3.11 In our 2006 report we recommended that HMRC review the expected contract cost to account for trends in the demand for ICT services. HMRC has not implemented this recommendation. It has not constructed a financial model that represents what it considers to be a reasonable expectation of future volumes and spend over the contract life. Instead of producing long-term financial forecasts, HMRC said that it forecasts costs in line with HM Treasury's three-year spending review cycle, agreeing firm budgets annually.
3.12 We found in 2006 that HMRC had used a financial model to evaluate different supplier's bids when it let the Aspire contract. Since 2004, HMRC has paid Capgemini to maintain the model. HMRC uses the model to maintain control over the prices per unit paid. HMRC is content with the way Capgemini is maintaining the financial model. However, we found that the most recent version of the model, produced in January 2014, used out of date volume data.
3.13 By using the model to accurately represent actual and forecast volumes, as well as prices, HMRC could have controlled costs better over the contract's lifecycle, monitoring its spend against its original assumptions. By not adjusting the model to reflect changes in the volume of work, HMRC missed this opportunity.