Revenue has 'lost control' as cost of IT contract soars

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 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?


Comment on this article: computer.weekly@rbi.co.uk


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