February 7th, 2008
More EDS issues over botched IT project in UK
According to a recent report from Parliament, Her Majesty’s Revenue and Customs (HMRC) in the UK continues to pursue EDS for compensation over a major failed IT implementation. The settlement totals £71.25 million and includes a direct cash payment along with £26.5 million in credits from EDS against future work performed by the company for the UK government. Not surprisingly, EDS hasn’t received much follow-on work, so a substantial portion of the compensation hasn’t been paid. The government is prepared to sue EDS over the remaining amount.
This is one of those Twilight Zone IT tales that comes out of nowhere from inside the bowels of the UK government. Granted, EDS has proven itself to be anything but a model corporate citizen, and without doubt managing such a behemoth is a difficult and challenging task in the best of circumstances. Nonetheless, such hare-brained schemes remind one of the fox guarding the hen house. Ah, the power of large corporate legal departments with sufficient resources to successfully fight the government.
When negotiating the settlement, EDS put forth self-serving projections related to future government procurement plans (paragraph 21):
EDS informed the Department that it expects to receive a large amount of new business from the Government as a result of its participation in various procurement competitions both for new agreements and under existing agreements.
Did EDS have more accurate knowledge of future government procurement plans than the government itself? I wonder who actually negotiated this settlement on behalf of the government.
The secrecy provisions around this settlement are also interesting. See this exchange during House of Commons testimony (Sir David Varney was Chairman of HMRC at the time):
Q507 Mr Todd: Do you want to set out what you can on this matter, bearing in mind that some of it appears to now be in the public domain?
Sir David Varney: Yes. I find myself in an extraordinarily and exquisitely difficult position. I gave evidence in private to the Public Accounts Committee in some considerable detail. They also intimated to me that they were thinking of publishing that evidence and our legal advisers wrote to them to raise two legal concerns, one of which was the exposure of the details of EDS’s contract book. The second was about the nature of the settlement with EDS, which is that we get £71,250,000 over a period of time. We have got about £47 million of that so far. If we do not get all that money—
Q507 Mr Todd: Sorry, is that £47 million in cash?
Sir David Varney: Cash or cash equivalent.
508 Mr Todd: Cash or delivery of works?
Sir David Varney: No, not works, but can I just say the net effect on our resource account is as if it was cash, but it is not cash.
509 Mr Todd: So you are talking about software, or kit, or whatever?
Sir David Varney: Whatever. Can I just not go there….
Although details have leaked, EDS apparently considered the settlement less sensitive than specific terms and conditions of the original contract. I suspect that’s why the settlement details ultimately came out but the contract details did not.
This story is far from over, and you can be sure we’ll follow it in the future.
Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures. Click here to discuss this post with him on Twitter. See his full profile and disclosure of his industry affiliations.
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