Feeds

EDS wants MOD pound of flesh

Gov evasive over IT hiccup

Build a business case: developing custom apps

US IT services giant EDS is seeking compensation from the UK Ministry of Defence (MOD) after being given bum orders for the delivery of a £2.3bn contract.

In the firm's annual report, filed with the US Securities and Exchange Commission last week, it said it was trying to get "adjustments" to compensate for the "financial impact" of the MOD having changed its mind about how it wanted its ambitious Defence Information Infrastructure (known as DII) built.

According to an MOD spokesman, the value of compensation sought by EDS was "in terms of the overall value of the contract...not significant". But EDS's SEC filing suggested the amount could be significant: "If we do not reach satisfactory resolution with respect to these matters...our revenues, earnings and free cash flow for this contract, or the timing of the recognition thereof, could be adversely impacted.

The statement also implied the MOD had failed to meet contractual responsibilities on which EDS was dependent to do its work.

In EDS-speak this was reported as "client driven program changes and inability to achieve dependencies". It expects to take a hit to profits and revenues if it fails to get compensation.

"We have met client expectations regarding key deliverables under this contract," EDS said, "despite program changes and inability to achieve certain related dependencies that have extended the initial development timeline."

The total value of this deal over 10 years, spread between a consortium of suppliers led by EDS, is £4bn. These issues have arisen just a year after the contract was awarded and the month before work was officially due to begin.

It was an ambitious project from the outset, and not just because of its size, involving 2,000 jobs and 70,000 desktop computers. It involved the assimilation of umpteen old computer systems into an all embracing network, the kind of task that complicates any IT project.

According to analysts at Ovum last year, DII was intended to "change the way the armed forces operate". EDS would be required to manage this organisational change, yet change management is time and again the spanner in the works of government IT projects. There is a severe shortage of people with the skills to manage this aspect.

There are other, more commonplace concerns raised by EDS's revelation. What, for example, will be the cost to the MOD of changing its mind about what it wanted from EDS, should it capitulate? According to analysts at Ovum last year, the project was estimated to bring savings of £170m within the first three years. £43m of this was expected to be gleaned in the first year. Will they still be realised?

Why did these changes have to be made and why weren't they spotted before? What impact will they have on project timescales and future costs?

The MOD provided written answers to some of these questions. The Gershon efficiency review had required some changes, but these had been anticipated, it said. Apparently, the contract "allows for a level of change".

It failed to say how changes in orders that had been anticipated and worked into EDS' contract would prompt the supplier to admit it was "working with the client to agree upon the appropriate adjustments provided for under the contract".

Contractual negotiations with the MOD prior to signings may have been "aggressive and confrontational", as said one source who had been involved in competitive negotiations for the MOD business before it was let this time last year.

"Once you get the contract out of the drawer and start poring over every sentence, then clearly the partnering has broken down," the source added. ®

The Essential Guide to IT Transformation

More from The Register

next story
Just TWO climate committee MPs contradict IPCC: The two with SCIENCE degrees
'Greenhouse effect is real, but as for the rest of it ...'
Adam Afriyie MP: Smart meters are NOT so smart
Mega-costly gas 'n' 'leccy totting-up tech not worth it - Tory MP
'Blow it up': Plods pop round for chat with Commonwealth Games tweeter
You'd better not be talking about the council's housing plans
Arrr: Freetard-bothering Digital Economy Act tied up, thrown in the hold
Ministry of Fun confirms: Yes, we're busy doing nothing
ONE EMAIL costs mining company $300 MEEELION
Environmental activist walks free after hoax sent share price over a cliff
Help yourself to anyone's photos FOR FREE, suggests UK.gov
Copyright law reforms will keep m'learned friends busy
Apple smacked with privacy sueball over Location Services
Class action launched on behalf of 100 million iPhone owners
UK government officially adopts Open Document Format
Microsoft insurgency fails, earns snarky remark from UK digital services head
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.