UK govt launches multibillion procurement for tax agency application services

The UK government has kicked off procurement to modernize aging legacy applications used by the national tax collector, HMRC.

Crown Commercial Services, which sits within the Cabinet Office, has released the contract notice for the Digital and Legacy Application Services (DALAS) framework, which could be worth up to £4.2 billion (c $4.64 billion) over four years.

But the invitation to tender, the process through which suppliers bid for the places on the framework deals, is set to be split. Phase 1 will begin in February next year, with the timetable for Phase 2 yet to be announced.

HMRC has one of the largest and most complex IT estates in Europe with over 600 systems, 800 terabytes of data, 1,000 IT changes a month, and a 24/7 IT operation. It serves 45 million citizens and more than 5 million business taxpayers.

In August, HMRC released a prior information notice, which starts early conversations with suppliers before the formal competition begins.

"The framework will provide a commercial vehicle to replace existing contractual arrangements that are due to expire between September 2023 and January 2025, and will provide the basis for letting a large proportion of HMRC future application services requirements," the notice said.

Last week, the tax collector published a contract notice offering more details on the timetable for the procurement, with suppliers passing the early round expected to be issued with invitations to tender in February 2023.

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The contract lots within Phase 1 include consulting, software development, internet, and support, such as the integration of software lifecycle from application development through release and IT ops. Lots also in this phase include those addressing management and support of new or existing custom applications. Also in the tranche is education on topics including DevOps, Scala, Microsoft Dynamics, and SAP.

The £4.3 billion procurement comes on the back of the Technology Sourcing Programme, a re-procurement of £7.1 billion ($8.5 billion) in IT spending designed to "radically transform how HMRC works with IT partners" over five years.

That began in September 2020, but the deadlines have slipped, according to a timetable set by UK government's projects watchdog.

One major application seemingly not up for replacement or major upgrade is HMRC's mammoth SAP system. In July, the tax collector opened conversations with tech support companies to keep its ageing SAP estate running in a contract award which could be worth up to £400m. The "highly customised version of the SAP ECC6.0" was launched in 2005 and is set to get support until December 2026, according to the documents.

The scale of HMRC's IT systems is such that it has been challenged with managing the suppliers needed to support them. In 2004, it kicked off the £10 billion Aspire contract with Fujitsu and Capgemini, which provided "stable but expensive IT systems," according to Parliament's spending watchdog. The arrangement was intended to formally end in 2020. In 2022, Capgemini won work it was first awarded under Aspire, although the tax collector said this was not a continuation of the mega-deal. ®