ONE of the region's biggest employers is requiring a £28 million bail out following the collapse of a planned IT upgrade.

And calls are being made for an inquiry into how more than £6 million of public cash was allowed to be wasted.

The Scottish Public Pensions Agency in Tweedbank employs more than 300 workers and is responsible for over £2.25 billion of pension payments every year.

Since relocating from Edinburgh 16 years ago, the Scottish Government agency has been widely recognised for the contribution it makes to the local economy.

But a major contract to develop an integrated administration and payment IT system, awarded in 2015 and worth a reported £5.6 million, was cancelled earlier this year.

And, following the publication of a report by the Auditor General last week, it has emerged that the SPPA will need an additional £9.8 million of public cash to plug revenue gaps for the next four years.

Holyrood will also need to provide an additional £18.4 million of capital cash to deliver a replacement IT system.

A spokesman for the Auditor General said:"The closure of the project means that SPPA has not been able to progress its strategic, business and workforce plans as originally intended.

"This includes its Target Operating Model to deliver future services more efficiently.

"The delay in implementing the Target Operating Model means that planned annual efficiency savings are not achievable.

"As a result, SPPA has forecast significant budget gaps and estimates that it requires additional revenue budget of £9.8 million between 2019/20 and 2022/23.

"SPPA also estimates it needs a total capital allocation of £18.4 million from the Scottish Government over the next five years to deliver a replacement project."

The Tweedbank agency awarded the £5.6 million upgrade contract to Capita Employee Solutions more than three years ago.

Costs increased to over £6 million to pay for additional staff, hardware and contract extensions.

The aim of the project, which was due to go live in March 2017, was to replace existing IT systems and improve both business efficiency and the service for members.

It was also expected to make long-term financial savings.

But delivery of the upgrade was soon running late - and emergency meetings were held at board level of the SPPA in February.

The Capita contract was cancelled in the same month.

The Auditor General spokesman added: "Discussions are currently under way between Capita and the SPPA over legal responsibility for the failed contract and any potential financial penalty."

The Pensions Agency has maintained throughout that the upgrade was to safeguard services and they were acting in the best interests of its members and pensioners.

But whistleblowers at Tweedbank are calling for a public enquiry.

A source said: "The Agency has wasted millions of pounds over the past four years on a project to bring in a new pension system from Capita when there is nothing wrong with the present system.

"For four years people were promoted within a project team, consultants employed and new staff employed to backfill posts.

"The Agency and Scottish Government should be held accountable and exposed for this public waste of money."

The Auditor General intends to publish a more detailed report on the conclusion of any legal case being settled by the SPPA and Capita.