In the House of Commons Committee of Public Accounts Eighth Report of Session 2007–08 (Tax Credits and PAYE) (Ordered by the House of Commons to be printed 28 January 2008) there are some interesting facts surrounding HMRC’s involvement with EDS. Most of us will be aware that the computer system developed and installed was a disaster, fewer of us will be aware that a ‘fine’ of £71.25m was levied against EDS for these failures.It is also worth noting that the failures of the system didn’t just cost the taxpayer, in many instances it caused serious problems for persons in receipt of Tax Credits.
Below is an excerpt taken directly from the report, which I am at pains to point out is within the public domain and available to all.
4 The Department’s settlement with EDS
22. Serious problems with the introduction of the computer systems used to support tax credits delayed the processing of claims and led to incorrect payments being made. In November 2005 the Department announced it had settled its claim for compensation with EDS for £71.25 million. The settlement
includes cash payments by EDS and the off setting of certain amounts which would have otherwise been due from HMRC to EDS. Of this sum, staged payments of up to £26.5 million are contingent on EDS winning new business
with the United Kingdom Government. Final settlement of the dispute is contingent on EDS paying the full amount of £71.25 million and the Department has reserved the right to reopen court proceedings if the full amount is not received.
23. In practice, the flow of payments from EDS has been extremely slow because EDS has been less successful in winning government contracts than the Department expected.22 It is highly unlikely that new business for EDS will generate the full payment by the end of 2008 that the Department envisaged. The Department acknowledged that it would take a long time to receive the full amount at the present rate of payment.
24. The Department has held meetings with EDS. It is determined to ensure that it obtains the full settlement even if the new business for EDS is not enough to generate the full payment. The Department is taking steps with EDS that it believes will accelerate the rate of payments from January 2008 and will return to litigation if the full amount of the settlement does not look to be forthcoming within the envisaged period. The Department has discussed with its lawyers a process for bringing the matter back to the courts if the acceleration of payments during 2008 does not meet its expectations.
Whilst we are glad that EDS is being held financially accountable for its mistakes I find it rather curious that they say a proportion of the fine will only be paid on receipt of further government contracts. I would have thought that the opposite should be the case where further government contracts would only be awarded once the fines had been paid in full.
However, in the conclusions and recommendations section of the document the committee says;
The Department’s settlement with EDS
8. In settling its claim against its contractor EDS for the problems encountered in implementing the tax credit system, the Department agreed that £26.5 million of the settlement could be paid in instalments reflecting new government business won by EDS. The Department has recovered little of the £26.5 million and may not obtain payment of full settlement by the end of 2008. We have previously criticised the invidious arrangement that requires the Government to commission further work from the contractor in order to recover compensation for underperformance.
The Department needs to work with EDS to accelerate the rate of payments, and should consider litigation if the full amount of the settlement is not forthcoming in
2008.
What strikes me with this whole issue is the imbalance between contractor and department. Can you imagine a situation in your personal lives were something similar would be OK? Imagine HMRC’s reaction if you decided not to pay your taxes, or decided not to return your overpayments. I think we all know what would happen. Furthermore it must be remembered that EDS is and enormous global corporation. We’re not talking about a local business that really does need to receive payment for its last job before it can buy materials for its’ next job.
In Feb/March 08 edition of @SPVA the CE says ‘Our partnering arrangement with EDS attracts a high degree of scrutiny and in some quarters, cynicism.’
In some ways I suppose that he is correct, but I think that he would have been more accurate had he said ‘…and in some quarters concern, particularly its impact on civil service jobs and cost to the taxpayer.’
By means of and example of how wonderful EDS are the CE tells us how marvellous EDS were in dealing with the loss of 600,000 personal details held on an RN laptop. Given that the details were also held on EDS servers I should jolly well hope that they’d be able to find them. Had it been possible for civil servants to have access to this data (which is our data, on servers that we pay for) then I’m sure they could have done the job equally well.
Given the fines imposed by HMRC on EDS we would be most interested to know if SPVA will be imposing fines on EDS for failures in the JPA Sadly questions to the CE concerning this have been rebuffed with the old ‘commercial in confidence’ line. We would have thought that given that he says that JPA is ‘performing well’ he could simply have said ‘no’. Readers will be please to hear that we are pursing this particular issue via other routes.
