Whitehall focus Relief as IT contractor moves back into profit

17 Feb 05
Electronic Data Systems, one of Whitehall's largest IT contractors, has eased fears about its financial health by reporting a profit but the government has revealed it has investigated the company's finances four times over the past three years.

18 February 2005

Electronic Data Systems, one of Whitehall's largest IT contractors, has eased fears about its financial health by reporting a profit – but the government has revealed it has investigated the company's finances four times over the past three years.

EDS chief executive Michael Jordan reported that the US-based company made a net profit of £28.6m in the final quarter of 2004. It was boosted by a new contract with the Ministry of Defence's Armed Forces Personnel Administration Agency and international public sector deals. In 2003, the company revealed losses of £181m for the same period.

The news came as a relief to officials at the Office of Government Commerce, Whitehall's procurement watchdog, which this week was forced to reveal that it had been closely monitoring 'financial affairs' at the company.

Following a request under the Freedom of Information Act by the Sunday Times, the OGC acknowledged it had commissioned accountants Deloitte to compile two reports on EDS.

The studies, Ranger I and II, were undertaken in 2002 and 2004. Two 'internal reports' by the OGC were also conducted in 2004.

The OGC could not, however, disclose the contents of each report 'in accordance with exemptions under the FOI Act'. Some exemptions apply to commercially sensitive data.

The OGC also withheld details of its correspondence with Deloitte, but revealed that it had discussed draft copies of the Ranger reports.

OGC officials would not reveal why the reports were undertaken, but Whitehall sources told Public Finance that EDS's role in a consortium bidding for a £4bn MoD IT contract 'undoubtedly played a part'. EDS will discover next week if its consortium, Atlas, has won the contract.

A spokesman for EDS said: 'It is common practice for the OGC to assess firms bidding for or supplying major contracts and we complied fully with all requests.'

EDS has been a big beneficiary of the government's outsourcing drive, but has been criticised for high-profile IT failures such as problems with electronic records at the Child Support Agency. The company has been subject to losses on large US public sector contracts and lost a major deal at the Inland Revenue in 2003.

Revealing EDS's figures on February 8, Jordan said: 'We're off to a solid start in 2005, while continuing to be disciplined in our approach to contract signings.'

Mother sues the CSA for negligence

A landmark court battle that could call into question the future of the troubled Child Support Agency is under way.

Alison Davies, a single mother and trainee legal executive from Crowton in Cheshire, is suing the CSA for £15,000 in damages and £4,500 in backdated payments. She has alleged negligence on the part of the agency after it undervalued payments she was owed from her former partner.

The claimant and the Department for Work and Pensions' legal team provided submissions at Warrington County Court last week. The DWP team argued that the CSA had no duty of care to make accurate payments.

Judgement on whether the case should proceed has been reserved for six weeks. If successful, the case would open the floodgates for others, which could cost the exchequer hundreds of millions of pounds.

Last month, work and pensions secretary Alan Johnson said he had not ruled out the 'nuclear option' of closing the CSA after the Commons' work and pensions select committee published a damning report on its failings.

MPs found that the 'woeful' agency had made around £172m in overpayments, failed to collect payments totalling £720m, written off £940m of arrears and built up a backlog of 250,000 claims.

Johnson has given the CSA just weeks to improve its performance, suspending plans to shed a quarter of its staff in the process. A DWP source told Public Finance that another public embarrassment 'would be viewed very unfavourably'.

FoI refusals reach watchdog

The minister responsible for the Freedom of Information Act this week vowed to continue improving Whitehall's transparency, as complaints began to reach the watchdog overseeing the law.

Constitutional affairs minister Catherine Ashton said the introduction of FoI had 'marked a fundamental change' to the way official information was treated.

But Public Finance has discovered that 22 requests for information from public bodies had already been referred to the independent Information Commissioner's Office by February 15 after they were turned down by public organisations.

While that appears to be a low figure when measured against thousands of requests made to public bodies following the introduction of the Act on January 1, this week represented one of the first opportunities for appeals to reach the watchdog.

Under the FoI Act, which provides a statutory right of access to certain information held by public bodies, organisations are required to respond to most requests within 20 days. If a request is turned down, the organisation must set out in writing reasons why it has been refused.

Responding to a report on the FoI Act this week, Ashton said: 'FOI is about the long-term transformation of culture towards official information.' She added: 'The government is committed to leading this process of cultural change.'

PFfeb2005

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