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Taking over taxes

I am sitting with David Thorpe, the Managing Director for EDS UK in a flash piece of New Mayfair with its own history of helping the government. In the 1980s, Landsdowne House in Berkley Square was home to Saatchi and Saatchi. After the go-go decade went, the Brothers S moved to more modest digs. Their offices were taken over by a global management consultancy, A.T Kierney, which EDS recently acquired. So the backroom boys of the 1990s have taken over from the flashiest of the 80s operators. It seems sort of ironic. And sort of fitting.

Thorpe is less cocksure than the guys out in West London. Likeable and easily distracted, not really much of a marine. He explains how EDS's business is changing. EDS doesn't want subcontracted chores. It wants partnerships. That's one of the reasons why it sought out Kearney, one of the world's top ten management consultancies.

It is time to move he tells me, from outsourcing to co-souring. Cosourcing is a way for EDS to become a partner in some or all key areas of a business, reaping rewards across the entire spectrum. By the year 2000, Thorpe predicts, fifty per cent of EDS business will be based on this sort of partnership. The pace of change will be so great by then that companies will need a partner that brings more to the picnic than the unfeasibly overdeveloped expertise in operating systems and data architecture. That's what EDS wants to offer.

And it wants to offer it to governments too. Thorpe shares with his colleagues a deep cynicism about government. By its very nature it is inflexible - unable to meet the demands of a complex marketplace. EDS, he says, has streamlined the re-engineering of government, helped to develop a service culture within departments, and saved several hundred million pounds.

Sounds good. But it is not always that simple. Take the Inland Revenue contract, EDS's biggest UK contract to date, a strategic partnership that amounts to something not unlike cosourcing. The invitation to tender ended up about two feet thick and took eighteen months to produce. It described the exercise as a strategic partnership. In the end, only two organisations were seen as fit to tender for the job: EDS and a partnership of CSC and IBM. In November 1993, EDS became the outright victor, reaping a billion pound ten year contract to manage and control all IT business of the Revenue.

The Revenue's staff association tried to stop the deal. It planted questions in Parliament, mounted a strategic lobbying exercise, and wrote to the fifty biggest companies warning that tax data in the hands of an American private company may fall victim to industrial espionage, but all to no avail. The staff association couldn't successfully argue with a quoted 225 million pounds that the contract would save over its lifetime.

With the help of 2,000 former Revenue employees, EDS operates the day to day PAYE tax system on a daily basis. (The employees, says the union, get a better deal now though they are contractually barred from discussing the terms of their employment) It will engineer and manage new projects such as self assessment. But the precise details of how it does all this are unclear It is not that noone has tried to specify them - people have. Expected results, required process, record keeping, finances, staff transfers, confidentiality provisions, copyright conditions and so on are all laid out in an astonishingly long and complex contract, one that more than matches the tender in complexity. But you cant get at it. The contract is treated as commercial in confidence, meaning that noone has the right to view it. The government's documents leading up to its development are called working papers and are also exempt from disclosure.

So information is flowing more freely than ever around the Inland Revenue. It must be, after all. The contract requires it. But how it flows, and who controls the flow - that is now unknowable. If efficiency has been gained, then it has been at the expense of accountability.

Or, rather, at the expense of the notion of accountability. anyone who has had the misfortune to be stuck in a DSS office, or bungle, will laugh at the notion that the system is accountable to the public. In theory at least, there is a democratic line of accountability leading to the Minister. In the new deal, it is the contract, not the line of accountability, which forms the primary instrument of administration. Pathetic, unworkable and disreputable as the chain ay have become, it still carries some normative, ideological value. But not after outsourcing.