Sources at the company dispute testimony given before a Parliamentary select committee by Cabinet ministers Alistair Darling, Stephen Byers and Alan Milburn. They deny ministerial claims that the payment system was not working and instead blame a related Department of Social Security computer project.
The row caps a year of serious mishaps for the computerisation of government systems in deals procured under the private finance initiative.
Another was the botched implementation of a new National Insurance database, which led to hundreds of thousands of pensions being underpaid. Yet another at the immigration service pushed the backlog for dealing with asylum cases to record levels. Most recently, delays with a new passport system caused massive queues at local offices.
The disagreement between ICL and the ministers over the cause of the failure has a long history. In 1996, the firm won a contract to computerise Post Office tills and automate the payment of benefits through them. Claimants were to have received a swipe card to authenticate their benefit claims, saving pounds 150m a year in encashment fraud.
But the contract immediately fell behind. Plans to roll out the tills and cards by the end of 1998 were pushed back two years.
As the delays mounted, the project was reviewed for a year before the benefits swipe-card element was abandoned in May, costing the Government pounds 140m and ICL pounds 180m in wasted development. The Government also lost pounds 320m in unrealised savings.
Speaking before MPs on the Trade and Industry Select Committee on 14 July, the three ministers said repeatedly that the benefits swipe card was simply not working.
Alan Milburn, chief secretary to the Treasury, said: "By the beginning of this year, the benefits payment card was looking undo-able," he said.
ICL denies this was the case. A spokeswoman said: "The card worked since 1996 and never missed a payment in trials."
Trade Minister Stephen Byers said that a live trial of the card system planned last autumn "failed". Sources at ICL said there was no failed trial, because the Government and the firm could not agree a schedule. The DSS wanted a trial for each benefit in turn, a process that would have taken up to five years, and was unacceptable to ICL.
ICL pins the blame on the DSS, which failed to deliver a pounds 268m in-house database of benefits data for the card system. It says benefits data was to be made progressively available from 1996 but only one - child benefit - was made available, with no others expected until 2000.
ICL, which is British managed but owned by Fujitsu of Japan, is now on the verge of signing a new pounds 900m deal just to provide new tills and a secure retail network for the Post Office. The DSS will pay benefits direct into bank accounts from 2003, bypassing the network.
Liberal Democrat social security spokesman David Rendel MP described ICL's attack on the DSS as "quite a serious allegation".
ICL's resistance indicates a growing willingness by computer firms to fight efforts to scapegoat them for government computer mistakes.
n Dan Sabbagh is a senior reporter for `Computing'Reuse content