The government spends billions of pounds on IT every year. While individual projects often make the news when investigated by auditors and select committees, the overall picture is less well-known.
But it IS big business – both because of how much is spent, but also because just a few big businesses suck up very large amounts of taxpayers’ money in this area.
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In this era of (reasonably) open government, that money can be tracked. Using Freedom of Information requests, monthly spending returns and government statistical publications, here is our guide to what Britons spend on IT as taxpayers, and who they spend it with.
Department for Work and Pensions
In the 2012-13 financial year, the DWP spent £1.17bn across 19 IT and telecoms suppliers, according to the data it released under the Freedom of Information Act. That represents 35 per cent of all the department’s £3.33bn spending with external suppliers.
Its biggest supplier is Trillium (Prime), a subsidiary of property firm Telereal Trillium, which charged £635.5m for facilities management. But the next three companies in the department’s list of top suppliers are all IT firms.
HP received £532.1m, 16 per cent of total spending with suppliers, for IT systems delivery of all kinds – including hosting, desktop services and application development. It was followed by BT (£183.5m, 5.5 per cent) which according to the spending returns for January to March 2013 received virtually all its money for network running costs – the only invoice for anything else came to £67,000, for network equipment. (Unlike the overall figures, the monthly returns include VAT where relevant.)
HP and BT have been the DWP’s main IT and communications suppliers for several years, but third-placed Accenture, earning £151.4 (4.5 per cent of the total) has risen in importance: a similar release covering the 2010-11 financial year had it in 11th place and paid less than half the 2012-13 amount. The department’s monthly spending returns show Accenture billed mostly for application development, although also for maintenance, support and consultancy.
The fifth-largest supplier to the department was Atos (£146.9m, 4.4 per cent), but the monthly returns show this was mostly for healthcare work, such as carrying out the government’s controversial work capability assessments, and rather less for IT systems delivery (so it was not counted among the 19 IT and telecoms suppliers).
While HP, BT and Accenture dominate, the DWP spends millions with other IT firms. IBM is the DWP’s eighth largest supplier, pulling in £93m – and if the £9.1m earnings of Curam Software, a welfare and social insurance specialist bought by Big Blue in 2011 are included, it leapfrogs Royal Mail’s £95.5m into seventh place. Xerox is the department’s 15th biggest supplier, receiving £42.9m; reseller SCC is 19th with £37.9m; 22nd-placed Oracle got £30.2m; and Tata Consultancy Services, three places lower, took £22.5m.
HM Revenue and Customs
If you’re looking for the taxman’s IT spending, look no further than its Aspire deal with Capgemini. In 2012-13, HMRC spent £735.2m through Aspire, which started in 2003 and has been extended to run until 2017. This made up 49 per cent of all the tax collection agency’s £1.5bn spending with external suppliers.
The monthly spending returns for the first three months of 2013 show the wide range of services covered by Aspire. Data centre operations take the biggest slice, with invoices for £51m received in that quarter alone. This was followed by desktop services (£32.3m); software maintenance (£16.8m); and various kinds of printing, upon which HMRC spent £9.3 in the first three months of this year. Then there’s £6.7m for telephony services, nearly as much again (£6.1m) for telephone-based support, £4.5m for software licences and £1.9m for disaster recovery.
Some of the money goes to other firms, including software licence fees, and £1.9m passed on to Accenture in the quarter for the National Insurance Recording System, NIRS2, for which the original contract was signed in 1995.
HMRC’s second-largest supplier in 2012-13 was Mapeley Steps, a Bermuda-registered firm set up in 1999 to bid to provide outsourced management of the tax agency’s property under a private finance initiative deal. Its holding company, Mapeley, is based in Guernsey.
“The benefits of the tax position we have are handed back to the government through a lower charge we make to them every year,” said Mapeley’s then chief executive Robin Priest in 2002.
Outside Aspire, HMRC spent only modest amounts with IT and telecoms suppliers, including a further £1.7m with Capgemini. Among the others are £4.8m for 17th-largest supplier Computacenter, £3.5m for 21st-placed SCC’s parent company Specialist Computer Holdings and £2.5m for Airwave, the UK’s supplier of emergency service communications.
Ministry of Defence
DWP and HMRC spend less than £5bn with suppliers to suck in and send out several hundred billions of pounds from and to almost everyone in the country. But if you want to see full-blooded public sector spending, forget the civilian civil service. The Ministry of Defence spent a stonking £22.3bn with 340 major suppliers (those receiving more than £5m) from both the public and private sectors in 2012-13.
To its credit, the ministry releases substantial research and data on this spending. This shows that the largest MoD supplier (leaving aside £1.79bn that goes to other government departments) is Nato and Occar, the latter being the body through which Britain jointly buys arms with Belgium, France, Germany, Italy and Spain.
These two international organisations jointly received £1.62bn, followed by BAE Systems Surface Ships, which got £1.13bn. Overall, the 12 subsidiaries of BAE Systems listed in the MoD figures earned £3.12bn in 2012-13. A separate statistical analysis of the MoD’s key suppliers reports that BAE received 13.7 per cent of all procurement spending in 2012/13, down from 14.2 per cent in 2007/8; Babcock International Group is a distant second at 5.4 per cent.
The first IT company on the list, in fifth place behind AWE Management (the Atomic Weapons Establishment based at Aldermaston, receiving £978m) is HP, which received £799m through its HP Enterprise Services Defence & Security UK subsidiary. It may have earned a bit more through other subsidiaries including Autonomy, although none of these get into the £5m+ list; overall, it takes 3.3 per cent of all MoD spending, up from the 3.1 per cent taken by EDS, since merged into HP, in 2007-8.
Further down the list, BT received £253m, making it the 17th-largest supplier to the MoD; information security-focused reseller Software Box (better known as SBL) earned £43m; Logica (now part of CGI) took £39m; IBM £21m; and CSC £20m. Microsoft received £8m from the MoD – supplemented by a further £25m for Microsoft Ireland Operations.
The biggest external supplier to the Home Office is Airwave Solutions; the firm’s status as provider of the UK’s emergency service communications network was built on winning the Home Office tender in 2000 to provide such a system for police forces. Airwave received £257.1m (unlike the other departments, the Home Office’s top supplier data includes VAT) from the department in 2012-13 for its police work, around a tenth of the £2.6bn the Home Office and its executive agencies spent with suppliers.
Between April and June 2012, monthly spending returns from the department included £539,000 charged by Airwave to provide services within London’s Underground system, a capability that started in 2009.
Fujitsu Services’ Alcedo subsidiary is a close third to property manager DTZ in the department’s top suppliers, receiving £134.3m as the Home Office’s biggest non-specialist IT provider. Most of this runs through its Sirius contract to provide the department with services including desktops, networks and hosting: between April to June 2012 (the latest quarter of data available), Fujitsu invoiced the department’s shared serviced directorate £6.8m for supporting desktops, laptops and peripherals and £2.1m for telephony, while it billed the UK Border Agency a further £5.8m for a range of services.
Unlike other big spending departments, the Home Office does substantial business with a number of IT suppliers: in 2012-13, IBM was its fourth-largest supplier, receiving £116.8m largely from the UK Border Agency, while Atos IT Services billed £68.2m and CSC £59.6m.
Further down the list is Rapiscan Systems, maker of the virtual clothes-removing equipment known to Register readers as perv scanners, which received £1.9m. However, it makes a range of scanning hardware for baggage, vehicles, cargo and radiation detection, as well as people. The data for the first three months of the financial year shows it invoicing the UK Border Agency for scientific equipment running costs and handling machines and equipment.
The Home Office’s top 100 supplier list no longer includes Raytheon (unless that is the identity of the redacted supplier in 24th place that received about £18m, which apparently will be revealed in January). In both 2009-10 and 2010-11 Raytheon made the top 100, received around £40m each year, but is now nowhere to be seen – rather like its cancelled contract to provide the e-Borders system.
Department of Health
The Department of Health provided a list of its top 100 suppliers, but did not include spending by NHS Connecting for Health, the section of the department which until last March ran the National Programme for IT. The government is dismantling the much-criticised central IT scheme for the NHS in England – but the money is still flowing.
It turns out that the Department of Health’s monthly spending returns for 2012-13 – which total £107.5bn, as they include funding for NHS organisations – also cover bills for the National Programme for IT. This is clear from details of payment made to the programme’s two big suppliers, BT and CSC. And these add up: BT’s bill for the 12 months came to £532.5m, while CSC charged £252.7m.
The detail shows BT charged £176.4m in pre-payments and accrued interest to NHS Connecting for Health; £114.1m specifically for the N3 broadband network that links NHS sites; and £89.6m for national "Spine" services, including summary care records and the NHS patient demographic service. BT billed a further £83m to act as the local service provider to NHS trusts in London, and £51.1m for similar services to some trusts in the south of England.
The Department of Health’s single largest payment to CSC was £52.4m, paid in September 2012 as a “de-commitment compensation”. That month saw CSC and the department agreeing that the firm would lose its exclusive right to provide clinical IT systems to NHS trusts in the north, Midlands and east of England, reportedly in return for £68m in compensation; this appears to be the pay-off, or the bulk of it.
Among the other big IT suppliers appearing in the Department of Health data, McKesson received payments totalling £45m – it runs the NHS’s Electronic Staff Record, the payroll system covering most NHS employees – and Atos got £33.2m. These figures don’t include spending by individual NHS trusts in England, or the health services of Scotland, Wales and Northern Ireland, which are run by each devolved administration.
And the winner is…
This data covers only five Whitehall departments, and although they are the five that probably spend most on IT, it doesn’t take account of the rest of the public sector, national, devolved and local. Given its exemption from the Freedom of Information Act, GCHQ’s no-doubt substantial IT budget is also excluded – although perhaps Edward Snowden will get around to leaking that at some point.
Furthermore, departments varied in how they responded to the Freedom of Information requests, with the Home Office including VAT and everyone else excluding it, and in several cases suppliers are acting as prime contractors, paying out large amounts to other firms.
So any attempt to calculate how much each big supplier earns from British taxpayers can only be an approximation. But The Register’s attempt to do just that (exclusive of VAT) sees HP at the top of the list, receiving £1.34bn, equivalent to everyone in Britain individually paying the firm £21, with the bulk of that from the MoD.
BT is not far behind with £970m; just over half comes from the Department of Health, with most of the rest divided between the MoD and DWP. Capgemini is third at £737m, all from its Aspire contract with HM Revenue and Customs.
In total, these five sections of central government spent in excess of £4.6bn with IT suppliers – roughly £73 for everyone in the country, just enough for a Microsoft Office 2010 single home user product key card. Tempting, isn’t it. ®