HMRC to hire consultants to advise on 400 new post-Aspire outsourcing contracts

HMRC HAS ISSUED a £20m tender for consultants to advise it on shifting from its Aspire outsourcing arrangement as it moves towards a wider range of smaller contracts in order to manage and run HMRC’s IT, reports sister publication Computing.

The Aspire contract expires in 2017 and HMRC is planning to move from one mega-contract and multiple sub-contractors, to managing more than 400 IT suppliers. The aim is that no one single contractor will have a contract worth more than about £100m.

This is part of a broader government policy of ending large IT contracts in favour of smaller and shorter contracts, enabling a wider range of organisations to tender, as well as opening up the market to smaller and medium-sized IT contractors and services companies.

In January, then-Public Accounts Committee chairwoman Margaret Hodge claimed HMRC’s approach replacing Aspire could leave its IT system in “havoc”.

At the moment, Aspire’s main supplier is Capgemini, with Fujitsu and Accenture the main subcontractors. Those three companies are responsible for any sub-contractors that work under them. When Aspire expires, HMRC will need to handle the transfer of more than 2,000 staff to the new arrangements.

The news was revealed in an advert in the Financial Times this week. It suggested that HMRC “needs an injection of strategic-level experience and capacity to support people and culture transformation… HMRC will require the supplier to provide strategic input to the planning of this activity and for support for senior line managers in delivering it”.

Control aim for HMRC

The aim of HMRC’s new approach to IT is to give it more control over its estate and, therefore, the kinds of projects that it can run.

One of HMRC’s long-term plans is to move UK tax over to a personal-account approach. “Its plan is to give every UK taxpayer a personalised digital tax account – built on agile principles – that allows interactions in real-time. This will require major changes in its IT, new organisational skills and changes to existing jobs,” claimed Tony Collins, writing for UKCampaign4Change.

One of the driving forces for the change of direction at HMRC, which has issued mega-outsourcing contracts since the mid-1990s, first with EDS, then later with Capgemini, is the belief that they have stifled innovation and flexibility.

A National Audit Office report in 2014, Collins points out, made it difficult for HMRC to “get direction or control of its ICT; there was little flexibility to get things done with the right supplier quickly or make greater use of cross-government shared infrastructure and services”.

Furthermore, HMRC had become too dependent on the expertise of its suppliers, continued the report, and benchmarking studies indicated that HMRC was over-paying compared to market rates. Indeed, both Capgemini and Fujitsu have achieved profit margins of 16% on the contracts, amounting to a combined profit of £1.2bn – more than double the original expectation of around £500m.

Collins, however, cautioned that the consultancy contract value seemed somewhat low compared to the level of work required. “A spend of £5m to £20m for help to replace Aspire seems ridiculously low given the risks of getting it wrong, the complexities, the number of staff changes involved, the changes in IT architecture, and the legal, commercial and technical capabilities required.”

TechMarketView managing partner Anthony Miller agreed: “I would suggest that any IT supplier seriously thinking of taking on the challenge of advising how to make this project work would either want to have an ‘all care, no responsibility’ clause firmly cemented into the contract, or ask for a darn sight more than £40m!”