Rich pickings and high risks are on the cards

But behind the scenes some of the world's largest IT companies, to which the Government will turn to develop and manage the computers and biometric technology for the cards, are jockeying for position. In their sights is what could be one of the biggest UK government computer projects.

Those lining up include EDS, BT, Fujitsu, Sun Microsystems and Accenture, and the potential bounty is huge. A report published by the London School of Economics last week estimated the cost of implementing ID cards at between £10.6bn and £19.2bn, although this figure was disputed by the Home Secretary, Charles Clarke.

The report's co-author, Professor Patrick Dunleavy, says that the introduction of ID cards would require a complete overhaul of many government departments' computer systems, some of which date back to the 1970s. "We think it could be bonanza time for IT companies," he says.

Many of these companies are nervous about talking openly about the ID card project and have used their trade body, Intellect, to negotiate with the Home Office on their behalf.

Nick Kalisperas, director of public sector at Intellect, says: "We have been talking to the Home Office for the last three and a half years. Early engagement is key to the success of large projects like this."

Those companies prepared to stick their heads above the parapet are bullish. Fujitsu Services, for example, is interested in developing and running the huge database to support the cards as well as providing the computers. "There will be something with the Fujistu stamp on it," says John Newton, a senior consultant at the company.

Sun Microsystems is also lobbying for a role in providing data storage and computers, and developing the standards on which the IT system will run. Graham Kemp, head of public sector at Sun UK, says: "We are well placed to provide the technology infrastructure. Sun is keen to take on more risk by going for projects like this."

Mr Kemp's comments touch on another reason why IT companies have so far kept a low profile on ID cards - risk. Government IT projects have a habit of going wrong - over budget and over time. Sometimes the systems don't even work properly. Many fear the introduction of ID cards could go the same way. Last week's London School of Economics report, which drew on the views of the IT industry, called the Home Office's proposals "too complex, technically unsafe, overly prescriptive and lack[ing in] a foundation of public trust".

Professor Dunleavy adds: "One big issue with biometrics is that if someone steals your credit card, you can cancel your details and get a new one. But you can't change your iris colour or fingerprints."

The report also said it would take 60,000 person years to interview, document, check and manage the registration of the population. It suggests an alternative model, where individuals register their biometric details on cards that they can use for banking, shopping and so on. This would be far cheaper to implement, it argues, as businesses would subsidise the costs because of the efficiencies gained and the commercial value of the data they would have access to.

The risk of failure is looming large in IT companies' minds. If something went wrong it would hit profits, damage their relationship with the Government and, worse, damage the reputation of the company as a whole. Eric Woods, a director at IT researchers Ovum, says: "This will be a high-risk project. In terms of profile and scrutiny, it will be even higher than the NHS IT project. Any supplier needs to factor this in when deciding whether to bid."

One major IT company, which asked not to be identified, confirmed it was not prepared to bid for a prime role because of the potential risks. As a result the Home Office has also consulted with defence companies, which are keen to expand into IT services. These are thought to include Raytheon, Lockheed Martin and EADS.

Companies could demand higher profits to compensate for the risks. Typically, the margin on a major government IT scheme is up to 8 per cent. Industry sources say they would expect a 10 per cent margin for the ID cards project.

Professor Dunleavy suggests that one way to reduce the risk would be make the technology involved - which will encompass fingerprint recognition, iris scanning and digital photography - less hi-tech. Another would be to spend more time on the design processes and in drawing up fixed-procurement contracts that would make it clear who was at fault if something went wrong.

The Government promises to introduce ID cards by 2008. Many industry sources believe this is too soon. Intellect's Mr Kalisperas says: "2008 is tight. If the Government wants to proceed with that deadline then it has to be selective in terms of the technology. There is no reason why it should not let the 2008 deadline slip a bit to get the procurement process right."

The Home Office last year set up a team to examine the feasibility of the project and how contracts would be structured. It is now thought to number around 100 staff. But a spokes-woman insists no supplier has yet been selected, and that procurement will be put out to competitive tender early next year.

Fujitsu's Mr Newton adds: "2008 will be challenging. You can read into that what you like."