A compensation deal for IT problems with the tax credit system
agreed between outsourcer EDS and HMRC “has the appearance of
impropriety, if not the fact,” according to the House of Commons
Treasury Committee.
The fact that up to £26.5m of the £71m compensation deal was
contingent on EDS winning new contracts with the government was
first revealed in Computer Weekly in April.
The report highlights the MPs’ frustration at the
confidentiality agreements signed by HMRC and its suppliers. Such
clauses hinder the wider public sector in learning lessons.
The existence of a confidentiality requirement “makes it
impossible for the house to assess what happened in this particular
case, and to seek to draw broader lessons from it about the
problematic area of government IT contracts,” the MPs
complained.
They also said such terms were restricting HMRC’s ability to
answer the committee’s questions. “We are extremely concerned that
HMRC appears to be claiming to have effectively ‘contracted out’ of
its obligation to be publicly accountable for its administration
and expenditure, by virtue of having entered a private
contract.”
HMRC officials cited confidentiality clauses when questioned
about the compensation settlement with EDS for the system’s
catastrophic failure when it was introduced, and the resulting
£2.2bn overpayment during 2003-2004.
During 2004 and most of 2005 the government and EDS were
embroiled in arguments about compensation, before settling out of
court in November 2005 for an agreed payment of £71.25m.
Neither HMRC, ministers nor EDS published the fact that £26.5m
of the settlement is contingent on EDS winning new business with
the government.
The committee said “We have grave concerns about the wisdom of
an agreement which then makes the payment of compensation to the
affected government department by the provider of the
unsatisfactory service contingent on that provider winning other
contracts with government.
“Our concern is not that we believe the contingent payments will
influence future decisions by government departments to award
contracts, but that it will be impossible to be sure that they have
not.”