NAO highlights failures of HMRC contract with Concentrix

17 Jan 17

The company contracted by HMRC to help reduce fraud and error in tax credits claims, Concentrix, regularly failed to meet its performance targets, according to an investigation by the National Audit Office.

Concentrix began a three-year contract in 2014 to investigate potentially incorrect personal tax credit awards for HMRC on a payment by results basis.

But the report, published today by the public spending watchdog, found that between 2014 and 2015, Concentrix failed to meet over half of applicable quality and customer service targets, achieving 104 out of 242.

Also, in July 2015, during the peak tax credit renewals period, the company answered an average of 5% of telephone enquiries from the public within five minutes, against a target of 90%.

The contract was renegotiated in October 2015, with the new terms including a higher commission rate for Concentrix. The company’s performance subsequently improved, but it fell again during the 2016 renewals process, when some claimants had difficulties contacting it to discuss their award.

In September, HMRC stopped passing new cases to Concentrix and began allocating its own staff to clear cases returned by the company. It also announced that it would not be extending the contract beyond May 2017. In November, HMRC and Concentrix agreed to terminate the contract with immediate effect.

HMRC paid Concentrix £32.5m over the life of the contract. It has assessed that overall, the contract resulted in net savings of £193m, excluding the payments to Concentrix. It had originally predicted that the contract would save £1bn.

Overall, Concentrix wrote to around one million people whom it thought may have been wrongly claiming tax credits. It stopped or amended tax credit awards in about 12% of the cases it investigated. About a third of these decisions were later overturned following a mandatory reconsideration. By mid-December last year, HMRC had paid £86,815 in compensation for complaints relating to cases handled by Concentrix.

In addition to this, tax credits were automatically terminated for those who did not reply to communications, following HMRC’s normal practice, which accounted for 10% of people contacted.

The report highlighted “five lessons” that HMRC told the Public Accounts Committee it had learned from the contract in October. These included questions over “whether third parties can understand the subtleties of delivering a public service”, and “whether a contract with financial incentives for reducing error and fraud is the right mechanism to ensure good customer service”.

HMRC apologised to any people who had received a sub-standard service and said that it would not be using external contracts for this task in future.

 Responding to the report, an HMRC spokesman said: “HMRC is absolutely committed to paying tax credit claimants all the money to which they are entitled, efficiently and on time. HMRC terminated the contract with Concentrix when it became clear that it was not delivering the quality of service we expect for our customers.   

“It is important to make checks on tax credits payments to ensure the right people are receiving them under the law, and this work will now be done by HMRC.”

The spokesman added: “We will not be entering into external contracts for this in future. We apologise to all those who did not receive the standard of service that they should have. The vast majority of people who asked to have Concentrix’s decision reviewed have now had their payments reinstated where that decision was wrong.”

Concentrix told the NAO that it made a financial loss of £20.5m over the life of the contract.

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