A public accounts MP says HM Revenue and Customs has
lost control of its costs after it emerged that the department's
main IT contract is projected to increase from £4.5bn to about
£8bn.
A report by the
House of Commons' Public Accounts Committee
- due to be published by May - is expected to draw attention to
the department's decision to pay an extra £3.5bn over 10 years
to its IT supplier Capgemini, and the company's
subcontractors.
There is scope for further increases because Capgemini's
"Aspire" contract with HMRC has more than seven years still to
run.
MP Richard Bacon, a member of the Public Accounts Committee,
said the increases show that the department has "lost control of
its costs".
Capgemini took over tax IT services from EDS in 2004 with a bid
price of £2.9bn for the Aspire contract. In 2005, Inland Revenue
and Customs and Excise were merged, and Fujitsu's £930m outsourcing
contract with Customs was brought into the Revenue's Aspire
contract with Capgemini. The total cost of the merged IT contracts
was about £4.5bn.
The merger was expected to cut IT and other costs, but HMRC has
told the Public Accounts Committee that the Aspire contract is now
valued at up to £8bn. The average profit margin on Aspire of more
than 10% means its suppliers could earn £800m or more from the
contract.
HMRC has provided only a vague explanation for the £3.5bn
increase in the Aspire contract. It said that demand for IT
services is increasing. A spokeswoman said, "The creation of HMRC
after the original contract was signed led to a re- evaluation of
the costs based on what the new, larger department needed to
achieve.
"The contract needs to deliver new and expanded projects and
programmes associated with the creation of HMRC and the delivery of
its IT goals going forward - for example, the integration of the IT
and HR systems from the differing systems used in the legacy
departments."
Last September analyst firm Ovum said the Aspire contract had
been "phenomenally successful" for Capgemini. Ovum quoted Capgemini
executives as saying that 57% of the company's UK revenue came from
just one contract - Aspire.
"Aspire illustrates our long-held belief that project services
work best when they have an outsourcing client base to sell into.
Some 44% of Aspire revenues currently come from application
development work, essentially add-on work over and above the
original contract signed in early 2004," said Ovum.
The National Audit Office said last year that HMRC wants to
reduce its IT spend to less than 20% of the total budget.
Related article:
What happened to our
£25bn?
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