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The system, to be built for the Armed Forces Personnel Administration Agency, will serve the Royal Navy, the RAF and the Army and will replace standalone systems for these forces from 2006/2007.
The system will be developed under the terms of a £300m contract signed between EDS and the MoD in 1997 that runs until 2009.
The joint personnel administration system is part of the MoD's Defence Change Programme, which the government believes could become a benchmark for future relationships between the public sector and the IT supplier community.
The prospect of failure in the 12-year public finance initiative contract caused the MoD to renegotiate terms with EDS in 2001. At the time, Malcolm Pledger, deputy chief of defence staff (personnel) said there had been a "failure" of the original contract.
As a result, the contract required "substantial reconstruction" as the two sides sought to improve the timeliness, accuracy and cost of handling the pay and pensions of hundreds of thousands of British service personnel.