Cap Gemini expects to make £400m on top of a £100m MoD
e-procurement contract it is set to win
An internal memo by David Galloway, public sector director at Cap
Gemini, has expressed delight at his company having "beaten off EDS
for the e-commerce prize at the Ministry of Defence", write
Tony
Collins and
Mike Simons.
Galloway was referring to a £100m e-commerce contract, the
Defence Electronic Commerce Service, which is due to be awarded to
Cap Gemini provided there are no last-minute hitches in
negotiations.
But the memo's disclosure that Cap Gemini expects to sell or
invoice about £400m on top of the initial deal, which is likely to
be worth about £100m, could prove an embarrassment for the Defence
Communication Services Agency, which let the contract.
The agency is part of the Defence Logistics Organisation (DLO)
which was formed last year to provide unified logistical support
across the three armed services, thereby cutting costs.
A recent report by consultant John Dowdy of management
consultancy McKinsey examined progress made by the DLO, which is
responsible for 20% of all MoD spending and has a staff of
41,000.
The organisation has made an "encouraging" start in some areas,
said the report, but it added that the DLO has yet to set out how
it plans to meet the 20% savings in its output costs by 2005.
Armed forces minister John Spellar said the MoD's new e-commerce
service could revolutionise the way the ministry buys goods and
services.
"We need excellent e-business systems internally to establish a
single view of our inventory, track assets to and from the front
line, and place orders electronically, accurately and swiftly,"
Spellar said.
"New electronic messaging systems, online catalogues of
products, and automatic transactions will transform what is
currently a largely paper-based system... This is likely to be the
biggest and most significant e-business system in government and
possibly in the UK, once it is up and running."
He added, "We need to develop collaborative e-business
relationships with our trading partners and suppliers, so that we
can access their in-house parts catalogues and engineering
configuration data.
An interim service under the e-commerce contract is due to start
this summer. Cap Gemini's bid consortium includes Ernst & Young
and Oracle, while EDS bid with Commerce One, a specialist US-based
e-commerce system supplier.
The Cap Gemini memo said: "According to our inside information
we beat EDS on technical architecture, on security, on business
understanding, and on our approach to partnering."
Computer Weekly has confirmed, independently of the memo,
that these were among the main criteria used by the MoD to assess
the bids from EDS and Cap Gemini.
The memo reveals that while EDS showed MoD officials a software
product developed by Commerce One systems in Nice, France, and Los
Angeles, Cap Gemini produced "superb" reference sites in Edinburgh
and Port Talbot.
"This will position us extremely well in the e-business space,
as well as giving us a very high profile in government and with the
MoD's suppliers," the memo says.
Cap Gemini is also supplying systems to Whitehall spending
watchdog the National Audit Office to "help the nation spend
wisely".
Government IT projects that have broken their contract
value
Inland Revenue and EDS
In 1994 the Inland Revenue outsourced its information systems
and IT to Texas-based outsourcer EDS in a contract worth £1,033m.
"The contract with EDS is not a fixed-price contract because the
needs of the Inland Revenue are constantly developing and
changing," noted the National Audit Office.
By 1996 the contract value had risen to £1.6bn while the NAO
this year said the cost had topped £2bn. It put to the increase
down to:
- Post-contract verification adjustment £203m
National Air Traffic Services and Lockhead Martin
In 1987 the Civil Aviation Authority (CAA) announced that it was
to build a New En Route Centre at Swanwick, Hampshire at a cost of
£475m. In 1992 the CAA announced it had given a £120m contract for
the operational systems to a consortium headed by Lockhead Martin.
Cost overruns have driven the price up to £699m, with payments to
Lockhead Martin set to top £337m.
The original opening date for the Swanwick centre was 1996. It
will not now be ready until spring 2001.
Project Trawlerman and ICL
The Ministry of Defence accepted a £32m computer system in 1995
knowing it was useless. The system, code-named Project Trawlerman,
was eventually abandoned with the MoD writing off £41m costs. The
project was let to Data Sciences, later acquired by IBM, which
subcontracted hardware development to ICL.
ICL was then commissioned to supply a replacement £6m
system.