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EDS Loses Contract With UK Inland Revenue

by Jason Gorringe, Tax-News.com, London

15 December 2003


EDS, the American-based IT services firm has lost its most lucrative government contract after the UK’s Inland Revenue announced a new ten-year deal with a consortium led by Cap Gemini, though the government insisted the decision was not motivated by the highly-publicised failure of the new tax credits system.

EDS has worked with the Inland Revenue’s tax and national insurance computer systems since winning the initial £1 billion ten-year contract in 1994 (which has since grown to £2.2 billion), but the firm never really recovered from the embarrassment following the repeated breakdown of the tax credit system it was responsible for building, leaving some claimants empty-handed for many weeks and providing plenty of extra work for the government's hard-pressed spin doctors.

Chairman of the Inland Revenue, Sir Nicholas Montague, has admitted the tax credit scheme went “spectacularly wrong" and was harshly criticised along with president of EDS Europe Bill Thomas by the Commons Public Accounts Committee. Its chairman Edward Leigh, accused both men of “conniving to introduce a system which you knew did not work and brought hardship to hundreds of thousands of people while allowing EDS to make a fat profit out of it".

However, despite the fact the affair left egg on the faces of senior Inland Revenue, Treasury and the government figures, a Revenue spokesman insisted the department had a “very productive relationship” with EDS, who remain in the running for £4 billion Ministry of Defence contract.


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