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Flexible IT contracts generate savings for HMRC

HMRC’s annual report and accounts show transformation savings are slightly lower than planned as Brexit work means other projects are put on hold, but it’s making significant savings from smaller and more agile IT contracts

HM Revenue and Customs (HMRC) is saving more than £100m from flexible IT contracts following its Aspire exit, according to its annual report and accounts.  

The department has long worked to exit its huge, £800m-a-year Aspire outsourcing contract, and replace it with smaller and more flexible deals. However, HMRC is taking a phased approach to the exit, with some services running until 2020.

The annual report and accounts said it had “replaced our outsourced IT contract with a series of smaller, more flexible contracts, which are already saving more than £100m in 2017-18”.

“This disaggregation was achieved by a combination of novating key supplier sub-contracts directly under our control, and by competing services within the IT marketplace. These contracts also allow HMRC to take better advantage of digital innovations and keep pace with technology trends of the future,” the report said.

“We are achieving further value for money through embedded contractual mechanisms, such as benchmarking, as well as ensuring any new contracts are smaller in scale, shorter in length, easier to exit and therefore more easily competed. This model is on target to save HMRC £200 million a year by 2020-21 on a like-for-like basis.”

As well as moving its data to the cloud, the department has also begun using new technologies such as biometrics, artificial intelligence (AI) and robotics.

HMRC recently launched a new customer service, allowing customers to use Amazon Alexa to ask for help or information.

However, despite new developments, the department is falling short of its original plans. As Computer Weekly reported earlier this year, HMRC has had to put 39 technology projects on hold due to focusing on Brexit preparations, such as rolling out the new Customs Declaration Service (CDS).  

The National Audit Office’s (NAO) report on HMRC’s accounts said that the department recognised in autumn 2017 that its transformation plans were not realistic “due to over-ambitious assumptions, and the additional demands of EU exit increased pressure on capacity”.  

“The impact of HMRC’s decisions has been to marginally reduce or delay the intended benefits from its transformation plans,” the NAO said.

“The prioritisation exercise has reduced HMRC’s forecast efficiency savings from £717m to £675m each year from 2019-20, although HMRC expects that, ultimately, it will be able to meet its original target. It is not clear yet what impact prioritisation will have on delivery of benefits across the whole of HMRC or on its customers.”

It added that the plans remain “highly challenging”, and the department still expects to spend “almost all” of its £1.8bn transformation budget in the four years until 2019-20, despite having stopped or delayed several projects.

The main Brexit work for HMRC is focused around CDS, which the department will begin rolling out in August 2018. The department remains positive it will be able to deploy the system on time without any significant problems.  

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