Spend to the end of the contract

3.17  HMRC has made substantial use of the flexibility within the Aspire contract to change the original scope and volumes. We estimate that by contract-end in June 2017, HMRC will have spent £10.4 billion, much more than the £4.1 billion used as the central case when evaluating Capgemini's bid. The rise in cost (Figure 10 overleaf) is due to:

•  merging Inland Revenue and HM Customs and Excise in 2005-06 (£1.0 billion);

•  increasing the volume and scope of the contract including doing more project development work than originally modelled, storing more data and introducing new desktop services, applications and contact centre services (£3.0 billion); and

•  deciding in 2007 to extend the contract by three years (£2.3 billion).

3.18  We consider that HMRC should have taken steps to manage its costs better over the life of the contract. In particular, HMRC committed itself to an extension worth £2.3 billion when only three years of a ten-year contract had passed. This is likely to have constrained its ability in recent years to change the contract. Further, it chose to increase spend by £3 billion knowing that the contract may not consistently provide market prices. Over the lifetime of the contract, it would have been good practice for HMRC to directly market test some significant elements. For example, HMRC could have exercised its contractual right to withdraw services and procure through open competition. This would have provided greater assurance that the £10.4 billion represents a market-comparable price. HMRC say it did not market test for a number of reasons, including: technical constraints; the need to respond with speed to legislative changes; and contractual constraints, such as exclusivity, that operated at points during the contract.