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.