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National Audit Office raises concerns over IT contract management
Trowers Public Insight

National Audit Office raises concerns over IT contract management

The National Audit Office has flagged some concerns to HM Revenue & Customs in relation to its management and replacement of its Aspire IT Contract.

This report provides helpful guidance for all authorities seeking to manage and replace long term contracts, especially those in fast moving fields such as ICT.  This is particularly vital to promote effective continuous service provision and improvements whilst maximising resources, especially given the financial belt tightening currently being experienced by public bodies.

Report

HMRC's Aspire contract is a long-term prime contract for technology services and development projects and was let in 2004 for 10 years, subsequently being extended to 2017.  It accounts for 84 per cent of HMRC's spend on ICT and is the government's largest IT contract costing £7.9 billion up to March 2014. 

There are a number of positives arising from the NAO's report: the Aspire contract was found to have provided high levels of service continuity and systems availability, few significant service failures, reduction of operating costs and improvement in yield and customer service. 

Whilst there are demonstrable benefits arising from this long term contract, including flexibility and cooperation in resolving issues, the report recognises that arrangement can get too accommodating and cease to provide sufficient price tension, challenge or rigour in commercial management.

Some specific areas for review and improvement raised in the report are: lack of evaluation meaning information was not available for future planning; significant term and scope extension, loss of commercial safeguards during negotiations in a bid to achieve cost savings and overdependence on contractor limiting HMRC's ability to manage the contract commercially.

The report also noted that in relation to contract replacement, there is a challenge to replace the contract prior to termination, whilst reforming the contract to provide for new digital technology and government policy (which now provides for shorter ICT contracts).  Failure to replace the contract could result in risks such as increased costs, limitations in legacy systems and impairment of ability modernise.  A business case and project plan would assist with this replacement and quantifying the resources required.

Lessons learnt

The report highlights two key points. 

Firstly contract management by public bodies of long term contracts is critical to both achieving quality services and efficiencies during the term of the contract and for future planning.  There is significant value in public bodies retaining an internal capability to review and manage the contract, as well as regular contract evaluations being carried out.  This will avoid overdependence on the contractor and ensure evidence is available to allow contract changes negotiated rigorously and in an informed manner.  It will also provide information for future planning for the service.

Secondly early future planning is key.  There can be major changes in policy, technology, service requirements and budget during the course of a long term contract which can necessitate a change of approach to a replacement contract.  There needs to be early formal planning for the new contract using project plans and business cases to settle the approach and to implement such changes, in order to ensure continuity of service and avoid increased costs and obsolescence.