Update: U.K. government withholds EDS checks over IT system

EDS continuing to have problems with management and telephony systems it developed for U.K. government

LONDON -- Electronic Data Systems (EDS) is continuing to experience problems with a welfare case management and telephony system it developed for the U.K. government and as a result, the Plano, Texas, company is having a hard time getting paid.

As it continues to work with EDS to get the system for the Child Support Agency (CSA) fully operational, the Department of Work and Pensions (DWP) has also withheld £13.3 million ($25 million) in payments to EDS over the last two years, according to the minister in charge of the department.

"Despite recent progress, some significant problems remain with the new computer and telephony systems. These continue to slow progress on business recovery," Secretary of State for Work and Pensions Alan Johnson said in the latest House of Commons Parliamentary Select Committee progress report published Thursday. The committee is the legislative body charged with oversight of the government department.

"The department continues to retain substantial payments from EDS. The payment each year is determined by the contract and is linked to service levels and to the degree of functionality delivered. Between Jan. 27, 2003 and Jan. 16, 2005, the agency retained £13.3 million of payments otherwise due to EDS," Johnson said.

The computer system for the CSA, which has been delaying payments to tens of thousands of single parents, was launched in March 2003, two years behind schedule and £256 million over budget. It involves a Java-based application developed by EDS and is expected to cost the government £456 million over 10 years.

In July, the Select Committee issued a scathing report that characterized the EDS system as an "appalling waste of public money," and called for the entire system to be dumped if it was not fully operational by Dec. 1, 2004. In November, speaking before the committee, Johnson said he was considering the "nuclear option" of pulling the plug on the system, promising a "quick decision" on the matter.

In March's assessment of the situation, it appeared that Johnson was backing away from shutting the system down. "An Agency Business Transformation Program is being developed, which will contain short-term tactical initiatives and also places significant emphasis on ensuring medium to long-term sustained recovery," he said.

EDS and the Department of Work and Pensions are working closely on the business transformation program and as a result, the computer system is providing a day-to-day service to over 620,000 cases, the committee said in its report. By contrast, in November the committee was told that only 61,000 out of 478,000 single parents received payments from the system and that a total of £720 million of support payments remained uncollected. An additional £1 billion had to be written off as "uncollectible" by the government.

What was not provided was a date for when the system is expected to be satisfactorily functional, a point that did not go unnoticed by the Work and Pensions Committee.

"Our concern was, and is, for the thousands of people who are suffering because of the inadequacy of the CSA and its computer system," said the chairman of the committee Sir Archy Kirkwood. "The absence of a confirmed date for acceptable performance by the CSA, while understandable, is a major shortcoming in the government’s response."

EDS is disputing the withholding of funds by the DWP, the company said in a statement. A spokeswoman for EDS in the U.K. declined to give any further comment to clarify whether EDS was out of pocket for the payment or if it could recoup the money at a later date. A DWP spokeswoman said that due to the ongoing contractual issues she was unable to add further comment to clarify the matter.

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