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The not-so-odd-at-all couple

So three years on, how does the relationship look? I may not be able to see the contract itself, but I can ask questions of its incarnation in the form of John Yard and Peter Clough.

John Yard used to be in charge of the Revenue IT section with 2,500 staff under his control. Now he has no IT staff, but has responsibility, among other things, for managing the EDS contract. He likens it to running around with a pooper scooper.

Peter Clough is the EDS Group Director responsible for the private sector end of the contract. He and Yard enjoy a close working relationship - so close indeed that they compare it to a marriage. They've almost taken on each others' names. Clough's business card reads c/o Inland Revenue while Yard's boasts the impeccably corporate title of Director, Business Services Office. And if one of them is giving me a harder sell than the other on the afternoon I met them, it's civil servant Yard - in the nicest most convivial sort of way.

What, I ask them, about democratic accountability ?

"I think there was a key concern about whether (in outsourcing) we overstepped the boundaries and lost the benefits of the public sector doing this work. The key for us around all of that were security of taxpayer records and confidentiality. We were very concerned that the propriety that tends to be associated with the public sector should equally apply to any private sector organisation that gets involved in this work."

Propriety ?

"Basically that's honesty, and dealing with things in a fair and equitable way."

Hang on a minute. Whoever claimed, even in their wildest fits of loving kindness that government agencies were honest, fair and equitable. To the extent that they ever do display those qualities surely its merely because they are subject to democratic processes. But Yard is adamant.

"If we outsource, we have to enter into contractual arrangements which we believe will protect the public interest. We will then be accountable if that public interest isn't served." So you see. If the public interest is served, then the system is accountable. Even if no-one can hold it to account, and the public isn't asked. EDS appears to be cosourcing with Sir Humphrey.

I change tack, and come at the from the direction that matters most to the whole deal: money. Since the contract was signed some voices have started to ask questions about the decency of the outsourcing emperors exposure. In a report released earlier this year, Leslie Wilcocks, a fellow of Templeton College at Oxford analysed 61 outsourcing deals in Europe and the US. In about a half of these, the expected savings either did not materialise or were invisible. The report found that none of the Strategic Partnerships of the Inland Revenue/EDS type reaped the expected savings. The Oxford report also found that the deals with the greatest chance of failure were long term contracts in which all IT was outsourced. Sound familiar?

Yard and Clough contend that they're different. They've got a special relationship. EDS and the Revenue are on a profit split deal that divides the spoils if profits from the operation go above the 225 million mark. It's in EDS best interest to perform if they want an additional piece of the cake. Much the same synergy applied though to the outsourcing deal between IBM and an amalgamation of regional police fores for a fingerprint database system, an agreement which ended up in court. And it may have applied to EDS's deal with the Child Support Agency. EDS supplies all the CSA's technology and know-how, and has been responsible for designing and implementing the Agencies current computer system. In the middle of this year - for reasons that are largely shrouded by various layers of secrecy - the whole system collapsed. More than 350,000 cases were backlogged. An already miserable and unhappy staff found themselves (amazingly) even more unpopular than before. Then followed a rapid sequence of buck- passing, with both parties claiming innocence. John Staples, the man in charge of the contract at the EDS end, told me his organisation was blameless. We delivered exactly what the CSA asked for. The problem, he explained, is with an organisation that changed its administration and its policy after the system was implemented. There was simply too much paperwork (a child support application form is now 34 pages) and the government kept tinkering with its policy.

The view of almost everyone I spoke to at EDS was that they were the unwitting victims of a hate campaign against the the child support system. In reply, a CSA press officer told me I don't think there's anything we can say about this matter.

The Government of Florida certainly had something to say. It had contracted EDS in similar circumstances to build a Social Security system using the same systems that CSA uses. In the first year the system went haywire, causing massive logjams of cases and paying out 100 million dollars more than it should in benefits. The State stopped paying EDS, and EDS sued, arguing that the government had changed the system unexpectedly after implementation and - just like the case here with the CSA - seriously underestimated the amount of information it would need to process. We delivered what they asked for an EDS spokesman told local television.

In short, the EDS view is that these failures come from unanticipated changes in policy. In each case the contract, the technology and the special relationship could not withstand sudden changes in government policy. The company is not to blame: democracy is.

The contract defines the relationship between parties. It lays out the way tasks must be undertaken. If the people or their politicians decide, in their messy way, to ask for something else to be done, then the company is often unable to do it. This could yet be a serious problem in the Yard/Clough marriage. According to David Thorpe (father of the bride at EDS) the Inland Revenue contract was drawn up before Self Assessment - the most important change in taxation practice in fifty years - was developed. The part of the contract dealing with this fundamental change was simply an add-on. If self assessment was indeed an add-on then history points to a potential disaster that could at least partially paralyse the tax system. John Yard says that wont happen and that self assessment was factored in from the beginning. It would be nice to be able to check.

How bad can it be though? After all, the whole idea is to bring in the rigors of the market. in theory at least the government could find another supplier, or even take the work back in-house. In practice, this is unlikely to happen. Its the worst kept secret in the Inland Revenue that this is a marriage for life. Yard explains in understated language that it would be difficult for the Revenue to handle its own information in the future. We could buy our assets back from EDS, but we couldn't necessary get the people back. If the Revenue thought it lacked good staff before the transition, it is going to look pretty sad in ten years time. The bottom line, according to Revenue officials, is that within a couple of years the Department will not have the competence to frame the right IT questions, let alone find the right answers.

What about getting another partner ? The problem here is that the detailed knowledge of how the system works in now locked into one company, and very hard for an outsider to duplicate. The issue that will crop up on a re- compete is that if CSC wins, for arguments sake, they will need to negotiate with EDS for how they get the expertise, and I foresee an issue at that point which says that if the very best people are involved the losing company will be rather reluctant to let them go. EDS European Communications Director Mark Fox says he cannot recall when a major contract has changed hands.

One conclusion that might be drawn from all this is that a ruthless company could easily hold a government to ransom. With the competence extracted from the customer and with competition held at bay, a government's outsourcing partnership in an information age could quickly become a policy nightmare: a marriage made in hell.

As I leave the happy couple I find that some of what they say makes sense to me. But I still think the contract is a fundamental weakness. I don't think we can accept glib assurances that ministers will ultimately be held liable for their outsourcing decisions. If the EDS dream of Cosourcing takes off in the public sector, the old line of political accountability - weak as it already is - will collapse.