Outsourcing: Taxman lifts lid on deal that's saving HMRC £1bn

HMRC IT director on the department's £750m-per-year Aspire contract

The taxman's IT director has lifted the lid on how the HM Revenue & Customs (HMRC) plans to squeeze more than £1bn of savings out of one of the UK's largest outsourcing contracts.

Mark Hall is overseeing the HMRC's Aspire (Acquiring Strategic Partners for the Inland Revenue) deal, the £750m per year contract led by Capgemini that provides the department with nearly all of its IT services and supplies.

The contract supports a vast IT estate, comprised of 600-plus computer systems, 8,000 servers, 80,000 desktop PCs and 7,500 laptops. The sizeable collection of computers underpin the government's ability to administer the UK's massive taxation system: the department last year collected £435bn in revenue and handles about 200 million calls and processes PAYE (Pay As You Earn) returns for 55 million employers each year.

At the core of the contract is a drive to reduce the number of computer systems used within the department from more than 600 to just 13 - fuelled by both the need to save money and to simplify and streamline its core systems. The systems were criticised for their fragmented nature by the former chairman of PricewaterhouseCoopers Kieran Poynter in his report into the department's loss of 25 million child benefit records in 2007.

The HMRC is reducing the number of its core systems from more than 600 to just 13
(Photo credit: Shutterstock)

"We had a challenging set of legacy systems and, with the cost of running those increasing every year, every pound that we spent on running them was a pound we could not spend on investment," Hall told the GovNet Efficiency through Service Delivery Partnerships conference in London yesterday.

One of the upshots of this consolidation of IT infrastructure has been that the 12 systems that were used to calculate how much PAYE tax a person should pay have been replaced by a single system called the National Insurance PAYE System (NPS).

The NPS allows HMRC staff to check a single customer record on one system - rather than different records on 12 systems as was previously the case - meaning it has become much easier for HMRC staff to spot when people are paying the wrong rate of tax.

This year was the first when the HMRC...

...used the NPS to carry out its annual check on whether people are paying the right amount of tax - leading to a significant increase in the number of errors discovered, with 4.3 million people found to be paying too much and 1.4 million too little.

By ditching unnecessary systems, HMRC is working towards the contract's other main aim, cutting the cost of running HMRC's IT infrastructure.

Since Capgemini was awarded the Aspire contract in 2004 it has reduced the running costs of running the department's IT estate by £152m, and by the time the contract expires in 2017 the aim is that for it to have saved £1.2bn.

Savings are also being achieved by reductions to what HMRC pays its suppliers - with the HMRC maximising cost reductions by getting its supplier to reinvest money saved into new efficiency measures.

"Instead of taking the... saving we reinvest the pound and we achieve another two or three pound worth of saving," said Hall.

"The investment will lead us to achieve the £161m [HMRC's annual savings target from 2011/12] and to move forward with the decommissioning of our systems.

The use of the new NPS to calculate PAYE tax codes has uncovered a significant number of people who have paid the wrong tax
(Photo credit: Rene Ehrhardt via Flickr under the following licence)

"We are transforming our IT estate with zero investment cost - recently we have updated our PC estate at no additional cost," he said.

Managing Aspire is no simple task, and it takes more than just setting "20,000 key performance indicators" to keep the contract's 240 software, hardware and IT services suppliers on track for the duration of the 13-year long contract, Hall said.

Most important, he added, has been recognising that HMRC's relationship with its suppliers needs to transcend the normal client-vendor dynamic, which means ensuring that both the suppliers and HMRC share the same goals and are rewarded for the same outcomes.

"It has to be about joint outcomes; it has to be about teams that are aligned and it has to be about both organisations taking the share of risk and reward," he said.