09 August 2002
According to the Commons Public Accounts Committee, the IR found itself tied to a deal with Accenture for a revised version of NIRS2 - the complex computer system which supports the administration of the national insurance scheme.
'The huge costs of getting out of the original deal effectively tied the Inland Revenue's hands in having to give Accenture a large extra contract,' said committee chair Edward Leigh.
'In agreeing the contract extension, the Inland Revenue accepted high prices and target productivity rates that were, to say the least, unchallenging.'
In a report published this week, the MPs say: 'Accenture have outperformed their target productivity levels by a wide margin. The prices appear to be very generous for a non-competitive contract, where, in practice, the Inland Revenue had little option but to use Accenture because of the high break costs of the original contract.
'In non-competitive situations, departments need to have in place rigorous methodologies for assessing the reasonableness of the prices on offer, and arrangements to avoid contractors earning excessive profits.'
The MPs estimate the value of the contract extension at between £70m and £144m, depending on the amount of work ordered over the remaining life of the contract.
They fear that the IR may fall in the same trap in 2004 when the contracts with Accenture and with EDS - which supplies associated IT systems - come up for renewal.
'Although they are taking steps to generate competition, the barriers may be too greatÉ for these large and complex systems in a deal likely to be worth over £4bn,' they say.
The NIRS holds details of 65 million individual national insurance records. In 2000/01 the IR collected more than £50bn in contributions and the Department of Social Security - now the Department for Work and Pensions - paid out £46bn in contributory benefits.
PFaug2002
