Government contract hits £8.5bn

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The cost of a 10-year contract to run computers for HM Revenue and Customs (HMRC) has more than doubled to £8.5bn, according to a committee of MPs.

Profits set to be made by Capgemini, the IT firm which won the contract in 2004, have almost quadrupled, the public accounts select committee said.

It said targets set by the department were not challenging enough.

A HMRC spokesman said government auditors concluded the contract was offering good value for money.

The BBC's social policy correspondent Kim Catcheside said the "clear message" from the senior MPs who wrote the report was that Revenue and Customs needed to sharpen its negotiating skills.

The department had been dogged with computer problems in the past, our correspondent said.

When the contract was won in 2004 it was valued at just under £3bn, of which £300m was expected to be profit.

But now the costs have soared to up to 8.5bn, and the profits to more than £1bn.

The report criticised the targets set by HMRC. Capgemini has exceeded these targets, delivering 90% of projects on time.