HMRC extends contract with Capgemini but embeds flexibility

The UK government has extended its HM Revenue & Customs (HMRC) IT services contract with Capgemini for two more years, taking the contract’s length to 18 years.

The extension to the deal, which began in 2004, has been restructured to secure the current services while enabling HMRC to continue with its plan to break the contract down among more suppliers.

HMRC’s technology sourcing programme is an attempt to access the services of more tech providers, including small and medium-sized enterprises (SMEs) and startups. It is designed to provide the flexibility to adopt the latest technologies when outsourcing.

With digital advances accelerating at an unprecedented rate, organisations do not want to be trapped in a contract that does not allow them to harness new technologies.

HMRC and Capgemini have a long history of working together that will require time to replace. The department has worked with Capgemini on what was previously known as the Aspire contract for 15 years but, as part of the contract extension, has changed the way it works with the service provider to support its technology sourcing programme.

HMRC said that now that the first part of the programme is complete, it has changed how it works with Capgemini. “We’re evolving our supply chain to give us greater access to innovation in the marketplace, and have reshaped our relationship with Capgemini,” said an HMRC spokesperson.

“The revised agreement provides continuity for some of our key services while we continue to progress our technology sourcing programme, which will increase our flexibility to work with a growing range of providers.”

Capgemini mainly provides data, digital and cloud technologies, alongside applications management services. The company said in a statement: “As part of this extension, Capgemini will also support HMRC in its strategic transformation programmes and in growing HMRC’s own IT capability.”

HMRC aims to save £200m a year by 2020-21 by scrapping the Aspire contract. It has reached an agreement to make a phased exit from a “single overarching IT contract” by breaking it down into several smaller and more flexible contracts.

In October 2015, the department signed a contract worth up to £20m with consultancy Bain and Company to help with the strategic and cultural issues involved in moving away from the large outsourcing deal.

With uncertainties surrounding the UK’s exit from the EU, the government is renewing hundreds of outsourcing contracts in their current form because civil servants are too busy with Brexit to negotiate new deals.

But Mark Lewis, technology outsourcing expert at Bryan Cave Leighton Paisner, said this is a huge, historic contract and he expects the government has put a lot of time and thought into it.

Lewis said the breaking up of huge contracts like this is a current trend as companies try to access the latest technologies.

“There have been a number of big contracts, both public and private sector, that have come to market and although they have been renewed, they have been structured to enable the introduction of new technologies, such as automation and artificial intelligence.”

Under the leadership of Jacky Wright over the last two years, HMRC has achieved a lot in terms of digital transformation, including a cloud migration and advances around HMRC’s network and sourcing strategy.

Wright, who had been working in the UK government under a two-year loan arrangement with Microsoft, will resume her role as chief digital officer at the software giant on 11 October.