The expected cost of HM Revenue and Customs' 10-year IT contract has almost tripled to £8.5bn from original estimates of less than £3bn in 2003, MPs have revealed.
In a report on its inquiry into the re-tendering of the Aspire IT contract, the powerful Commons public accounts committee also warned that HMRC had paid a high price for its successful switch of the contract from the original suppliers, EDS and Accenture, to current provider Capgemini.
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).
The change of suppliers was the first on such a scale in the public sector. It saw Capgemini secure the new Aspire contract in July 2004 after a 21-month bidding process. The supplier’s bid was more than £2.8bn for the 10-year deal. After the Revenue merged with Customs and Excise in 2005, Aspire was expanded to include Customs’ contract with Fujitsu.
The MPs' inquiry into the re-tendering of Aspire found that the “main transition from EDS was completed successfully and on time”, with no major disruptions to services.
But the MPs highlighted the huge increase in the estimated total value of the deal since the original 2003 estimates – and the level of profits to be made by Capgemini.
Profits have shot up to a possible £1.1bn as the volume of work included in the contract has increased, but because profit margins remain at around 10–13%, they are “below the thresholds which trigger the profit sharing agreement the Department negotiated in the contract”, the MPs’ report says. This means HMRC cannot claw back the money.
Committee chair Edward Leigh said: “There has been a very steep rise in HMRC’s spending on IT services – the forecast figure is some £8.5bn over the 10 years of the contract compared with the original estimate of nearly £3 billion. If profit margins carry on at the current level, then Capgemini could make £1.1bn on the contract, nearly four times the amount originally envisaged.”