HMRC set to spend £10bn on Capgemini Aspire ICT deal

The National Audit Office (NAO) says the Aspire contract, the government’s largest technology contract, cost £7.9bn between July 2004 and March 2014, and estimates that, by the time it ends in June 2017, HMRC will have spent £10.4bn compared to the original expenditure of £4.1bn used when evaluating Capgemini’s bid, in part because additional projects and services have been added

HMRC’s Aspire contract with Capgemini, to provide and improve its ICT services has cost more than twice the original estimate and there are signs the department is struggling to reform the deal to match current government policy on technology procurement, the NAO's report says.

In addition, it noted that HMRC has commissioned much more work through Aspire than was modelled when the contract was let and has not market-tested any significant element of the contract.

Additionally, evidence from benchmarking suggests that it has paid above market prices for this work.

The NAO says that while HMRC recouped some of this spending through financial savings it negotiated between 2007 and 2012, the 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 report also finds that HMRC was overly dependent on the technical capability of the Aspire suppliers between 2004 and 2012, which limited its ability to manage the contract commercially.

The NAO says that there have been some successes, with Aspire enabling HMRC to collect around £500bn of tax each year with few significant service failures.

The report says 95% of projects implemented since 2008-09 have recorded no high-priority incidents and the number of working minutes lost per full time equivalent HMRC staff member due to unavailability of ICT has reduced from 2,736 minutes in 2007-08 to 387 in 2013-14. There has also been a 30% reduction in HMRC’s operating costs between 2006-07 and 2013-14.

HMRC is now actively trying to reform the Aspire contract so it matches new government guidelines on technology procurement which preclude the use of a single, prime supplier, and the NAO says there are serious risks to HMRC’s business if the programme to replace the contract fails to meet its objectives by June 2017.

Amyas Morse, NAO head, said that 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. We welcome HMRC’s recognition of this part way through the Aspire contract and its efforts now to rebuild its capability.

'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,' Morse said.

In a statement Margaret Hodge, chair of the Public Accounts Committee (PAC) described HMRC’s management of Aspire as ‘unacceptably poor’, saying that HMRC spent £5bn of the total cost of the contract without first checking whether other providers could deliver a better deal, even though it had evidence that it was paying above market prices.

Hodge also said plans to replace Aspire were ‘half-baked, with no business case and no idea of the skills or resources needed to make it work’.

‘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 £1.2bn 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. All of this gives me little confidence that HMRC’s senior team has the capability to manage large and complex contracts.’ Hodge said.  

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