HM Revenue and Customs has restructured and extended its Aspire IT outsourcing contract with Capgemini as part of moves to reduce IT running costs by 10% by 2010-11.

The restructured contract will now run to 2017 in a three-year extension to the original deal, which allowed for an extension of up to eight years.

The Aspire contract was first drawn up by the Inland Revenue to replace its contracts with EDS for IT services and with Accenture for the huge National Insurance Recording System (NIRS2).

HMRC signed the 10-year contract with Capgemini in 2003 on the basis of the IT service’s firm’s £2.83bn bid. But a report from the House of Commons public accounts committee in June criticised the tripling of the estimated cost of the deal to £8.5bn.

In the wake of the committee’s report, HMRC pledged it would “endeavour to drive … efficiency savings from the IT contract”.

The government’s formal response to the committee, published last month, said HMRC would keep Aspire under review through “a rolling programme of internal benchmarking”, adding that it was “always understood that costs would rise if more work was added to the contract”.

HMRC chief information officer Deepak Singh said: “The restructuring of the Aspire contract balances the need for HMRC to meet its commitments to cost reductions under the 2007 Comprehensive Spending Review without compromising our joint drive to become a world class IT function.”

The IT outsourcing relationship had seen “significant improvements in service quality and delivery capability”, he added.