Managing and replacing the Aspire contract - Public Accounts Committee Contents

1  HMRC's ability to deliver the change required by 2017

1. On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue and Customs (HMRC), the Cabinet Office and Capgemini on the replacement of HMRC's Aspire contract.[1]

2. In January 2004, the Inland Revenue, now part of HMRC, signed a ten year contract with Capgemini to provide ICT services. HMRC called the contract Aspire (Acquiring Strategic Partners for the Inland Revenue) and it is the government's largest technology contract. Under the contract Capgemini maintains and, where necessary, replaces ICT hardware and software and carries out new technology projects. HMRC uses this technology to collect £500 billion of tax revenues a year, so it is essential to HMRC's and the government's work. HMRC's four objectives for the Aspire contract were to ensure continuity of its ICT systems at all times; to continuously improve the performance of HMRC's ICT services; to provide rapid access to up-to-date skills and technologies to meet HMRC's requirements; and to facilitate change to HMRC's business processes, in line with its strategy, supporting other government departments where necessary.[2]

3. By the end of March 2014, HMRC had spent some £7.9 billion through the contract since it started in 2004. In 2006, the former Inland Revenue and HM Customs and Excise merged to create HMRC and annual spend through Aspire increased by around 25%. Between April 2006 and March 2014, Aspire accounted for about 84% of HMRC's total spending on technology. Aspire represents a 'prime supplier' contracting model through which HMRC contracts solely with Capgemini. Capgemini provides all services and has two main subcontracts: one with Fujitsu (worth £2.8 billion from July 2004 to March 2014), and one with Accenture (worth £0.3 billion in the same period). Capgemini and Fujitsu spent some £2.5 billion with subcontractors to March 2014.[3]

4. HMRC let the Aspire contract in 2004 to run until 2014, with an option to extend it for a further eight years. In 2007, HMRC extended the contract for three years, moving the expiry date to June 2017. The Aspire contract conflicts with current government policy on how departments should buy technology. In 2010 the Cabinet Office announced that long term contracts with a prime supplier do not deliver optimal levels of innovation, value for money or pace of change.[4] In 2014 the Cabinet Office announced new rules to limit the value, length and structure of ICT contracts. The 'red lines' introduced by the Cabinet Office state that no contract should exceed £100 million, while other stipulations prevent a supplier from providing both services and systems integration to the same area of government, disallow contract extensions without a compelling case, and limit new hosting contracts to two years. Smaller contracts should allow many more companies to bid, including SMEs, and it is claimed that an increase in competition will drive down costs. On expiration in June 2017, the Aspire contract should therefore be replaced by a multi-supplier model with shorter contracts, with none exceeding £100 million unless there is an exceptional reason.[5]

5. HMRC has not properly evaluated the value and risks of employing a long-term contract of this nature so it cannot assess the costs or benefits of the two approaches. In 2012, HMRC signed a memorandum of agreement with Capgemini to begin to make Aspire more compliant with current government policy. The memorandum committed HMRC and Capgemini to introduce competitive service procurement and changed Capgemini's role to separate service provision from its role as service integrator. The memorandum also committed HMRC and Capgemini to introduce more competition by negotiating direct contracts between HMRC and Capgemini's main subcontractors, Fujitsu and Accenture. These negotiations have still not been completed, two years on.[6]

6. We asked what costs would be associated with the change from the current model to one with multiple suppliers and no contracts of more than £100 million. HMRC told us that it was in the process of preparing a business case and was still scoping options. Accordingly, it was unable to describe to us the model it expected to operate after 2017, without proper modelling or a clear understanding of costs. The Department still claimed that it expected the change to reduce its cost base by 25%. HMRC has budgeted £5 million in 2014-15 and £25 million in 2015-16 for extra staff costs to manage the change, but HMRC could not provide any estimate of what the transition would really cost including other costs such as buildings and infrastructure as these depend on which option is chosen. HMRC expects its business case to be agreed with the Cabinet Office by Christmas and intends to publish in early 2015.[7]

7. HMRC noted that it supports in principle the move to short-duration contracts with many suppliers, and anticipates meeting its future ICT requirements with a mixed economy of small and large suppliers. While HMRC was confident that it would meet the 2017 deadline and stated that it had no plans to extend the existing contract with Capgemini beyond that date. However the Cabinet Office in its evidence said that the contingency plan, should it be necessary, would be to extend the Aspire contract.[8]

8. Between April 2006 and March 2014, 84% of HMRC's ICT spend was through the single Aspire contract. Since 2012 HMRC has tried to compete more work outside Aspire but has tendered only £22 million per annum since that time, equivalent to just 3% of the average annual cost of Aspire. HMRC recognised that it would need to redesign its business processes and systems in order to cope with up to 400 suppliers, comparable to the number of subcontractors currently managed by Capgemini and Fujitsu under the Aspire contract. HMRC accepted that it would need different skills sets at different stages of the transition. HMRC currently has 95 contract managers and expects to need 250 during transition, then around 150 thereafter. So far HMRC has only made three senior technical appointments. It has yet to address middle management recruitment. It also told us it had recruited 26 people at lower levels, and had made a further 13 job offers, in part through its apprenticeship and graduate programme. [9]

  1. In response to our concerns about its ability to recruit the staff required in a very competitive IT market HMRC told us that it was confident that it would be able to attract the right staff, and that by recruiting outside London—in Newcastle, Manchester, Telford and Southend—the position would be sustainable. It believed that it was becoming a 'Go To' employer for ICT, providing career-enhancing opportunities due to the scale of its digital ambitions. HMRC noted that it already has 300 experts in systems administration and coding, enabling HMRC staff to manage the applications that support 34% of all tax currently collected, and that this would rise to 40% by the end of the year. HMRC also noted that 40% of design and project work by volume (20% by value) was currently run by HMRC, and it expected this proportion to increase as it moved more infrastructure to a cloud-based model.[10]

1   C&AG's Report, Managing and Replacing the Aspire Contract, HC 444 Session 2014-15 Back

2   C&AG's Report, para 1.6 Back

3   C&AG's Report, paras 1.10 and 1.11 Back

4   Cabinet Office Minister's speech to supplier summit, published online at:, 1 December 2010. Back

5   Q 240; C&AG's Report, para 1.16 Back

6   Q 135; C&AG's Report, para 1.19 Back

7   Qq 6-7,14,17,20 Back

8   Qq 21-22,40,126,237 Back

9   Qq 58,60,63-65,67,71-73; C&AG's Report, paras 1.8 and 4.5 Back

10   Qq 34,36,85,93 Back

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Prepared 27 January 2015