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Goverment warned over IT transition payments

Government departments should negotiate contracts to make sure they do not pay IT suppliers transition costs for a handover of service that does not take place, the Public Accounts Committee has said.


The warning came after the committee found Capgemini had been paid for the handover of a system managing National Insurance payments, even though it had sub-contracted the work to the original supplier, Accenture. “The department therefore paid for a transition which, in respect of Accenture, effectively did not take place,” said the public spending watchdog.


Capgemini took over NIRS2, the National Insurance system, when the government awarded it a contract to run IT services for the newly merged HM Revenue and Customs, taking over from EDS and Accenture.


A HMRC spokesman said, “By supporting transition costs we ensured the successful bidder was not financially penalised for taking over existing systems. This allowed genuine competition, maximising value for money for the taxpayer and HMRC over the contract’s duration.” Capgemini said it did not want to issue a separate comment.


The Public Accounts Committee also said that HMRC’s spending on IT services was forecast to rise to £8.5bn over the 10 years of the Aspire contract with Capgemini, compared with the original estimate of nearly £2.8bn in 2003.


“If profit margins carry on at the current level, then Capgemini could make £1.1bn on the contract, nearly four times the amount originally envisaged,” said Edward Leigh, chairman of the Public Accounts Committee.


The report also criticised the government for failing to collect a £26.5m settlement for failures in the tax credit system. In 2004 and 2005 £1.8bn in tax credits was overpaid, partly due to computer system errors.


HMRC agreed a settlement of £71m with EDS in 2005, £26.5m of which was dependent on EDS receiving additional government contracts. EDS said it was compliant with the terms of the agreement.

Revenue ‘has lost control’ as costs soar >>

Spending watchdog examines £2.3bn NHS IT plan >>

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