Post Office opts for EDS to avoid Pathway fiasco

The Post Office claims it has learnt the lessons from the £1bn Pathway fiasco as it signed a landmark outsourcing contract with...

The Post Office claims it has learnt the lessons from the £1bn Pathway fiasco as it signed a landmark outsourcing contract with EDS to allow benefits to be paid electronically through bank accounts.

The eight-year deal, announced last week, will see EDS build and support the basic bank accounts for receiving benefits, including customer relationship management support.

However, the last major IT project designed to pay benefits through post offices cost the taxpayer about £1bn and never fully got off the ground.

Analysts this week warned that the Post Office would need to learn from its past project management failures.

The business outsourcing deal with EDS, which will form part of the Government's universal banking service, is due to go live in April 2003 when benefit payments will be paid electronically rather than by paper.

About three million customers are expected to use the basic bank accounts, which will allow benefit recipients to withdraw cash from their benefits account using a bank card. Industry sources estimated that the contract was worth more than £1bn to EDS.

The EDS contract comes in the wake of the disastrous Pathway project, a joint project between the Post Office and the Benefits Agency and supplied by ICL.

A key part of the public finance initiative-funded project to computerise the Post Office's network and automate the payment of benefits was axed by the Government after three years in 1999.

A National Audit Office report said that up to £1bn in taxpayers' money was wasted on the project. Fatal flaws included divided leadership of the project and insufficient attention being spent on the technical details of the system, the report said.

Analysts said the Post Office needed to change its approach to managing large IT projects if its latest contract is to avoid the same fate as the Pathway project.

"The Post Office has a history of over-defining requirements [in IT projects]," said Bob Aylott, a principal consultant at Orbys, the outsourcing consultancy. "As long as they leave EDS to get on with the means of delivery it should be successful."

The Post Office said that it had learnt its lessons from the Pathway fiasco, and added that the deal with EDS was completely different.

"It's a totally different project," said Graham Halliday, banking partnerships director for Consignia, the company that owns the Post Office. "This is a very different product using existing banking technology. [Our service] will be a very simple banking account."

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