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HMRC's phasing out of Aspire outsourcing contract presents “significant risks”

Derek du Preez Profile picture for user ddpreez July 19, 2015
The National Audit Office has said that HRMC's phase out of multi-billion pound Aspire contract will need the right commercial and technical capabilities to work.

The government watchdog has said that HMRC's plan to phase out its decade-long, multi-billion pound outsourcing contract presents “significant risks” to the tax authority's technology strategy, claiming that it needs to build the right commercial and technical capabilities to manage the shift before the contract ends in 2017.

The National Audit Office also said that the current transformation programme is more complex and more radical than anything overseen by HMRC previously.

And whilst we are not unaccustomed to hearing about government technology projects going catastrophically wrong, the breaking up of the monolithic Aspire contract, and the success or failure of that break-up, arguably holds more weight than anything else we have seen in recent years.

This is because Aspire, in a way, represents everything that the UK's Government Digital Service is currently trying to get away from. It's expensive (£11bn+). It ran for too long (10+ years). It's not particularly agile. It doesn't necessarily encourage innovation. And it was handed to some of the largest outsourcing providers out there (it is led by Capgemini and Fujitsu).

The plan for the future of HMRC is to break this contract up and spread it across 400 smaller providers with no single supplier receiving a contract over £100 million. It represents a future where a government department is using smaller suppliers to manage and build agile digital services, whilst also taking advantage of commoditised cloud technologies.

And HMRC itself has recognised that this isn't going to be easy, that it can't do it alone and the transition is going to be expensive (approximately £600 million). For example, it recently issued a £40 million two-year tender for consultants to advise on how the manage the transition, which said:

[HMRC] needs an injection of strategic-level experience and capacity to support people and culture transformation… HMRC will require the supplier to provide strategic input to the planning of this activity and for support for senior line managers in delivering it.

However, the National Audit Office's report on HMRC's accounts points to the challenges facing the organisation, which is planning to have moved away from Aspire in less than two years. It notes:

HMRC managed its Aspire contract well (for outsourcing most of its technology projects and services since 2004). We praised HMRC’s strong track record in introducing new technology and providing continuity of its core systems that are essential to collecting tax revenue. However, we identified that the phasing out of Aspire presented significant risks to HMRC’s technology strategy if it cannot build commercial and technical capability before contract end in 2017.

In January 2015 the Committee of Public Accounts said that HMRC had made little progress in defining its needs and appeared not to appreciate the scale of the challenge. In March 2015, HMRC told the Committee it had set up direct commercial relationships with each of the major companies, Capgemini, Fujitsu and Accenture, who were previously part of the Aspire consortium. This was helping with some early transition work and controlling ICT costs. However, HMRC had not had formal sign-off of its business case for replacing Aspire.

It adds that HMRC's broader transformation to becoming a digital tax authority with a focus on putting customers at the centre, faces huge challenges. The report says:

HMRC launched its new strategy for transforming the tax system in June 2014.23 The strategy aims to help customers pay the right amount of tax at the right time by making better use of its data and providing more personalised online services. A key ambition is to give every customer in the UK a personal online tax account so that they can manage all their tax affairs easily in one place, rather than deal with HMRC separately for each tax they pay.

The transformation will be complex, and more radical than HMRC’s previous change programmes. HMRC already has an ambitious timescale to phase out the tax return starting in 2016, and this is just one part of its transformation plans. HMRC will need to balance ambition with realism about its critical assumptions and contingency planning. It also has to manage significant operational change while it changes how it procures and manages its IT (including digital) services. Implementation problems are inevitable and HMRC will need commitment and resilience if it is not to be deflected from the delivery of its strategic vision, paragraph.

Despite HMRC having said that there is “no question” of extending Aspire, my conversations with sources

close to the matter have suggested that the chance of an extension is currently around the 50/50 odds mark. It has also been suggested to me that although CIO and Digital Officer Mark Dearnley is doing a good job in many respects, there is some concern around the pace at which he is hiring in the correct commercial and digital capabilities – something that is consistently highlighted as being necessary.

The National Audit Office report also pulled out some of the key digital projects taking shape within HMRC, some of which I thought are worth highlighting here:

• Customers accessing their online tax accounts will get intelligence-led guidance and automated answers to their queries. This will help them carry out more tasks themselves. Face-to-face and phone support will be available for those customers who need extra help.

• Automating routine processing of tax information and transactions: Moving services online means that many manual processes will become automated. For example, HMRC plans to pre-populate tax returns and online accounts with real-time data. This should save customers’ time and reduce the need for contact and manual processing by HMRC.

• Developing a ‘multi-channel digital platform’ that interacts with customers flexibly through a range of channels such as web chat and secure messaging.

• Creating a ‘single customer view’ in HMRC that allows staff to see information about all the taxes paid by an individual, and their interactions with HMRC, in one place.

• Giving small and medium enterprises (SMEs) ‘your tax account’ – an online service with a personalised homepage, providing an overview of the SME’s main taxes and allowing it to quickly access all services from one place.

• Building an ‘enterprise data hub’ to house all HMRC data, replacing its current system of multiple, disconnected data stores to allow HMRC to analyse data more easily and efficiently, and to improve customer service and compliance.

And as the National Audit Office notes, it's not going to be easy:

HMRC must change more radically than it has in the past to achieve this transformation. HMRC’s previous change programmes had focused on increasing efficiencies, improving processes and investing more in pre-existing compliance activities. This time the change programme is more ambitious and more complex: making planned cost reductions while moving millions of taxpayers to digital customer services and decommissioning old ones

My take

All eyes will be on HMRC and the Aspire contract in the run up to 2017, because if it gets this wrong, it brings into question the government's whole digital agenda and the years it has spent convincing us that it can move away from these monolithic contracts.

My guess is that HMRC won't be able to make a clean shift away from Aspire by 2017. It's too soon and it hasn't moved quickly enough. That's not to say it won't have made progress towards this, I'm pretty sure it will get a couple of examples of success lined up before then to showcase it's almost there.

But really, a lot of this all depends on the progress of government-as-a-platform too. Getting reusable services and platforms in place for HMRC to build on, or shift towards, will be the ultimate transformation for the department. And I think a lot of this will be about managing a pivot away from Aspire to some smaller contracts in the medium-term, whilst waiting for some momentum behind government-as-a-platform to take hold. That's the long-term game.

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