HMRC to scrap Aspire outsourcing contract in 2017 - 25 per cent savings expected

HMRC CIO Mark Dearnley to replace Aspire with multiple smaller contracts

HMRC is planning to scrap the Aspire outsourcing deal when the contract comes up for renewal in June 2017. And ditching the deal will save taxpayers at least £200m in costs, according to HMRC chief digital and information officer Mark Dearnley.

In response to questioning in front of the Public Accounts Committee this week, Dearnley said that HMRC is already planning for the cessation of the Aspire contract - which was signed in 2003, revised in 2009 and extended for five years in 2012 - and costing its replacement. The Aspire contract had ended up costing more than expected, partly due to the merger of the Inland Revenue with Customs & Excise in 2005.

HMRC believes that planning for the cessation of the deal and its replacement will cost £5m this year and £25m next year. However, preliminary costings, according to Dearnley, indicate that the replacement for Aspire will cost 25 per cent less - depending on the cost of making the shift.

However, HMRC CEO and permanent secretary Lin Homer warned that any new outsourcing contract is likely to be much less than the 10 years - before extension - that Capgemini and Aspire enjoyed when the deal was first signed in 2004. It would also be smaller, or broken down into various different parts.

"Large contracts of this nature are not the right way to run the business in the future," admitted Homer. She also admitted that the Aspire contract had been "a fairly expensive contract", but added: "It has given us high quality and stability, and those were the things that were asked for when this contract was set."

"When Aspire breaks up," added Dearnley, "there will still be quite large chunks. There will not be lots of situations where four or five people are working on things; these will still be large contracts. I am not sure they will be big enough for them all to get to £100m, but they are still significant pieces that will need to be run by people who understand service management."

What this means, said Homer, is that HMRC would have more control over its own IT in the future. "At the moment everything goes in through Aspire and fans out from there. In the future, we see our capability growing and us running our own future more hands-on," said Homer.

Part of the problem with Aspire is its inflexibility, she continued, with proprietary equipment providing value for money only if it is highly used.

"We have, of course, benefited from a long-standing and stable relationship with Aspire, but, in a sense, there are still elements that are hardwired into the existing contract that are difficult to change... We are hardwired into a lot of proprietary kit. It is built and maintained for us. If we use it extensively, we might get good value, but if our usage drops, we are not getting that value.

"For example, in storage, which is one thing we are given through the contract, our rate of usage of what is made available to us is very low - around 6 per cent or 7 per cent, compared with an industry norm of 25 per cent to 30 per cent," said Homer.

A new telephony contract with Kcom is one that Dearnley, formerly CIO at Vodafone, said could be a template for the future.

"By working with them sat with our front-line staff and understanding what it means for all their solutions, they have not only been able to implement more quickly, but implement in a way that means our staff satisfaction has gone up. The contract also means that we will bring in more innovative solutions, such as online chat and secure messaging, much more quickly than we would have done," said Dearnley.

If Capgemini fails to win any of the new HMRC contracts when they are tendered, it will lose just under one-tenth of its total revenues - and 60 per cent of UK public sector revenues.