Monopoly fears over government computer contract

EDS, the computer company founded by United States presidential candidate, Ross Perot, undercut rival bids by half in order to win the latest in a string of government contracts worth pounds 2bn.

According to today's Computer Weekly magazine, which has uncovered a number of anomalies in the awarding of government department contracts, EDS said it would charge only pounds 25m to provide computing services to 250 county and crown courts in England and Wales, while its nearest rivals are understood to have bid pounds 50m.

The company announced the deal this week but the difference in bids has resulted in some observers suggesting that EDS intends to use the contract as a way into future, more lucrative business. Under recommendations by Lord Woolf, Master of the Rolls, all courts are expected to undergo radical changes in the field of information technology.

Others believe EDS, which now has no links with Mr Perot, is growing too big too fast. It already has contracts to provide IT services to the Inland Revenue, the Department of Social Security, the Child Support Agency, the Ministry of Defence and the Driver and Vehicle Licensing Agency. According to a National Audit Office report, it also bid substantially below rivals to secure the DVLA contract.

Labour MP Alan Milburn, who has raised questions about the growth of EDS, said yesterday: "Clearly there is a danger of a new monopoly developing. The whole thrust of the Government's claims about market testing is to break down monopolies and not to make new ones.

"If there are any suggestions that a company is getting its foot in the door at a low rate now simply to make money out of the taxpayer in the future, then I think that is a great cause for concern."

The contract, awarded by the Lord Chancellor's department under the Government's Private Finance Initiative, will result in all court records being computerised. Currently, only six county courts benefit from computer record systems. EDS will earn a fee each time a summons is processed, with profits being directly related to the amount of "business" conducted by courts.

David Biondini, business manager at EDS, denied yesterday that the bid was a loss-leader, even though Computer Weekly's sources said that rivals, including Siemens, had costed the work at about pounds 50m.

"We have certainly not bought the business," he said. "There is no guarantee in the contract that further work will follow, so it would be madness to gamble on it.

"We have simply been able to bid lower than our competitors because we worked very closely with the courts and developed a system that enabled us to make huge savings."

He added: "This isn't a case of comparing apples with apples. The Private Finance Initiative allows you to innovate, and that is what we have done.

"The technology we have used and the way we have used it is the reason for our bid. I won't describe what it involves because we will want to use it again."

Asked about concerns over the number of contracts it held, another EDS spokesman said: "The important thing to remember is who owns the information we process - the government departments involved. There is a master-servant relationship and we are the servant of the departments who have contracted us to do a job."