Tories criticise ID cards contract compensation

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The Conservative Party has criticised plans to include compensation clauses in the event of cancellation of ID card outsourcing contracts.

The ongoing negotiations between a number of outsourcing providers and the Home Office regarding the government’s ID card and National Identity Register (NIR) schemes have angered the opposition, which has pledged to scrap both.

In the event that the Conservatives are elected to power and fulfil their pledge to abandon the plans, they could be held liable for compensation worth tens of millions of taxpayers’ pounds.

The shadow home secretary, Dominic Grieve, said: “We put the government and industry on notice two years ago that we would abandon this project.”

And he called for the government to “disclose what steps it has taken to protect the taxpayer from liability”.

The Home Office responded in a statement by saying it would be inappropriate to release any negotiation details, but that it would “agree contracts that appropriately protect the public purse”.

“It is normal and fully within government guidelines to include break clauses in contracts of this kind, but such contracts are always commercially confidential,” said the statement.

“Regardless of the government of the day it would be inappropriate to operate based on opposition policy because it would unreasonably constrain our work,” it added.

Although the actual figures under negotiation were unknown, the ID cards scheme is expected to be worth some £2 billion. Thales SA is the only firm so far to have been awarded an £18-million contract for a trial involving airport workers.

But the government did confirm compensation would be paid for scrapped contracts, allowing the firms to claim costs, in addition to lost profits, if they receive less than a year’s notice.

The Liberal Democrats home affairs spokesman, Chris Huhne, commented: “If these contracts are signed and then cancelled it would represent a spectacular waste of taxpayer's money on literally nothing at all.”

Dominic Trott, consultant at specialist outsourcing researcher, Pierre Audoin Consultants (PAC) told IT PRO that the addition of break clauses to IT outsourcing contracts was common practice for public sector organisations.

He added: “Although these cancellations are uncommon, it is not unreasonable for the supplier to expect compensation. It is important to note that, especially for large frameworks such as the National Identity Scheme, there are considerable costs involved simply to bid for the contract. Also, with much of the early costs of such projects being borne by the supplier, they are unlikely to start making a profit from them for the first couple of years.”

Five firms, including CSC, EDS, Fujitsu, IBM and Thales, won the framework contract to supply the scheme in May last year.

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