UPDATED: Norway’s huge state welfare agency NAV, which administers everything from sick leave to pension and unemployment benefits, has moved from crisis to crisis since it was formed nearly a decade ago. Now another one looms, over the costs and delays tied to modernization of data systems rooted in the former agencies that were merged to create NAV in 2006.
Newspaper Dagens Næringsliv (DN) reported Monday that a new analysis ordered by NAV boss Joakim Lystad himself contends that NAV’s much-troubled and loss-generating modernization project is still full of flaws. Consulting company A2 concluded, according to DN, that “deficiencies and weaknesses” in the project mean that NAV risks more “unexpected costs and delays.”
A2’s critical conclusions of NAV’s modernization come just as the Norwegian Parliament’s investigative and disciplinary committee was meeting on Monday, to further question both NAV officials and their highly paid consultants. Lystad is being pressed to guarantee that NAV’s modernization is finally under control. On Monday he admitted that modernization costs are running NOK 1.5 billion more than originally budgeted in 2011.
Lystad, who recently assured Members of Parliament that NAV’s modernization was indeed on track, nonetheless disagrees with A2’s critical conclusions. He told DN that he and NAV’s own project management group believe A2’s analysis is based on the “wrong premises,” and that NAV will be able to handle the risk of any further delays or expenses.
A2’s report of its analysis has been branded confidential and removed from the public purview, although DN obtained access to it. It wasn’t even included in documents sent to the parliamentary committee that’s been probing problems at NAV. That has upset committee members including MP Gunvor Eldegard of the Labour Party. The massive welfare reform that created NAV took effect just as the former Labour-led coalition government was assuming power nine years ago, and problems arose early as NAV attempted to handle all the welfare claims that previously were administered by several separate agencies.
The biggest problems, involving integration and modernization of NAV’s information technology systems, led to massive budget overruns. The modernization launched in 2012 was supposed to cost NOK 3.3 billion and be finished in 2018. It failed, was shelved by the end of 2013 and DN reported in December that its initial cost overruns of NOK 340 million were likely to mount to more than NOK 1 billion. Lystad has now confirmed a budget overrun of NOK 1.5 billion, putting the current cost of the project at NOK 4.8 billion. State auditors have also harshly criticized NAV’s modernization project, for its high costs and lack of results so far.
Politicians frustrated, consultants also questioned
That’s why the parliamentary committee is trying to monitor the project, and is frustrated in its efforts. “It almost disrespectful that (the new A2 report) hasn’t been sent to us,” Eldegard told DN. Lystad stressed that NAV disagreed with its conclusions and that it’s not necessary to pursue them. He maintains that NAV’s new modernization plans are on track and that new data systems are being delivered.
NAV has earlier been harshly criticized for its widespread use of consulting firms, not least for the billions it has paid to international firms like McKinsey and Accenture over the years. Accenture officials were also called in on Monday to clarify their role in the ill-fated modernization. DN reported just before Christmas that Accenture alone has billed NAV for NOK 3 billion over the past eight years, and that Lystad had been warned not to get so closely tied to the consulting firm. NAV has been a major client for consulting firms since 2006, with McKinsey also called in for questioning. DN reported that all told, NAV has paid out nearly NOK 6 billion (USD 1 billion given exchange rates at the time) to its six most frequently used consulting firms.