ignoring ample warnings, the DWP, the CSA and IT contractor EDS introduced a large, complex IT system at the same time as restructuring the Agency. The new system was brought in and, as night follows day, stumbled and now has enormous operational difficulties."