US outsourcer EDS has lost its 10-year IT services contract with the Inland Revenue.
The department announced today that it has selected Cap Gemini Ernst & Young as the preferred supplier for the Aspire contract to modernise tax and national insurance systems.
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EDS was heavily criticised by MPs on the House of Commons Public Accounts Committee earlier this month for problems with the introduction of tax credits.
The announcement follows a 21-month competition to find a strategic partner for the Aspire contract, which starts in July. Inland Revenue officials expect transition work to start on 5 January.
Three consortia had been shortlisted by the Inland Revenue: EDS with Accenture, Cap Gemini Ernst & Young with Fujitsu and BT with Computer Sciences Corporation and Schlumberger Sema.
Sir Nicholas Montagu, chairman of the Inland Revenue, said, "I am delighted with the outcome of this competition - it has been genuinely tough and fair throughout, and we had to decide between extremely strong bids from all three of the consortia whom we originally shortlisted."
Around 2,250 employees are expected to join Cap Gemini Ernst & Young from EDS and its partner Accenture, with more than 900 joining Fujitsu Services under Transfer of Undertaking for Protection of Employment regulations.
Fujitsu Services will be subcontracted to Cap Gemini Ernst & Young predominantly to manage data centre services. BT will also be subcontracted to provide wide area network and voice support services.