Several years ago, executives at Accenture, who were working on a replacement National Insurance Recording System, NIRS2, joked privately that the system was so complicated nobody else could run it. They have been proved right.
Gordon Brown's HM Revenue and Customs is now locked into Accenture in what an internal government briefing paper says could be an indefinite period.
This explodes the myth that the government can replace any supplier in a competitive bid if it really wants to.
Accenture lost a bid in 2003 to carry on running NIRS2. The contract changed hands in what was called ASPIRE - Acquiring Strategic Partners for Inland Revenue. Capgemini and Fujitsu took over the NIRS2 component of ASPIRE in 2005. Or so we thought.
It has now transpired that Fujitsu had to hand back the work to Accenture, largely due to the complexity of the system. And now, three years after losing its NIRS2 contract, Accenture is still at HM Revenue, working on the NIRS2 system.
Accenture's board has further reasons to smile. Its contract to build NIRS2 was signed under Gordon Brown's Private Finance Initiative contract. So Accenture keeps the intellectual property rights. The supplier has allowed Capgemini and Fujitsu access to the system - but only after HM Revenue and Customs paid £14m to Accenture for the rights to continue using NIRS2. And a further £14.9m was paid in total for the hardware and software to transfer to new systems belonging to Capgemini and Fujitsu.
The smooth running of the system is vital to the smooth running of the Exchequer. NIRS2 records every national insurance contribution paid by tens of millions of people. The data it holds is critical to working out pensions and benefit payments.
There's nothing much wrong with Accenture's being the enduring supplier of NIRS2. It keeps the system working well. One problem though is that it is unclear whether the taxpayer is paying Capgemini and Fujitsu to run NIRS2 in name - and Accenture to run the system in practice.
Accenture is described by HM Revenue and Customs as a "material subcontractor" on NIRS2.
One wonders why the department's mandarins pretend that they can replace any supplier if they want to - they did EDS in 2004 - and cannot now own up to hiring a contractor they are locked into.
These are the replies to our questions about whether HM Revenue and Customs is locked into Accenture. The responses say everything except "Yes, we are locked in."
Is Accenture still running NIRS2 as a subcontractor to Capgemini on Aspire and if so why when it's nearly 3 years into Aspire and the transfer of NIRS2 was supposed to have been included?
HM Revenue and Customs' response:
Accenture have been retained by Capgemini as a 'Material Sub-Contractor' within the Ecosystem framework, mainly to continue work related to the NIRS system where they have particular skills. Accenture resources are available to HMRC through Capgemini at the standard ASPIRE terms and prices agreed in the original contract.
Our further questions to HMRC
a) Does the continuing work of Accenture on NIRS2 mean that although it proved possible to supplant EDS with Capgemini, it has not proved possible to replace Accenture for the PFI and other reasons set out last year by the National Audit Office?
b) Does this show that if the wrong sort of deal is stuck in the first place, it may prove difficult if not impossible in the short of medium term to get rid of the supplier even if you appoint what you consider to be a better one?
c) Is the taxpayer now paying for Accenture to run NIRS2, plus a further fee to Capgemini for being in charge of the overall ASPIRE contract of which NIRS2 is a part, whereas the taxpayer was paying fees only to Accenture for running NIRS2?
HM Revenue and Customs' response:
"It was decided to provisionally retain Accenture's experience and understanding of NIRS. There is no overall increase in the costs for running NIRS as a result of the agreement to retain Accenture. The ASPIRE contract provides HMRC value for money across the estate.
"The arrangement to retain Accenture was put in place for a limited period only and was subject to review. We have now made arrangements to extend the availability of Accenture skills beyond the end of Year 3 of the Aspire contract.
"This has been agreed at standard contract rates - i.e. at no extra charge - under the umbrella of the Ecosystem which provides access to specialist skills. This does not reflect on the wisdom of ASPIRE as NIRS2 work represents only one segment of a very, very wide IT portfolio."
Computer Weekly also put some questions to Capgemini. Again, nowhere does it say in the responses: Yes we are locked into Accenture on NIRS2.
Our question: EDS and Accenture lost the ASPIRE bid yet Accenture is still running NIRS2. Why has Accenture proved impossible to shake off as you did EDS?
Capgemini's response: "Capgemini believe that Accenture bring specific skills and experience to bear and do a very good job of maintaining and enhancing the NIRS2 system (note that Fujitsu Services operate NIRS2, so Accenture's role has diminished).
Our question: "Is the taxpayer paying Capgemini and in effect Accenture via Capgemini to run NIRS2 whereas the taxpayer paid only for Accenture to run the system before the main contract changed hands?
Capgemini's response: "It is a matter for HMRC, but we believe that the overall price to HMRC under the Aspire contract for the NIRS2 system (including the Capgemini, Fujitsu and Accenture effort required) is better value than the previous arrangement."
Accenture declined to say whether its work on NIRS2 has in any way diminished since it lost the NIRS contract.
Computer Weekly has published a news story and analysis on the spiralling costs of the ASPIRE contract. A longer version of the news story is below:
The government is locked into one of its major outsourcing suppliers, Accenture, more than two years after the company was paid £14m in the closure of its contract to run National Insurance systems.
The inseparable relationship between HM Revenue and Customs and Accenture on the running of the National Insurance Recording System2 [NIRS2] shows that it is not always possible dislodge a company whose staff have a profound understanding of business systems and processes that are critical to the smooth running of the organisation.
Last year the House of Commons' Public Accounts Committee and the National Audit Office praised HM Revenue and Customs for proving it was possible to replace an entrenched supplier, EDS.
Under a 10 year contract which cost £2.5bn EDS had run the main tax systems. Accenture ran the NIRS2 system - which holds national insurance records and details on more 60 million people - under a contract worth £200m. In 2003 the two contracts were combined and re-tendered under a competition called ASPIRE - Acquiring Strategic Partners for the Inland Revenue.
Capgemini and its partner Fujitsu won ASPIRE in a deal worth £3.5bn which has expanded and is now worth a projected £8bn.
Now Computer Weekly has learned that only EDS has been replaced - Accenture's work passed initially to Fujitsu was handed back again due mainly to the complexity of the systems and difficulties replicating Accenture's expertise.
Unlike EDS's 2,000 staff who joined Capgemini, Accenture's experts were less willing to transfer.
The Revenue has conceded that, although Accenture three years ago lost its joint bid with EDS to continue running tax and national insurance systems, Accenture has been retained for its expertise in running NIRS2. Accenture is now officially described as a "material sub-contractor" on the Aspire contract.
It status as an irreplaceable expert supplier on NIRS2 - government specialists say the lock-in could prove indefinite - has been reconfirmed with a decision of the Revenue and Capgemini to renew Accenture's work on NIRS2 beyond the first three years of the ASPIRE contract which began in July 2004.
The department's spokesman has not denied that Accenture will be retained until 2014 - and possibly beyond then.
Attempts to transfer NIRS2 work to new suppliers have run into several barriers:
- The department had limited in-house knowledge of the IT used in NIRS2.
- Changing contractor as part of ASPIRE involved NIRS2's hardware, software and operating system being transferred from equipment hosted by Accenture to Fujitsu. But Capgemini and Fujitsu "encountered major problems in the system build" said the National Audit Office. HM Revenue and Customs paid £3.4m to Accenture to support the transition.
- When Capgemini won the new ASPIRE deal, the Department paid £14m to Accenture to continue to use NIRS2 software and as part of the closing rights on Accenture's original NIRS Private Finance Initiative contract signed in 1995. Despite the £14m payment Accenture was able to retain intellectual property rights in the NIRS software.
- The National Audit Office reported last July that, after the joint bid with EDS was lost, "Accenture's workforce was less willing to transfer to the new supplier".
- Auditors also found that "initially the degree of collaboration between the incumbent [Accenture] and the incoming supplier was not as strong as in the main transition [with EDS] but Accenture did meet its obligations under the agreed exit provisions."
Further reading: Spiralling costs of ASPIRE contract - 20 March 2007 - here