South Norfolk MP Richard Bacon has expressed concern that HM Revenue and Customs negotiated a key part of a £3 billion computer deal with IT supplier Capgemini after the firm had already won the contract, on which costs have now exploded to £8.5 billion.
Mr Bacon said today: “When they signed this deal, Capgemini probably could not believe their luck. HMRC contributed to the cost of their bid and agreed to pay transition costs, which were not negotiated until after the firm had won the contract”.
“By waiting until the competition was over, HMRC effectively shot itself in the foot. It ended up haggling with Capgemini over which costs were ‘unique’ and even agreed a 15 per cent profit margin. Given that the contract is now costing three times the original £3 billion deal, this agreement is proving to be very profitable for Capgemini but very expensive for taxpayers”.
Mr Bacon was speaking as the Commons public accounts committee published its report into ASPIRE, a £3 billion contract to provide IT services for HM Revenue and Customs. Because of an increase in demand for IT services, the cost has now risen to £8.5 billion over the 10-year life of the contract.
To encourage competition against incumbent suppliers EDS and Accenture, HM Revenue and Customs (HMRC) agreed to pay transition costs to any new supplier. HMRC did not, however, agree the value of these costs until after the contract was signed with Capgemini. As part of these negotiations, HMRC agreed a 15 per cent profit margin and spent considerable time negotiating whether a particular cost was unique or not.
TAX CREDITS
The report also finds that, in settling its claim
against computer firm EDS for problems with the tax credits system, HMRC
agreed that £26.5 million of the settlement could be paid in
instalments. These payments are dependent upon EDS winning new business
from the government, despite their track record on tax credits.
Mr Bacon added: “It is not obvious why the government should give further work to EDS just to get compensation for the firm’s poor performance. Many of my constituents are facing real hardship as a result of computer failures in the tax credits system, and they do not expect the company at the centre of the fiasco to get further work from the government”.
12 June 2007
PAC REPORT: ASPIRE: The re-competiton of outsourced IT servicesPARLIAMENT: Omens for tax computers not good, says MP
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