2.13 ICL submitted a bid of £146 million on 27 May 1998 and as the only bidder was chosen as the preferred bidder in July 1998. At the time ICL was bidding for the Libra contract, the Department was aware that ICL was facing difficulties on another government IT project - the Benefits Payment Card (Figure 9). The Department was concerned that any financial problems from the termination of that project might have knock-on effects on the Libra project. Addressing these concerns to the Department's satisfaction was a caveat on ICL's preferred bidder status.
9 |
| ICL's involvement in the Benefits Payment Card project |
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| The Benefits Payment Card project was intended to replace the existing paper-based methods of paying social security benefits with a magnetic strip payment card. The contract was awarded to ICL in May 1996. By October 1996 ICL had developed a limited version of the system but the two purchasers, the Benefits Agency and the Post Office, and ICL became increasingly aware of the difficulty they faced in developing the full payment card system. This resulted in a "no-fault" replan of the project. Despite the replan, the project continued to make slow progress, as the full implications of the greater than expected complexity of the Payment Card service requirement continued to emerge. Though ICL had delivered intermediate releases of software by November 1997, it had not completed, as required by the replan, a live trial to demonstrate satisfactory, sustained operation of child benefit payments and a range of Post Office functions in 300 post offices. In December 1997, ICL suggested that if the project were to continue it would either have to increase its prices by 30 per cent or extend the contract by five years. In May 1999 the project was cancelled. The Government chose not to claim damages as part of an agreement with ICL in which the company also agreed not to counter-claim. Although all high-level specifications had been agreed ahead of the issue of the Invitation to Tender, a decision was made not to complete before contract award the documentation of detailed requirements. This was a major contributor to the later problems of the project. A key conclusion was that there must be agreement between purchasers and suppliers at the outset of IT projects on the extent to which new systems will either replicate the purchasers' existing systems, or re-engineer and simplify them. Source: C&AG's Report, The Cancellation of the Benefits Payment Card project, HC 857, 18 August 2000 |
2.14 The Department sought the views of the Post Office and the Benefits Agency to assess the potential financial exposure of ICL in respect of the Benefits Payment Card project. The Department's financial advisers considered that ICL would have sufficient financial strength to undertake the Libra contract as it was owned by Fujitsu. The proposed contract would also allow the Department to undertake financial security tests annually. If ICL were to fail one of those tests, the Department would have been able to terminate the contract.