The Commons Defence Committee has sharply criticised the Ministry of Defence's Joint Personnel Administration programme.
In its annual report on the performance of the ministry, it says there were fundamental problems in the design of the Joint Personnel Administration (JPA) and that it is "difficult to exaggerate the magnitude of the failure".
The JPA was developed by EDS and rolled out over 2006-07 to manage the payroll of the UK's armed forces. Its early days were beset by problems with reports of incorrect payments to service personnel.
The report attributes this partly to the MoD's pursual of its efficiency targets, which led it to reduce staff numbers and move quickly towards an emphasis on contact centres. This could reflect a conflict of priorities and raises questions about the management of the MoD's change programme.
While the payment problems have reportedly been solved, the Defence Committee highlights an insufficient emphasis on financial reporting and the requirements for management information. It says this is a "basic and fundamental error which is unacceptable on a project of this scale and importance".
The report notes that work has been done in this area, but that more is needed and that the committee will return to the issue next year.
Among the MPs' recommendations is that the MoD develops a system of monitoring its efficiency programme to enable it to better manage its impact on service personnel.
They also express concern that the ministry has lost significant amounts of personal data, including 121 memory sticks and 747 laptops since 2004. The report acknowledges that measures have been put in place to reduce further losses but says there is no room for complacency.
