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IT outsourcing giant Atos is to have all £500 million worth of its Whitehall contracts reviewed, as the Cabinet Office responds to a furious Public Accounts Committee from MPs.

The review could be for a whole host of reasons – general annoyance with Atos; a warning shot from government to show the big suppliers it means business; or even as a bargaining chip for negotiating favourable contracts in future.

It's unusual for one company to be singled out, even for a firm like Atos that has been mired in controversy over various projects.

The Public Accounts Committee (PAC) said in December that Atos did not show an “appropriate duty of care to the taxpayer” for the IT system behind the General Practice Extraction Service – which was designed to allow the extraction of data from GP practices. However, the National Audit Office report prior to the PAC grilling was much more measured.

Should Atos be held solely responsible? Or does this highlight failings in the government procurement model?

Kable’s chief analyst Jessica Figueras says: “I thought the statement from the PAC about the duty to the taxpayer was slightly off – it’s the departments that have the duty to the taxpayer.

“They also have the duty to get the contracting model right to manage their suppliers appropriately. They need to take responsibility.

“I don’t think you do that just by reviewing one contract at a time – I think there has to be a bigger piece of work where they bring all of these things together and just look for evidence of what works. We’ve not seen that.”

Under the previous Coalition government, the Competition Commission threatened to look into the big public sector IT providers unless changes were made – so it’s no wonder there’s some speculation this is the Cabinet Office baring its teeth.

Daniel Thornton, programme director at the Institute for Government, told the Guardian that reviewing a single supplier is unusual – but not unheard of.

“As part of its drive to save money, the government now relies on outside providers to deliver essential public services, despite repeated problems with managing outsourced services.

“So while it is unusual to recommend a review into all contracts with a single provider, it isn’t unheard of – and we might expect more of this in future.”

Atos has issued a statement, which reads: “We welcome this review. We look forward to working with the Cabinet Office with whom we have a transparent and open relationship and we look forward to maintaining our green rating for delivery across Whitehall.”

The move could have dramatic implications for the UK’s major IT outsourcers, according to Kable’s Figueras, as public sector bodies adjust to managing outsourced contracts rather than providing services directly.

“In the IT outsourcing space there are major contracts coming up and expiring – the Home Office, HMRC, DWP, and others – there are big things happening there,” she says. “Clearly all of the big outsourcing companies like HP, Capgemini, CSC and Fujitsu will be looking at those opportunities.

Atos must be wondering if the Cabinet Office review will damage its position in competing for future contracts. And while the review could prove a boon to the other big players in the short-term, it also suggests a higher risk for reputational damage in the long-term.

“The Cabinet Office has indicated quite clearly that it doesn’t want the next round of contracts to be business as usual," Figueras says.

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