09 June 2009 | Jake Kanter
A group of MPs today criticised HM Revenue & Customs (HMRC) for its "highly unsatisfactory" method of securing £71.25 million in compensation following a dispute with a supplier.
In 2005 technology services provider EDS paid HMRC a chunk of money to compensate for its underperforming computer system to deliver tax credits (government payments to people that need support with tax).
It also committed to pay HMRC the remaining £26.5 million over a period of three years but during that time the department received less than £1 million. EDS settled the compensation in a lump sum in January, following its takeover by Hewlett-Packard last year.
A report by the Public Accounts Committee (PAC) said HMRC's agreement that EDS pay part of the compensation in instalments based on the IT firm winning future government contracts, did not work. The committee has previously recommended that Government should not be placed in the "invidious position of having to commission further work from the contractor to recover compensation for underperformance".
PAC chairman Edward Leigh MP said the agreement was "highly unsatisfactory" and should "never be repeated".
The report urged HMRC to work with the OGC to ensure other departments learn from the handling of the dispute. It added that the OGC should provide guidance for the public sector on settling similar wrangles.
HMRC did not respond to supplymanagement.com's request for comment.