19 November 2008 | Jake Kanter
Unsuccessful bidders for the Department for Work and Pensions' (DWP) £1 billion Post Office Card Account (POCA) contract will be compensated for "reasonable costs" after the government cancelled the tender process.
The project was dropped and the deal was awarded to existing supplier the Post Office. The decision was taken to support the Post Office - part of the Royal Mail Group which is a public sector entity - because the POCA contract provides it with an important source of income. It allows up to four million customers to collect benefits and pensions using a plastic card and pin.
Speaking in parliament last week, secretary of state for work and pensions James Purnell said the decision was not taken lightly and bidders who missed out would have their "reasonable" costs compensated. The DWP would not reveal how many bidders were involved because the information was "commercially sensitive".
He added that protecting "vulnerable" Post Office groups justified the award of a contract outside the competitive process. But Purnell was criticised by Tory MP Alan Duncan, who questioned whether the decision was made on sound legal grounding. Purnell argued the contract award complied with EU laws.
The DWP said it received legal advice to go to tender and cancelled the procurement through a "proper course of action". A spokesman for the department added it was not possible to put a figure on how much money the government had lost by scrapping the tender.
PayPoint, which was involved in a rival bid for the contract, said it was disappointed with the outcome. The bill payment services firm added it was too early to say if it will challenge the award.