The Inland Revenue has admitted that it could cost up to £10m to encourage companies to bid for the £4bn IT contract to run the UK's tax systems.
The current contract is run by EDS and is up for renewal in 2004. The Revenue estimates it to be worth between £300m and £400m a year for a minimum of 10 and a maximum of 18 years.
But the cost of bidding for a contract that industry experts believe is likely to stay with EDS is said to be putting potential bidders off, and the Revenue admits that it may have to cover the costs to make the competition fair.
A spokeswoman for the Revenue said the costs had been estimated at between £5m and £10m.
"That decision will be made after the initial stage of the competition and will be based on value for money criteria," she explained.
Initial responses and expressions of interest must be made this week and the spokeswoman claimed that more than 100 had been received so far.
Bids must be made by 10 May and a shortlist will be announced between August and October, with the winner selected in December next year.
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