HMRC blasted for poorly managing IT contractors

The taxman's record on managing IT contractors gives “little confidence” that he can successfully jump from one big technology supplier to multiple ones on short-term contracts.

Such is the downbeat assessment from a panel of MPs who have scrutinised HMRC’s plan to replace Capgemini in 2017 with ‘a mixed economy’ of large and small IT contractors.

This new contracting model, built to cut the department’s running costs by 25%, won’t just be an “enormous challenge” for HM Revenue & Customs at launch stage, warns the panel.

Tory MP Richard Bacon said: “HMRC’s record in managing IT contractors gives us little confidence that HMRC can successfully achieve this transition or that it can manage the proposed model effectively”.

Indeed, although HMRC decided three years ago to move to the new contracting model and its medley of up to 400 different IT suppliers, it is yet to produce a detailed business case for the change.

Partly this is because no immediate comparison exists, as HMRC also cannot assess the value and risks of its long-term engagement of Capgemini via its IT contract Aspire, which has cost £7.9billion over 10 years.

The MPs therefore accuse HMRC of being  “overly complacent”, not least because the department has only committed to publishing a business case for the IT contract changes this spring, which will leave just two years to secure the skills it needs.

HMRC believes that it is an attractive employer for ICT specialists, due to the scale of its digital ambitions and it plans to expand programmes to recruit graduates and apprentices.

But so far the Revenue has not recruited for many critical technical and commercial roles it will need, including those to manage multiple suppliers and design and integrate technology.

The MP panel also pointed out that, although HMRC has taken on some new operational staff, at key moments in its current contract it has been “outmanoeuvred” by its IT partners.

The MPs, on the Public Accounts Committee (PAC) evidenced: “For example, in a series of disastrous concessions, HMRC conceded its rights to withdraw activities from Aspire, to benchmark the contract prices against the market to determine whether they were reasonable. It also gave up its right to share in any excess profits.”

To safeguard against a repeat of these mistakes, and to help HMRC guard against new ones, the PAC has come up with six recommendations, including one to publish and quickly act on a recruitment plan in an “overheated” skills market.

The PAC added: “HMRC and the Cabinet Office should jointly agree key milestones and warning flags leading up to the end of the contract in June 2017, with contingency plans”.

According to the committee, these contingency plans must (among other criteria) “manage the risks to the stability of the tax collection system,” as a failed transition to the new IT contracting model “would create havoc with the public finances.”