HMRC launches 20 million tender for IT consulting

The HMRC has launched a £20 million tender for consulting firms to guide its IT department in a move away from a one sized mega-project IT system operated by one main contractor to one that is open to many smaller and mid-sized IT contractors. The reason for the decision is increased control over projects, as well as increased competition lowering profit-making. The department is looking to make the changes by 2017, when its current contract with Capgemini ends.

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 going 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 highlights that, by giving full control of IT to one contractor, the department lost direction and control of its ICT, lost flexibility to get things done with the right supplier quickly or make greater use of cross-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 also 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.

Changing direction
To end the excessive profit making, as well as gain more control over its IT estate, the HMRC is looking to change the way in which its IT systems are operated. It is seeking for consultancy advice worth up to £20 million to move away from its single Aspire outsourcing arrangement towards a more varied outsourcing approach that involves a number of smaller contracts that manage the HMRC’s IT systems.

Under the new procurement system, the department will seek to have its IT systems managed by up to 400 IT subcontract suppliers, with no contract worth more than £100 million. The new way of operating is expected to generate a number of advantages, which include the ability for a wide range of contractors to tender, while opening up the government service to smaller and medium-sized IT contractors and services companies that can compete for contracts.

To make the changes, the HMRC recently advertised for a tender, stating it is looking for an expert firm that can see that the 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.”

Future havoc
Not everyone believes however that bringing in a large number of small players will improve the quality of service or lower operating costs. For instance, Mark Dearnley, the department’s Chief Information and Digital Officer, says that getting rid of Aspire for a new system could itself cost up to £600 million. The government’s Chief Commercial Officer Bill Crothers warns that if wide-ranging changes are to be made then planning needs to start early. “This is enormous, risky and important, and that should guide what we do. Sitting behind this is getting better capability, being a better client and doing things in a phased way as much as possible...we should not be complacent,” he says.