Transparency data

6 September 2022: HM Passport Office (HMPO) Transformation Programme accounting officer assessment

Updated 2 April 2024

The most recent version of the Full Business Case was approved by the Home Office Finance and Investment Committee (FIC) on 8 October 2021. The next update to that committee is due in November 2022.

Background and Context

It is normal practice for accounting officers to scrutinize significant policy proposals or plans to start or vary major projects, and then assess whether they measure up to the standards set out in Managing Public Money. From April 2017, the government has committed to make a summary of the key points from these assessments available to Parliament when an accounting officer has agreed an assessment of projects within the Government’s Major Projects Portfolio.

HMPO’s Transformation Programme was not regarded as a GMPP programme at its outset in 2016. The original budget of £107m (£170m inclusive of optimism bias) was only marginally above the GMPP threshold of £100m and the activities of the programme were not regarded as novel or contentious. The original Programme Business Case was therefore internally approved by the Home Office Finance and Investment Committee (FIC).

The scope of the programme has increased significantly for several reasons, causing delay and an increase in costs. The programme therefore retrospectively became a GMPP programme in April 2021. This Accounting Officer Assessment is therefore the first published formal assessment of the programme’s regularity, propriety, value for money and feasibility.

The programme has been subject to full independent Infrastructure and Programmes Authority (IPA) style gateway reviews and has updated FIC on progress at least annually since 2016, with the last full refresh of the business case completed in October 2021.

The HMPO Transformation programme has sought to transform the passport service by:

• Making the application process ‘digital by default’ by developing a new, GDS compliant, online application process that improved the customer experience, reduced failure demand and reduced paper handling costs;
• Making the case working ‘back office’ paperless through digital submission of supporting documents where possible, and the digitisation of physical documents at the boundary where digital submission is not possible;
• Introducing greater levels of automation into passport application processing, including the full end to end automation of application processing on more straightforward applications (in particular passport renewal applications)
• Replacing legacy IT systems with modern, GDS compliant, systems developed and managed in house, reducing our reliance on large IT systems integrator suppliers; and
• Enhancing the employee experience, through removal of repetitive low value tasks as a consequence of digitisation and automation and through in-house development allowing systems to be adapted more quickly in response to changes in staff and customer needs

These would allow HMPO to reduce the day to day running costs of the Passport service to meet the objective of successive Spending Reviews to enable HMPO to generate a net operating surplus sufficient to fund the costs of processing British Citizens at the border (under powers included in the Immigration Act 2016).

HMPO has made good progress in delivering the Transformation Programme. The new award-winning digital channels have been fully live since April 2019 with more than 80% of customers choosing to use these channels over paper-based routes. The new Digital Application Processing system (DAP) is currently processing around 70% of passport applications, with a significant proportion of the assessment of adult renewal applications now fully automated and automation used more extensively than in the legacy system for the remaining applications.

The programme is a ‘whole organisation transformation’ impacting on almost everything HMPO does. The disruption the global pandemic has caused to the normal flow of passport demand makes it very difficult to assess the full and true value delivered by the programme to date. However, by the end of financial year 2019/20, HMPO estimates that the cost of processing the volume of passport applications received that year would have been around £30m more without Transformation than it actually cost, based on the 2015/16 cost base that existed at the start of the programme.

As the benefits are driven by per unit cost reductions in staff and outsourced supplier costs, direct cashable benefits of the programme fell in 2020 and 2021 in line with passport demand.

The limited physical capacity of offices under social distancing rules meant there were very considerable non-cashable benefits associated with the programme through 2020 and 2021 that will persist into the future. The new desktop environment and the new DAP system both supported remote working, allowing HMPO to overcome physical office capacity constraints in a way that legacy systems could not. HMPO could therefore continue processing passport applications during the pandemic, many of which went on to be used as proof of identity to access Government pandemic financial support schemes and to allow volunteers to support the NHS.

Now that passport demand has recovered, we expect that the cashable benefits will also increase back up to £30m per annum or more.

The programme is now entering its final phase. The work left to complete includes:

• Developing additional features and capabilities in DAP to allow it to process 100% of applications, allowing HMPO to retire the legacy AMS system;
• Deploying and integrating into DAP the ‘Scanning Validation and Storage’ capability, which will enable almost entirely paperless back office processes. This is expected to be completed by the end of 2022;
• Migrating the store of all passport application decisions (data that is queried by a number of public sector agencies, for example to allow passport photos to be reused in driving licences) from the legacy DXC supported solution to a new Home Office supported solution;
• Complete development of our new business intelligence solution; and
• Safely decommission the DXC legacy services.

It is essential that HMPO completes this work. The legacy services contract is currently due to expire in March 2024. That contract maintains business critical systems that need to be fully replaced in order to protect the business continuity of the passport service.

It is anticipated that completing this programme will yield further cashable savings for the Home Office.

Assessment against the Accounting Officer Standards

Regularity

Passports are issued under the ‘Royal Prerogative,’ rather than under primary legislation. The Transformation programme makes changes to the way customers submit their applications and supporting documents, and to the way that HMPO processes that evidence. But it does not change the eligibility or entitlement criteria relating to passports.

The HMPO Transformation programme, therefore, does not require new or amended legislation to progress. I therefore consider it to conform to the Regularity Accounting Officer standard.

Propriety

HMPO Transformation is funded out of a wider allocation of capital and resource change budgets in the Migration and Borders Mission. The Mission continues to manage spending across that portfolio to maximise outcomes while remaining within Spending Review 2021 (SR21) spending limits and conforming with controls set out in Managing Public Money and the HMT Green Book.

Appropriate governance is in place to ensure that spend is monitored and well managed, risks to delivery are identified and mitigated as appropriate and that spend is in line with HMPO’s and the wider department’s objectives.

All contracts awarded to support the delivery of the programme have been let through open and fair means, with the support of the Home Office Commercial team.

The programme is inherently relatively low risk, as it is already well advanced in meeting its objectives, is relatively self-contained, does not seek to amend government policy and has minimal impact on the activities of wider government.

The proposal’s intent, at this stage, is uncontentious. The primary purpose now is to finish the replacement of legacy systems to protect the integrity of the passport service

I consider HMPO Transformation to align with the principles documented in Managing Public Money and to conform to the Propriety Accounting Officer standard. It will continue to be monitored by the Home Office and the National Audit Office.

Value for Money

The overall timeline of the HMPO programme has been extended, and costs have increased since the original business case in 2016. Sunk costs to the end of 2021/22 amount to £209m. However, the most recent programme business case in October 2021 still sets out a good NPV of £189m based on the expected costs to complete the remaining scope and benefits to be accrued over the next 10 years.

The current expected discounted cost of completing the programme scope (inclusive of Optimism Bias) is £88m (£47m CDEL, £41m OB on CDEL and £1m RDEL) in period 2022/23 to 2024/25.

Total incremental cashable benefits over the next 10 years (2022/23 to 2031/32) are expected to be £343m in real terms (£278m discounted at 3.5%). These benefits are derived from:

• Contract savings related to exiting the DXC contract, thus ending the dual running costs of maintaining new and legacy systems side by side;
• Contract savings relating to the fact that the new ‘Scanning Validation and Storage’ outsource contract has a lower per unit cost than the BPO contract it replaces;
• FTE reductions as a result of no longer requiring staff to physically process and distribute paper around the HMPO estate; and

FTE reductions as a result of a more efficient DAP system and the removal of the current dual handling costs of applications being part processed in DAP and completed in the legacy system.

When last updated the NPV over a 10 year period was £189m. These figures are all interim figures based on the position presented to FIC in May 2022 pending the full refresh of the business case in autumn 2022. It is possible that process will identify an increase in costs and potentially a small delay to benefits. However, it is anticipated that when the business case is fully refreshed this autumn, the programme will still return a healthy positive NPV. Furthermore, the programme activity is critical to maintaining the integrity of passport issuing systems; with passports being a primary identity document enabling access to work, housing, finance and travel. Success of the programme is therefore of huge wider value to UK PLC, which HMPO has not sought to quantify.

Taking account of the points above, overall, I consider the project to conform to the Value for Money Accounting Officer standard.

Feasibility

The most recent IPA Gate 0 Review of the Programme in July 2022 returned a delivery confidence rating of Red.  The main reason for this is that the review team did not have confidence that the plan they were presented with was deliverable. The programme had already recognised that the last formally approved plan was no longer achievable and is already well progressed in developing a revised plan; a well-developed draft of which forms the basis for the value for money assessment above.

The review team observed that good progress had been made against the programme objectives. However, the review highlighted risks around the fact that the new solutions were now supporting the processing of up to 80% of passport applications, which meant live service support often pulled resources away from developing new features. Given expected high levels of passport demand in 2023, this posed further risk to the delivery of the programme.

The review team found that the programme governance was appropriate but that certain aspects of it could be strengthened and that it could be better communicated to ensure that it is fully adhered to in all situations.

More positively, the review team had confidence that an agreed revised plan could be delivered in readiness for the next full refresh of the business case this autumn and recommended that a review of the plan by ‘agile delivery experts’ would improve confidence in this plan and might identify opportunities to reduce programme timelines.

The Senior Responsible Officer will develop an action plan to implement the review team’s recommendations; an update on progress against that plan will be provided to the Home Office Finance and Investment Committee alongside the updated business case this November.

More generally, while the programme is late, the remaining scope is well understood with increasing confidence in the cadence of delivery and the scale of the work required to deliver the remaining scope points.

Transforming the organisation while also supporting a live public service has caused challenges and delays. These risks are now better understood and an allowance for that is being built into the latest programme plan.

The programme is being delivered via agile delivery techniques, which allows HMPO to realise benefits as the programme progresses in a way that wouldn’t normally be possible under more ‘traditional’ waterfall delivery approaches.

The programme is governed via a monthly programme board, supported by a fortnightly risk and progress reporting process and programme scope is managed through the ‘transformation prioritisation group’.

The resources delivering new capabilities (and supporting the live services) have been secured under multiyear commercial arrangements, guaranteeing access to the skills and resources needed to implement the new plan. There are some interdependencies within the programme that are being closely managed, but the technology underpinning the remaining capability development is well established and proven and the delivery team has reached a level of maturity. The programme is therefore feasible from a commercial and technological perspective.

Subject to an action plan to address the issues raised by the IPA review and the completion of the ongoing replanning exercise being ratified by FIC in November, I am satisfied that the programme meets the feasibility test. This opinion is supported by the progress made by the programme to date, and the understanding the programme has of the remaining scope and the experience accrued in delivery in this context.

Conclusion

The HMPO Transformation Programme conforms to the four Accounting Officer standards of regularity, propriety, value for money and feasibility. There are challenges and risks to delivery, in particular with regards proximity of the end of the legacy support contract with DXC and the higher-than-normal passport volumes in 2022 and 2023. The project is working on mitigations against these, including working with commercial and GLD colleagues on options around the end of the DXC contract.  I therefore consider the programme, which improves the efficiency of the passport service, while protecting the integrity of it, to warrant approval to progress.

As the Accounting Officer for HMPO Transformation within the Home Office I have prepared this summary to set out the key points which informed my decision. If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them. This summary will be published on the government’s website (GOV.UK). Copies will be deposited in the Library of the House of Commons and sent to the Comptroller and Auditor General, Treasury Officer of Accounts and Chair of the Public Accounts Committee.

Tricia Hayes

Second Permanent Secretary for the Home Office

6 September 2022