The warning comes in a confidential and critical draft report due to be published in March by the government auditor, the National Audit Office. This document has been examined by the Independent on Sunday.
Siemens' development of the system for the Home Office's Immigration and Nationality directorate should have been completed last October. It is now not expected to be finished until January 2000.
The NAO report describes the situation as a "matter for concern", which means that the backlog of asylum cases - already at a record 45,000 - is "likely to rise".
The delays, which have cost Siemens millions of pounds, could leave the directorate exposed to the impact of the millennium computer bug and will almost certainly lead to a parliamentary inquiry.
One analyst, William Heath, the chairman of a specialist consultancy, Kable, said: "This is a report that a lot of people would like to keep the lid on. In reality, an in-house government development wouldn't have been much better, but that's not much consolation if you're in the asylum queue."
Siemens could lose as much as pounds 15m in unearned income, under the private finance initiative terms of the contract. The contractor pays up-front for the system development and rents the system back once it has gone live.
The company is also understood to have paid in effect an unspecified sum in compensation. This is described in the NAO report as "a commercial agreement relating, inter alia, to the mitigation of wasted expenditure during the period of delivery".
Pressure is on to complete the development by the millennium. The NAO draft report warns: "Many of the [existing] IT systems are not compliant with Year 2000 requirements."
Siemens declined to comment, although it has previously acknowledged that there have been delays in developing the system.
Dan Sabbagh is senior reporter for `Computing'.Reuse content