IT services giant EDS will lose out on almost £1bn in a ‘realigned’ contract
with the Department of Work and Pensions, due to the government’s pledge to
improve efficiency in Whitehall.
According to a DWP statement, the ‘realigned’ deal will mean that the
department will spend, ‘on average’ about £520m a year on services delivered by
EDS, compared with more than £700m a year since the DWP was created in 2002 – a
saving of £900m.
EDS was paid £715.6m in 2002/03, £834.7m in 2003/04 and £705.6m 2004/05.
A DWP spokeswoman said that the renewed contract’s lower costs were ‘in line
with the Gershon review’ and this would improve and standardise IT services
throughout the department.
‘We need to lower inefficiency, and because of budgets not going up
dramatically and the number of people, reducing the need to become more
IT-centred is crucial.
‘We have therefore re-aligned all our 150 contracts into one and come up with
an end date of 2010 for all our work including pensions and the Child Support
Agency’, the spokeswoman said. She added that the arrangement would enable the
DWP to make ‘substantial savings’ on IT costs while receiving an ‘improved
‘Benefits to the DWP will include upgraded IT infrastructure, improved system
availability and faster system response times.’
An EDS spokesman said that the firm had signed the deal to ‘fit in around
Gershon’ and that it was delighted to ‘provide services around DWP to reduce its
costs and standardise services’.
He said that the deal provided EDS with ‘greater certainty of its income from
the DWP, which ‘subject to its performance’, is valued at £2.6bn over five
He added that the deal had made EDS’s revenue expectations clearer. ‘We can
now go out to the market and book a figure of around £800m that we expect to
earn between 2010.’
The DWP statement added: ‘If EDS performs well under the contract, the
department could award the company additional work valued at up to £180m over
the lifetime of the contract.’
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