26 July 2010| Angeline Albert

A £600 million pension technology deal is one of 35 UK government IT contracts at risk of renegotiation or cancellation, according to a report from analyst firm Ovum.

The UK’s coalition government is putting a total contract value limit of £100 million on every ICT procurement and 35 IT deals currently exceed this cap, said a new Ovum report.  

At risk is Tata Consultancy Services’ £600 million IT and administration contract for a low-cost pension scheme the National Employment Savings Trust. The India-based offshore vendor’s contract with the Pensions Administration and Delivery Agency was signed by the Labour government only a few weeks before it lost the election.

The report said the government would target existing IT programmes perceived to be of limited value or return on investment, such as Serco’s £100 million-plus BusinessLink contract with HM Revenue and Customs.

In February 2009, the Conservative party said government IT contracts should not exceed £100 million and the party’s March 2010 Technology manifesto said smaller projects would mitigate delays and failures and cut costs by increasing competition.

“There is no getting away from the fact that the new government has made winning new IT business more difficult,” said John O’Brien, senior analyst at Ovum and the report’s author.

“This is going to make life far tougher for many suppliers over the next few years. A key message to IT services suppliers is that it is not all doom and gloom. The government has not waged war with the IT industry – just with programmes that are perceived to be poor value for money, too risky, and which do not meet its political aims. Therefore, we do not believe these new policies will spell an end to the £8.5 billion a year public sector IT service market.”