WTH?!?!?!?!111 Nice to know all your tax money does not go to the unemployed as much as you thought it was.
£20000 to set up an 12000 pa to run it is pin money to govt depts, If the tech became viable to run this and the government was not able to do it there would be an outcry.
As someone who knows how much local authorities pay for simple web applications I can tell you that this is unbelievably cheap. Factor in the fact that they expect to cover their maintenance fees and it becomes a fantastic deal.