Amazon Web Services (AWS) has been awarded a 10-year £473m contract with HMRC despite being the only bidder in the process. The award has caused widespread consternation among those with an interest in public sector procurement, being lambasted as anti-competitive, and likely to lead to lock-in, rising costs and a loss of leverage for the government customer.
Critics have argued that government IT contracts should be reformed to make them more modular and shorter, and to treat exit as seriously as entry. They also called for an independent body to be formed that can deliver oversight, expertise and decision powers to risk-averse and time-crunched civil servants.
Key criticisms of the HMRC/AWS tender and award
HMRC announced in 2025 that it needed a provider to manage the migration of three Fujitsu datacentres to the cloud, with movement of data from existing OS and storage environments including Windows, various Linuxes, HP-Unix, IBM AIX and Sun Solaris, VMware virtualisation, plus storage from NetApp Ontap.
The award and the process that led to it has been harshly criticised for several reasons. First, the tender was explicitly labelled “for hyperscaler only” when, it is argued, multiple smaller – and UK-based companies – could have made suitable bids. Second, the process was soon reduced to one candidate, and so government “will lose leverage” in its dealings with the supplier. Third, the replacement of one complex legacy environment will likely result in a different – albeit cloud – environment that is equally difficult to exit.
AWS emerges as the only hyperscaler option
In June 2025 AWS, Google, IBM, Microsoft and Oracle were all approached to participate in the request for information (RFI) portion of the tender process. In the following months, Oracle and Microsoft exited the process, with AWS, Google and IBM provisionally shortlisted. IBM and Google later pulled out.
The HMRC’s UK3 procurement notice specified that “the authority is seeking to appoint a hyperscaler to manage the migration of servers from the current on-premise solution to the hyperscaler’s cloud environment”. The fact that the tender was framed as “for hyperscalers only” and that AWS was soon the only provider in the running provoked criticism among those with an interest in public sector procurement.
In response to comment this week, an HMRC spokesperson said: “We follow government procurement rules when awarding contracts, ensuring value for money for taxpayers. We will publish final details of this contract on Contracts Finder in due course.”
The hyperscaler was awarded the contract despite the HMRC admitting in a June 2025 tender notice that it had lacked the time to carry out a full market testing process.
In a section entitled ‘Justification for not publishing a preliminary market engagement notice’, the document said: “Due to tight timescales for the development of the Outline Business Case, the authority was unable to publish a notice or engage in a full market testing exercise on this occasion. Limited high-level engagement was carried out with AWS, Google, IBM, Microsoft and Oracle…This took the form of an RFI pack being sent to each, a two-hour conversation with each and a written response.”
Amazon Web Services is the fourth largest tech supplier to HMRC, with £93m of direct revenue from the department in 2024-25, according to figures from analysts Tussell. HMRC’s biggest tech spend in that year was with Capgemini, which is a reseller for AWS, Google Cloud and Microsoft Azure. The next biggest tech recipients of HMRC budget in that year were Fujitsu (£315m) and Accenture (£149m – also a reseller of all three hyperscalers).
A risk of swapping one supplier lock-in for another?
Concerns about the way the contract has been awarded include that the tender conditions excluded many other suppliers, while the awarding of a 10-year contract signals to many that this is a government department swapping one supplier lock-in for another.
That’s the view of Nicky Stewart, senior adviser to the Open Cloud Coalition. She pointed out that certain contracts can be “reserved” but only for certain types of suppliers – notably small and medium-sized enterprises (SMEs) and social enterprises.
“But this does not stop some buyers from bending or flouting the rules, leading to the chronic lack of competition already acknowledged by the CMA, which, ironically, does nothing to demonstrate value for money for taxpayers,” she added.
“HMRC is at risk of swapping out the risks and costs of ageing legacy hardware and software with the vendor lock-in trap, potentially committing government and taxpayer alike to an arrangement that could extend well beyond the maximum 10-year contract term.”
Nobody ever got fired for buying
It used to be said that nobody ever got fired for buying IBM. It’s possible there’s an element of this mantra in public sector procurement, as demonstrated by this case.
Bill McLuggage was director of IT strategy and policy in the Cabinet Office and deputy government CIO from 2009 to 2012. He suggested an element of convenience for civil servants in specifying and engaging with a hyperscaler for government contracts.
“When a £500m contract ends up with a single bidder, it’s fair to ask whether the procurement was ever truly open,” said McLuggage. “A hyperscaler-only outcome may be convenient for civil service procurement professionals – and for their technical colleagues responsible for setting the technical requirements – but it narrows the field and it sidelines alternative and domestic UK providers.”
McLuggage echoed concerns about the difficulty of exit from such contracts: “Once you’ve re-engineered legacy platforms into a hyperscaler like AWS, you’re not just a customer, you’re embedded and virtually all your leverage disappears. The technical and financial barriers to leaving are so high that switching becomes unrealistic.”
He also pointed out that in a period where risks around data sovereignty are particularly heightened, the bigger issue is strategic, saying: “The UK is becoming increasingly dependent on a handful of US providers, while others in Europe are moving in the opposite direction, focusing on sovereignty and control.”
Is there a problem with the framing of tender notices?
Some believe government buyers word tender notices to restrict bids to certain types of suppliers. That is, they will lay out qualifying criteria that subtly shape those able to respond. That could include referencing specific capabilities they must be able to evidence, references of specific prior contract values or customer types, or financial stability requirements.
Owen Sayers, an independent consultant with decades of experience in delivering public sector IT, said: “There are multiple reasons why a government buyer may want to limit a procurement to specific bidders or types of bidder, and historically some frameworks have been created to focus on specific parts of the supplier market, including hyperscalers. They are rarely as directly restrictive as the wording of this competition notice, however.”
Concern surrounding government buyers’ expertise
The belief exists that government buyers often don’t really have the expertise to most effectively procure services they buy. This could mean they don’t know what the frameworks and the processes to create them truly provide, or that they don’t understand what the big cloud providers offer, or they have not properly read contract terms or reconciled them with procurement rules.
The G-Cloud framework, for example, does not guarantee pre-assured secure suppliers. Meanwhile, government departments may think they have contracts with suppliers that guarantee data stays onshore – but if they accept the standard terms of service, they also contractually accept offshoring.
Meanwhile, the suppliers ensure thorough knowledge of this and use that knowledge to gain advantage, said Sayers, adding: “In truth, there is nothing wrong with the legislation of the processes laid down based on that legislation. What may be wrong is that persons running government procurements in the UK do not actually follow those processes particularly well.
“Generally, UK government procurement does progress OK. They don’t give especially good value for money, however, and that’s for a few reasons. First, the suppliers understand how the process works a lot better than government, so they game the process to maximise commercial revenue. Also, suppliers love contract change, and some have made a good business out of bidding low to get government contracts and then making money on the change processes.”
How to fix government procurement
Whatever the reason for government contracts being awarded that appear unfair and detrimental to the public purse and sovereignty, what can be done to ensure an effective public sector procurement environment?
The Open Cloud Coalition’s Stewart said: “Competition, choice and value for money should be at the heart of everything, and vendor lock-in should not be treated as an acceptable exchange for convenience or familiarity.
“If the government continues to operate with a ‘we have no choice’ mindset, it is sending a terrible message to the wider cloud industry, impacting investment decisions, domestic resilience and economic growth.”
Answers could include breaking up mega contracts with lot-based bidding and mandatory multi-supplier RFIs, so that SMEs and UK providers will be able to compete with hyperscalers. Exitability from contracts could be weighted criteria, which could include no egress fees for government customers, and use of open source software that could make exiting contracts non-cost prohibitive.
A need for independent review of contracts
Sayers thinks government needs to realise it is not very good at buying complex services. And so, review of contracts – before they are awarded – needs to be carried out by an independent and expert body.
“We need a function independent of delivery that looks at contracts before they can be issued,” he said. “The best the National Audit Office can do is a retrospective or in-life review of how badly things are going. They come along after the battle and bayonet the wounded.”
For Sayers, that means a body in government capable of giving proper contractual advice about standard supplier terms of service and what they mean.
“Today, the obligation to work this out has been shoved down to the poor guy at the department buying the services,” he said. “So, you have a buyer facing off against a hyperscaler and under pressure from his internal IT team and seniors – who also don’t know how the hyperscaler really works – to just get the contract issued. He can’t do due diligence and he won’t be rewarded for finding issues.”
It sounds a lot like nobody ever got fired for buying from a hyperscaler.