UK tax department: Bizarre IT spending incentives

Phil Pavitt, CIO for the UK tax department, recently spoke out against huge IT projects. Some of his comments are extraordinary.

Phil Pavitt, CIO for Her Majesty's Revenue and Customs (HMRC), the UK tax department, recently spoke out against huge IT projects. Some of his comments are extraordinary.

Pavitt had choice words to describe the UK tax authority's £9.75bn ($15.3 billion) ASPIRE project being run by Capgemini. Here are his comments, as reported in Silicon.com:

There have been cases of HMRC's internal IT team taking on work that should have been carried out by the outsourcer, resulting in the department "paying twice" to get the job done, the HMRC CIO said.

"We have a complication where the role of who does what after a number of years of being outsourced is complex and it does blur," Pavitt told the GovNet Government IT 2010 conference last week.

"It's time as an industry, and with my partners it is time as an outsourcer, that we began to reduce dramatically those programmes to sizes that can be understood, swallowed and delivered," he added.

Pavitt subscribes to the belief that no IT outsourcing contract should be larger than £100m.

"£100m is never £100m - in an £100m programme people forget why they started and the people responsible at the outset are rarely there at the end," he said.

Pavitt goes on to describe the bizarre incentives that push toward higher, and likely wasteful, IT spending (emphasis added):

However, cost-cutting does not always bring rewards for a CIO: according to Pavitt, Whitehall doctrine specifies it is the IT chiefs who spend the most in Westminster that set IT policy for the whole of government.

"In my first few weeks of the job I was visited by leading members of the Cabinet Office," he said.

"In that conversation with me they mentioned I am in the top purchasing club... That means you have tremendous influence on buying power, buying ideas and management and so on.

"I said 'If I reduce costs by 50 per cent what happens?', 'Well, you leave the club,' I was told.

"So here I am relieved of my ability to influence government's ability to purchase if I am clever and do my job. It's one of the most perverse things that I've heard.

"We don't have a 'demonstrable reduction of cost club', we have a 'sheer size of spend club'. Surely this is the wrong way round.

When Redmonk analyst, James Governor, alerted me to this story, he said, "I think you'll find your post for today just wrote itself." Well, James was right.

What do you think about huge projects and the impact on IT services?

[Image from iStockphoto.com.]

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