Warnings in a confidential Inland Revenue memo, written as a 10-year outsourcing deal was being finalised with Electronic Data Systems (EDS), have become reality.
The memo, dated 1995, warned that taxpayers could end up paying premium rates for staff required at short notice. It also warned that taxpayers could have to pay for staff ordered from EDS but not required.
The warnings have proved correct on both counts.
A report last week by the National Audit Office shows that taxpayers have ended up paying for EDS employees who were not needed at the time planned. They also paid premium rates for EDS staff who were ordered at short notice.
This occurred when the Revenue embarked on a £13m project to set up a fully functional call centre to test the viability of a national network of call centres.
Some EDS staff were not needed at the time planned but were needed for the following quarter. Although they were not used, EDS still had to be paid for them. Also, when staff were required in the next quarter the Revenue had to pay EDS higher short-term rates for them.
However, the Revenue told the National Audit Office, "Although it had no contractual commitment to do so, EDS had worked with the department to minimise the overall financial impact of such cases."
EDS' contract with the Revenue is nearing the six-year mark. The Revenue is already giving consideration as to how the contract can be opened up to competition. But the National Audit Office has warned that the Revenue may find itself locked into the EDS deal.