Capgemini is set to axe the jobs of up to 600 staff working on its Aspire IT contract with HM Revenue and Customs – 20% of the total.
The move follows a restructuring of the outsourcing deal announced last week as part of moves to reduce HMRC’s IT running costs by 10% by 2010 to 2011 – a saving HMRC estimates at about £100m a year – in line with targets set out in the government’s comprehensive spending review.
HMRC originally signed the 10-year contract with Capgemini in 2003 on the basis of the IT services firm’s £2.83bn bid. But a report from the Commons public accounts committee in June criticised the tripling of the estimated cost of the deal to £8.5bn.
Capgemini has now confirmed that it has begun consultation with staff on up to 600 compulsory redundancies – a fifth of its 3,000 strong Aspire workforce.
“HMRC is committed to reducing its IT running costs in line with the comprehensive spending review. As a major project within the department, the Aspire contract is committed to delivering a significant proportion of these savings,” a spokesperson for the IT services firm said.
“We are therefore currently reviewing the Capgemini/Aspire contract to assess our ongoing requirements and the business has entered a formal period of consultation with our works council on a compulsory redundancy programme, which could affect up to 20% of the Capgemini Aspire workforce across the whole business.”
The consultation is expected to end in March next year.
Last week, HMRC refused to confirm whether controversial profit sharing clauses in the Aspire contract had been renegotiated as part of the restructuring of the deal.
The Commons public accounts committee hit out at the scale of Capgemini’s expected profits from the contract. The MPs found that profits could hit £1.1bn as the volume of work included in the contract increases, but HMRC was unable to claw back the money because profit margins – at around 10–13% – were “below the thresholds which trigger the profit sharing agreement” included in the Aspire contract.
HMRC said the exact details of the restructured contract were “commercial in confidence”, although a spokesperson added: “We expect margins to reduce over the lifetime of the contract.”
The Aspire contract was first drawn up by the Inland Revenue to replace its contracts with EDS for IT services and with Accenture for the huge National Insurance Recording System (NIRS2).
HMRC signed the 10-year contract with Capgemini in 2003 on the basis of the IT service’s firm’s £2.83bn bid. But a report from the Commons public accounts committee in June criticised the tripling of the estimated cost of the deal to £8.5bn.