Revenue cuts outsourcing shortlist to two

The Inland Revenue has reduced the shortlist of bidders for its £4bn Aspire outsourcing project to two, surprising analysts by knocking out BT's Fusion Alliance which was considered a strong contender.

Aspire, which will be one of the UK's biggest IT contracts, will cover 73,000 desktops, 200 systems, 20 ICL mainframes, and 177 IBM and HP Unix servers in a 10-year deal.

The Revenue said in a statement that it had chosen "preferred bidders" from its previous shortlist of three.

Cap Gemini Ernst & Young (in alliance with Fujitsu) and Revenue Professional Service (EDS in alliance with Accenture), will go through to the assurance phase.

The Fusion Alliance, headed by BT with CSC and SchlumbergerSema, did not make the cut.

In a statement Fusion Alliance said: "We've always made it clear that we respected the integrity of the competition. This decision, however disappointing for us, is part of that process."

Anthony Miller, an analyst with Ovum Holway, added: "We thought that the proposition from Fusion was probably the stronger, but obviously the Revenue didn't see it that way."

Miller agreed that the competition has been very thorough "and without fear of favour".

"No way [are] EDS and Accenture assuming that this is a shoe-in. That gives me a warm feeling that there is a level playing field," he said.

But Miller warned: "This is of such importance that the Revenue has to get it right. It cannot afford to fail on this one."

He added that, if the contract is given to Cap Gemini Ernst & Young, the transition to a new supplier would be very complex.

The competition now moves to the 'assurance phase', which involves due diligence, negotiation, access to senior executives throughout the Revenue, and transition planning.

The department is expected to announce the winner in December, with the new contract commencing on 1 July 2004.

A spokesman for the incumbent EDS/Accenture consortium indicated that it was pleased to be shortlisted.

"If successful, we look forward to continuing our partnership with the Inland Revenue to help it achieve its challenging modernisation agenda of improving services to citizens and businesses," he explained.

Cap Gemini Ernst & Young vice president Martin Cook said in a statement: "Obviously, the whole team is delighted.

"The decision reflects the hard work, innovative thinking and robust, thought-through proposals that we brought to the Aspire bid.

"But there is a lot of work to be done before the competition is won, a contract is signed and the service is transitioned securely to us.".