MPs have attacked a Whitehall deal with EDS in which the
supplier has agreed to pay £26.5m in compensation to its former
customer HM Revenue and Customs on the basis it wins some large
contracts from the government.
Members of the House of Commons Public Accounts Committee (PAC)
said there was "no guarantee" that EDS would win sufficient new
business to trigger payment of the full amount.
The committee also criticised the confidentiality of the
settlement terms - and defied HM Revenue and Customs' desire for
secrecy by publishing some key details of the settlement.
A PAC report published today (25 April) confirmed an article in
Computer Weekly last week which said that part of the £71.25m to be
paid by EDS in compensation over the fraught introduction of tax
credits was based on the supplier winning future contracts with the
government.
When the settlement was announced by HM Revenue and Customs in
November, no mention was made that £26.5m of the £71.25m figure was
not guaranteed. The PAC said, "Staged payments of up to £26.5m are
contingent on EDS winning new business with the government."
EDS told the Revenue that it expected to receive a large amount
of new business from the government as a result of its
participation in procurement competitions for new deals and under
existing agreements. EDS's payment of the full amount of
compensation is based in part on it winning the anticipated level
of business.
The committee's report said, "Government should not be placed in
the invidious position of having to commission further work from a
contractor in order to recover compensation for
underperformance."
MPs also said the settlement should not have been confidential.
"Confidentiality arrangements should not be accepted where they
will impair accountability for public money. Contractors need to
accept that, if they do business in the public sector, the terms of
such settlements should be in the public domain."
The report added, "The Treasury should require departments to
abstain from confidentiality clauses in settlements with
contractors, as is the case with severance compensation
packages."
The Revenue's compensation claim
The Public Accounts Committee said serious problems with the
introduction of systems used to support tax credits delayed the
processing of claims and led to incorrect payments being made.
HM Revenue and Customs assessed the gross losses attributable to
EDS for the computer problems to be £209m. But it sought
compensation for a much lower figure in part because it expected
£105m in overpayments to be paid back by claimants.
But the committee warned that some of the £105m may turn out to
be unrecoverable. "The department's ability to recover this amount
will be important in assessing the value for money of the
settlement," it said.
If EDS does not pay the full amount in compensation, the Revenue
said it would take legal action. But the department spent more than
a year negotiating with the supplier in part because it
wanted to avoid a public court hearing over the introduction of tax
credits.
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