By Tony Collins
In an outsourcing deal of then unprecedented size Inland Revenue contracted out about 2000 IT staff and services to EDS – now HP – in 1994.
The deal was worth about £1bn over 10 years. Later Inland Revenue joined with Customs & Excise and became HM Revenue and Customs. As part of the merger HP took over Customs’ IT which was largely run by Fujitsu. The £1bn outsourcing contract with HP turned into a £2bn deal.
In 2004 the merged contracts were called “Aspire” and Capgemini took over staff and IT services from HP in a 10-year deal expected to be worth between £3bn and £5bn. The contract was later extended by 3 years to 2017.
Today a National Audit Office report Managing and replacing the Aspire contract says the deal is worth £10.4bn to Capgemini and Fujitsu.
Margaret Hodge, chairman of the Committee of Public Accounts, says of the NAO report on the Aspire contract:
“HMRC’s management of Aspire, its most important contract which provides 650 IT systems to help HMRC to collect tax, has been unacceptably poor.
“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.
“It is deeply depressing that once again a government contract has proved better value for the private companies involved than for the taxpayer, with Capgemini and Fujitsu pocketing an incredible £1.2 billion in combined profits – more than twice the profit HMRC expected.
“Its own lack of capability meant HMRC was over-reliant on providers’ technical expertise, undermining its ability to act as an intelligent customer on behalf of the taxpayer.
“HMRC is planning to replace the Aspire contract in 2017, but its new project is still half-baked, with no business case and no idea of the skills or resources needed to make it work. All of this gives me little confidence that HMRC’s senior team has the capability to manage large and complex contracts.”
“More changes than normal”
The NAO found that in more than 80% of projects, HMRC and Capgemini changed the agreed scope, time or budget. Says the NAO report:
“One feature of the cooperative approach between HMRC and Capgemini has been a willingness on both sides to make changes once the extensive planning is complete and budget, scope and timing has been agreed commercially.
“These changes are made through formal governance processes and usually help to educe risk. Some change is to be expected as part of good project management.
“However, we consider that HMRC and Capgemini made more changes than normal on projects after the point at which budgets, scope and timing had been commercially agreed. The degree of change makes it very difficult to hold the Aspire suppliers to account for their performance across the portfolio of projects.”