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]
- 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 Londonin
Newcastle, Manchester, Telford and Southendthe 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: www.cabinetoffice.gov.uk/news/cabinet-office-ministers-speech-supplier-summit,
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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