Tag Archives: Accenture

Are HMRC’s IT costs under firm control?

By Tony Collins

 The costs of IT outsourcing at HMRC have soared despite a well-written contract that promised large savings. When, as Inland Revenue, the department first outsourced IT in 1994, annual IT costs were around £100m.  Now it has emerged that HMRC’s  annual IT spending was running at more than  £1bn between April 2011 and March 2012.  Only some of the 10-fold increase is explained by new work.

Are there lessons for Barnet, Cornwall and other public authorities as they ponder large-scale outsourcing, given that HMRC did almost everything right and still faces a costly contractual lock-in to major IT suppliers until 2017 – a 13-year outsourcing contract?

HMRC has made some extraordinary payments to its outsourcing suppliers since 2011  – more than mid-way through a 13-year contract.

HMRC figures collated by former Inland Revenue IT employee and now payroll specialist Matt Boyle of Research4paye show that HMRC paid its “Aspire” IT partners £964.2m in a single year, between April 2011 and March 2012.

HMRC paid a further £42.6m of invoices from Serco for one year of website development and support. These figures do not include all of HMRC’s IT costs between April 2011 and March 2012, such as invoices from Accenture for maintenance fees and for work relating to Customs.

IT costs soar

1994. £100 annual IT costs. Inland Revenue first outsources its 2,000-strong IT department to EDS. The annual cost of the 10-year contract is about £100m a year according to the National Audit Office.

2004.  £250m annual IT costs. The end of the EDS contract. HMRC’s annual IT costs have risen to about £250m a year (National Audit Office figure).

2004. £280m annual IT costs. Capgemini wins from EDS a new 10-year HMRC outsourcing deal called Aspire (Acquiring Strategic Partners for the Inland Revenue). Capgemini’s main subcontractors are Fujitsu and Accenture. Capgemini’s bid is for £2.8bn, an average of £280m a year.

2005. £539m annual IT cost.  Inland Revenue merges with Customs and Excise to form HMRC which takes on £1bn Fujitsu IT contract from Customs. The first year of the Aspire contract costs £539m, nearly double the expected amount. The NAO blames most of the increase on new work.

2007. In return for promised savings of £70m a year from 2010/11, HMRC extends Capgemini’s contract by three years to 2017. There’s an option to extend for a further five years.

2010. £700m annual IT costs. Under FOI, HMRC releases a statement saying that the Aspire annual contract costs are running at about £700m.

2011/12. £964.2m annual IT cost. HMRC’s list of invoices from its Aspire suppliers for one year between April 2011 and March 2012 add up to £964.2m. A further £42.6m is invoiced by Serco for website development and support.  This puts HMRC’s IT annual outsourcing costs at 10 times higher than they were when Inland Revenue let its first outsourcing deal in 1994. Some of today’s HMRC systems pre-date 1994 [BROCS/CODA].

Aspire – a good contract?

It appears that HMRC did everything right in its Aspire contract. Indeed the National Audit Office has found little to criticise. Aspire is committed to “open book”, so Capgemini, Fujitsu and Accenture must account for their costs and profit margins.

The contract has some innovations. The suppliers’ margin is retained by HMRC until trials are successfully passed. Even then 50% of the margin is retained until the final Post Implementation Trial about six months after implementation.

Charges under Aspire are split into two categories: “S” and “P”.  The former is mainly a commodity pricing arrangement with unit prices being charged for all service elements at a commodity level (e.g. per Workstation, volumes of printed output etc). The charge to HMRC will vary by volume of demand for each service line.

The ‘’P’’ series charge lines are charged on a man-day basis. Application development and delivery is charged mainly on what HMRC calls an “output basis utilising function points“.

Where IT spending goes

There are more than 800 invoices from Aspire covering the year from April 2011 to March 2012. Some of the invoices are, individually, for tens of millions of pounds and cover a single month’s work.

The invoices cover services such as data centre output, data centre operations, systems software maintenance, software coding changes, licences, IT hardware and data storage.

For some of the Aspire invoices HMRC gives a brief explanation such as £57.6m – “June monthly payment for development and support”. But some of the biggest invoices have little explanation:

May 2011:  invoice for £24.7m – IT Software. A further invoice of £61.7m – “data output prod”.

June 2011: invoice for £55.8m – “data output prod”. A further invoice £56.8m – “data output prod”.

On top of these payments HMRC paid about 24 invoices of management fees in the year. Typical monthly invoice amounts for Aspire management fees ranged from about £390,000 to £2.9m.

There are dozens of Aspire invoices in the year for IT software changes to support day-to-day HMRC’s business. Quite a few of those invoices for software changes are each for tens of thousands of pounds but more than 30 invoices for IT changes in the year 2011/12 each bill more than £100,000. The biggest single invoice in the same year for software changes to support day-to-day HMRC business is  £469, 964 in December 2011.

Transparency

Matt Boyle collated the figures on HMRC’s IT spending from spreadsheets published by HMRC . All credit to Francis Maude, the Cabinet Office minister, for making government departments publish details of their invoices over £25,000.

And credit is due to Matt Boyle for collating and totalling HMRC’s IT-related invoices. Boyle says he is surprised at the high costs of Aspire. He is also surprised that the contract excludes web development and support.

Comment:

HMRC appears to have done nearly everything right and still its IT outsourcing costs are soaring, apparently uncontrollably.

It is hard to avoid the conclusion that the department and taxpayers would have been much better off if Inland Revenue had not outsourced and instead spent the millions it pays annually on, say,  management fees, to building up an in-house IT force and expertise.

Central government seems now to shun big outsourcing deals but local authorities including Barnet and Cornwall are at the stage Inland Revenue was in 1994: they are considering saving money by outsourcing major IT and other services to one main supplier.

If they learn from HMRC’s experiences – and the sums it has had to pay to outsourcing partners – it may take a little of the sting out of HMRC’s enforced prodigality.

[It may also be worth mentioning that some including Boyle ask how it is possible to credibly justify a spend of £46m in one year on a website.]

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Chief Procurement Officer quits for private sector

Tony Collins

John Collington has resigned as Government Chief Procurement Officer after little more than a year in the post.

Collington’s resignation is reported by Peter Smith of Spend Matters. Smith says that Collington is to become Chief Operating Officer of Alexander Mann Solutions, a leading “Recruitment Process Outsourcing” firm.

“We might have expected consultancy, or software, but Collington has been involved in shared services in recent months and has a track record in outsourcing from his time at Accenture and I believe even before that.

“He’s got strong operational skills which should play to the COO role …” says Smith.

“Francis Maude gave Collington a glowing testimonial, as we might expect…But then Cabinet Office have to spoil it by talking nonsense …”

The Cabinet Office said Collington has reduced overall spend on goods and services from £51bn to £45bn and spend with SMEs is estimated to have doubled to £6bn, along with a 73 per cent reduction in spend on consultancy and contingent labour.

“We accept he has helped to reduce spend but, given he has no budget of his own, it’s a bit much to say he ‘has reduced overall spend’…” says Smith.

“And as Cabinet Office themselves know very well, they have no clue whether spend with SMEs has doubled, given the robustness (or lack of) around the data …”

It appears that Collington was a believer in incremental reform. He was not a Chris Chant who spoke of the need for radical reform. Chant argued with force  that high costs, present ways of working and the dominance of a few major suppliers were unacceptable.

Collington reported to Ian Watmore who was Permanent Secretary at the Cabinet Office. Watmore has also resigned.

**

Nigel Smith, formerly head of the Office of Government Commerce [now subsumed into the Cabinet Office], was one the harshest critics of the way government bought goods and services.

Smith said in June 2010 that up to £220bn – nearly a third of everything government spent – was on procurement. But there were 44,000 buying organisations in the public sector which bought “roughly the same things, or similar things, in basic commodity categories” such as IT and office supplies. There were 42 professional buying organisations in public sector.

He said there was “massive duplication” of activity. We wonder how much has changed since then.

Spend Matters

Collington appointed Chief Procurement Officer

FBI chooses Accenture for IT project to modernise its HR systems

By David Bicknell

Yesterday I mentioned the challenges that the FBI is having in bringing a case management IT project in on time.

It’s good to know then that the FBI will now be assisted in its ongoing delivery of IT by Accenture.  Not for the case management project, but for an enterprise resource planning (ERP) system  to support the FBI’s Human Resources Information System (HRIS).

The award, under a  General Services Administration IT schedule that provides technology support services to the FBI through a ‘Blanket Purchase Agreement’ (BPA) plus four task orders’ will enable Accenture Federal Services to oversee selection, installation, testing and support to the agency’s HR systems.  Accenture also will complete a fit gap analysis to determine possible future costs to replace the FBI’s current HRIS systems.

Accenture said that by modernising its Human Resources information System, the FBI ‘will be able to increase effectiveness and streamline processes. These improvements will help the FBI develop a modern, on-demand system for accessing personnel information.’

The contract, which includes one base year with four option periods, also requires Accenture to submit a report with recommendations the FBI can use to determine whether to customise software, re-engineer business processes or combine both options to support future needs.   
 
Accenture, as its press release puts it, will also be ‘eligible to receive additional task orders under the BPA.’
 

Australia faces public sector IT challenges in 2012

By David Bicknell

It may be early 2012, but it sounds as it if  will be later in the year before the Australian state of New South Wales gets on top of the latest in a series of public sector  IT headaches that are challenging the Aussies.

Last last year, it was the state of Victoria that warned that an extra A$1.44bn of expenditure would be needed on failing IT projects. Now, it looks as  remedial action to try and save a A$386m New South Wales schools administration system will be needed throughout 2012. A$176 million has already been spent for little tangible reward so far.

The  ‘Learning Management and Business Reform (LMBR)’ project for the NSW Department of Education, has already failed to deliver what was promised, which was a system replacing finance, human resources, payroll and student administration systems.

According to reports Down Under late last year, IBM and Accenture are bidding for a multimillion dollar contract to implement the system. Accenture reportedly wrote the business case for the SAP-based system.

The LMBR project has been likened in a YouTube video to root canal therapy or even giving birth to a 20 pound baby – with teeth.

Schools IT scheme ‘a stuff-up’