Chancellor's multimillion IT investment plans raise spectre of more
outsourcing lock-in.
The Inland Revenue has announced the short list for a £4bn, 10-year
contract to run its IT systems but, despite its efforts to
stimulate competition, many key players have refused to bid.
In a week when the Government has dedicated billions of pounds to
public sector IT spending, much of which will go to private sector
partnerships, MPs questioned whether its largest IT outsourcing
contract to date can give value for money.
The short list for the public private partnership consists of the
incumbents - EDS and Accenture - plus British Telecom and Cap
Gemini Ernst & Young. Just one other firm, US-based defence and
manufacturing organisation TRW, responded to the Revenue's
invitation to tender.
Bids might also have been expected from IBM Global Services, CSC,
Fujitsu, Lockheed Martin, Siemens or PriceWaterhouse Coopers.
Two years ago the National Audit Office and the MPs' spending
watchdog, the Public Accounts Committee (PAC), warned of the danger
of the Revenue becoming locked into its current suppliers, EDS and
Accenture.
In response the Revenue launched a two-year tender competition for
the next contract, code-named Aspire. Its failure to attract a
wider field of bidders has worried politicians and tax experts.
Contract values have increased, although the deals with EDS and
Accenture created delays and problems with tax records.
MP Frank Field, a member of the PAC, said, "The Government needs a
real competition for this contract if it is to secure best value
for the tax payer, which it has failed to achieve in other IT
contracts." The Revenue's short list raises serious doubts about
whether this will be achieved, he added.
Chas Roy-Chowdhury, head of taxation at the Association of
Chartered Certified Accountants, was equally worried. He said the
complexity of the Revenue's systems were a major barrier to
potential bidders.
The Revenue dismissed the criticisms. Senior officials had spoken
to "more than 10 major IT suppliers", including the short-listed
bidders, since the competition was announced and, "We are satisfied
with the short list of three," a spokesman said.
However, there are questions about the ability of British Telecom
and Cap Gemini Ernst & Young to challenge the incumbents. BT
runs NHSnet, the health service intranet, and a customer contact
centre in partnership with Liverpool council, but it has little
experience of running anything on the scale of the Inland Revenue,
which would involve the transfer of more than 2,000 staff.
Cap Gemini Ernst & Young is one of the world's largest
management and IT consulting companies, and has several major
contracts with the Ministry of Defence, but nothing on the scale of
the Revenue deal. Nevertheless, Les Mara,who headed the firm's bid
team, said, "We are confident of our competitiveness. This is a big
prize."
The failure of Aspire to raise the level of competition has
implications across government. If bidders continue to be deterred
from competing for contracts where incumbent suppliers have the
advantage of knowing the core business and technology, how can
public sector IT outsourcing provide tax payers with the value such
deals claim to offer?
The Inland Revenue's difficult IT history
1994: Inland Revenue outsources all IT to single supplier, EDS
1995: National Audit Office warns it could take five years
to transfer Revenue IT back in-house
1995: Accenture awarded contract to run national insurance
IT
1997-98: Problems aligning national insurance and PAYE leave
a million taxpayers unsure if the have paid the right tax
April 2000: Public Accounts Committee expresses concern that
Revenue contract cost had risen from £1bn to £2.4bn
2000: Problems with national insurance computer systems lead
to backlog of 170,000 claims
February 2002: Revenue announces Aspire competition
June 2002: Revenue freezes national internal e-mail plans
June 2002: Security glitch takes down online self-assessment
site
2004: Current EDS/Accenture contract runs out.