Recommendation 4

The Department’s approach to working with contractors as part of the Programme could leave the taxpayer vulnerable to contractual disputes, higher costs and delays. Integrating digital systems is a common source of contractual failure and dispute. Contractors can use difficulties in the roll-out of a new system as justification for not providing the services expected, or performing to the standards agreed as part of the contract. The National Audit Office identified three sources of this integration that the Department will need to successfully manage. The Department asserts that it has included sufficient flexibility in its contacts with providers to allow it to change them to include the scaling of the service, testing, and integration of systems that it needs. However, the Department is using standard service contracts and each change will need to be negotiated separately, which can be time consuming and introduces the risk of both cost increases and delay. We are also concerned that, without an alternative viable option, the contractors involved in testing the new service could have an advantage when it comes to letting contracts for the new health assessment service in 2029. The Department intends to keep the option of bringing the service in-house service when it decides in 2027 how to deliver the new transformed service from 2029. This will also improve its ability to negotiate with contractors. However, designing, introducing and implementing an in-house service would be time consuming and the Department would need to do a lot of preparatory work to maintain this as a realistic option. Social Security Scotland directly employs its health care professionals for functional health assessments rather than using contractors. The Department has committed to working with Social Security Scotland to understand how this works in practice and what it could learn for the new service. Recommendation 3a: The Department should set out, as part of its Treasury Minute respo