25. The Comptroller and Auditor General reported that the contract managers at the Inland Revenue and Accenture both considered that the relationship between the parties had improved since the introduction and operation of the new arrangements. The Inland Revenue and Accenture agreed that much stronger and more robust partnership arrangements had contributed to the improved relationship. The first two software releases under the contract extension, which included changes required for pensions sharing on divorce, bereavement, incapacity and the restructuring of national insurance contributions, had been completed on schedule. The quality of software had improved significantly, compared with the earliest releases.25
26. The Inland Revenue had also benefited from cost and productivity improvements under the new profit and productivity sharing arrangements. For the last three releases up to October 2001, actual productivity (3.4 days per function point) had been significantly less than the 7.5 days agreed in the contract extension. This had resulted in a total saving to the Inland Revenue of £9.6 million.26
27. The average margin made by Accenture for the year ending 31 August 2000 at 26 per cent was below the average gross target margin of 30 per cent. However, their provisional margin in 2000-01 of 54 per cent had exceeded the trigger (35 per cent) by a large margin and assuming the provisional figures are ratified will result in a rebate to the Inland Revenue of £3.6 million. There have been no penalties under the contract extension so far.27
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25 C&AG's Report, paras 3.29-3.30; Qs 51-52
26 Qs 29-35; Ev 23
27 C&AG's Report, para 3.22 and Figure 9; Qs 81-83, 202; Ev 23