15 June 2007
Revenue and Customs needs to sharpen its negotiating skills after the cost of a ten-year IT contract soared to £8.5bn, the Public Accounts Committee has said.
Profits set to be made by Capgemini, which won the contract in 2004 after R&C ended its previous deal with EDS and Accenture, have almost quadrupled, the MPs said in a report published on June 12.
'The department should have foreseen that its demand for IT services could vary significantly and determined how this might affect its contractor's prices and profit margins,' said PAC chair Edward Leigh. 'These will have to be rigorously benchmarked in future to make sure the prices fairly reflect the actual volume of work being carried out.'
The forecast figure for the R&C's IT spending was now £8.5bn, £5.5bn higher than the original estimate. Capgemini could make £1.1bn on the contract, almost four times the amount originally envisaged.
Leigh added: 'The department could also have been sharper in its negotiations. The actual costs of transition were agreed after the contract was awarded and competitive tension had vanished.'
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