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22 July 2014 | Gurjit Degun
HM Revenue & Customs (HMRC) lacked “rigour” in managing its IT contract Aspire, according to Amyas Morse, head of the National Audit Office (NAO).
A report by the NAO added that HMRC has had “limited success” in reforming its Aspire contract with Capgemini. It warned that there are “serious risks” to the HMRC’s business if the programme to replace the contract fails to meet its objectives by June 2017 when the contract ends.
The contract is the government’s largest technology contract, costing £7.9 billion between July 2004 and March 2014. It was intended to ensure continuity of HMRC’s IT services; facilitate change to HMRC’s business; and provide rapid access to up-to-date skills and technologies.
“However, the Aspire contract is at odds with current government policy on how departments should buy technology,” the report explained. “Since 2011, HMRC has accepted the Cabinet Office view that, as a long-term prime contract for technology, Aspire was no longer a suitable way of providing value for money and that changes needed to be made; but HMRC has had limited success in negotiating these with suppliers.”
The report pointed to some positive outcomes of the deal such as Aspire helping HMRC to collect around £500 billion of tax each year with “few significant service failures”.
However, the report added that the HMRC has commissioned a lot more work through Aspire than was planned when the contract was let and has not market-tested any significant element of the contract. It has also paid more than market prices for the work.
“Furthermore, pressures to find cost savings in the short term led HMRC to trade away its negotiating power and hindered its ability to get strategic value from such a long-term contract,” the NAO said.
Morse added: “There has been a lack of rigour in HMRC's commercial management of the contract. It is essential in any contract that the client retains the independent expertise to challenge the supplier.
“HMRC now faces a considerable challenge in a limited amount of time to negotiate reform to the contract while at the same time defining its technology strategy for post-Aspire.”
A statement from Margaret Hodge, chairman of the Public Accounts Committee, said: “While it may have secured a good level of IT service in the end, by the time the contract ends in 2017 HMRC will have spent £10.4 billion - more than double what it initially expected to spend. What’s worse, it has spent £5 billion of this total without first checking whether other providers could deliver a better deal, even though it had evidence that it was paying above market prices.”
A HMRC spokesman said that the department will “continue to improve the performance of the contract over the next three years”.
He added: “As the NAO report recognises, the Aspire contract helped the department to collect almost £506 billion for the UK in the last year alone as well as improving services to customers.
"The NAO also recognises the progress that HMRC has made over the last two years in developing in-house technical skills, so that we are less dependent on external suppliers. For instance, we recently opened a new Digital Delivery Centre in Newcastle as part of our Digital transformation programme.”