The HMRC has selected Bain & Company to guide its transition away from its hefty £10.7 billion Aspire IT outsourcing contract. The strategy consulting firm beat out eight other bids for the £20 million contract.
Since the mid-1990s, the HM Revenue & Customs (HMRC) has gone for a one player mega-contract approach for its IT needs. The first contract went to EDS, followed by Capgemini’s Aspire IT framework which started in 2004 and is contracted to run until 2017.
Whereas a one contract approach has advantages – such that the main sub-contractors Fujitsu and Accenture are all co-ordinated by Capgemini – there have also been issues raised by the approach. A 2014 National Audit Office report highlighted that by giving full control of IT to one contractor, the department lost direction and control of its ICT, as well as flexibility to get things done with the right supplier quickly. In addition, the approach too was said to slow synergy realisation across government shared infrastructure and services.
Further issues highlighted by the report are that, through the HMRC’s dependence on a single supplier, the department becomes dependent on the expertise of its suppliers. Recent benchmarking studies for instance show that of the around £10 billion the project is expected to cost by 2017, Capgemini will be making a tidy 16% profit, amounting to £1.2 billion. This is more than double the £500 million original projection.
To gain more control over its IT estate, and end the excessive profit making, the HMRC is exploring ways to change the way in which its IT operations are managed. To support the IT strategy process, the department put out a tender for consulting services earlier this year, with the aim of seeking advice on how it best can move away from its single Aspire outsourcing arrangement towards a more varied approach that involves a number of smaller contracts that manage its IT systems, with no contract worth more than £100 million.
Dozens of consulting firms showed interest in the project, worth around £20 million in fees, and following a due diligence on bids, nine firms made the shortlist, with Bain & Company ultimately coming out as the winner of the pack. Bain & Company was chosen on the back of its strategic IT expertise (85%) and price (15%), and the move will see the consultancy become HMRC’s main transformation advisory partner.
Bain’s new role will be to provide strategic support to the HMRC, helping the “programme management team exit from a large-scale outsourced IT arrangement” according to the tender document. The consultants will among others be responsible for IT strategy advisory, programme management and governance, system process re-engineering, supporting the people and culture change workstream, and providing further functional/industry expertise as required. The contract with Bain formally started in September of this year and runs until August 2017, thus sometime after the Aspire contract comes to an end.
The move by the HMRC is aimed at saving up to £200 million per year, while opening up its IT network to a range of smaller players’ offerings – thereby stimulating growth and competition in the mid-market. Capgemini, in the final phase, will also support the HMRC regain control of some functional areas by moving them in-house, including Case Management, Excite and MOIS Procurement.
The task at hand will however not be an easy one, warned the Public Accounts Committee recently, stating that it will be difficult to move away from all aspect of the Aspire contract by its set deadline.