French IT company Cap Gemini has revealed details of how it plans to earn between £400m and £500m from a £50m contract to supply the Ministry of Defence (MoD) with a huge e-business system.
The MoD awarded the contract for the Defence Electronic Commerce Services (Decs) system, which is expected to handle transactions worth billions of pounds, to Cap Gemini, under Labour's private-public partnership last week.
An internal memo leaked to Computer Weekly in June showed that the services company had told staff that the contract would yield a further £400m on top of the purchase price from the MoD.
Decs, a key part in the Defence Logistics Organisation's strategy to cut its overheads by 20%, will enable MoD staff to buy anything from vehicle spare parts to office stationery electronically. It promises to transform radically MoD procurement.
The MoD will pay £4.5m a year for 10 years to use the basic Decs system. But Cap Gemini revealed that it will boost the value of the contract by developing a range of value added services.
David Galloway, public sector director for Cap Gemini, said they would include online catalogues, electronic tendering, the ability to share engineering drawings and technical data, electronic tendering, and travel management.
In addition, Cap Gemini, which has invested "significant sums" in Decs, will benefit from transaction charges paid by MoD suppliers that sign up for the system. It also plans to sell Decs to other government departments and defence organisations.
Major General Tony Raper, Defence Communications Agency CEO, said Decs would help the MoD achieve a step-change in efficiency and transform the way the MoD does business.
He added that the MoD would only buy additional Decs services that have a proven business case.
Technology behind Decs