The Inland Revenue has thrown out its incumbent suppliers and signed the £3bn Aspire contract with a consortium headed by Cap Gemini Ernst & Young (CGEY).

The 10-year deal combines the existing outsourcing contract held by EDS with the National Insurance system run by Accenture. CGEY and chief subcontractor Fujitsu Services will take over on 1 July 2004 following a six-month transition period.

The move away from the present suppliers signals a change in government's relationship with suppliers, but a lot will depend on successful transition, says Ovum Holway analyst Tola Sargeant.

'The CGEY win does show that incumbents are no longer guaranteed success even for large contracts,' she said.

'There has been a change in attitude over the last year. In the NHS procurements, for example, government is very keen to ensure it won't get left in a situation where the incumbent is the only provider that can run the contract efficiently.

'The Aspire deal will set a precedent, but a lot will depend on what happens over next few months and whether the Revenue can demonstrate it is possible to switch suppliers smoothly and cost effectively.'

The Revenue paid some of the costs of competitive bids to allay industry fears that it was not worth bidding against the existing suppliers.

The cost to suppliers of tendering for complex public sector projects remains an issue, says Nick Kalisperas, egovernment programme manager at supplier body Intellect.

'These long procurements have a significant impact on bidders' resources in terms of both people and financial costs. Though we are dealing with a competitive marketplace, the customer has a responsibility to ensure that the procurement, while thorough, isn't arduous,' he said.

But Robert Morgan, chief executive of outsourcing advisors Morgan Chambers, says the government is setting a dangerous precedent by paying competitors to bid.

'This will set a precedent for any contract considered to be large and complex - people will now expect government to step in and pay for market tests,' he said.