BT snubbed over £4bn IT project

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BT's plans to expand its IT services arm have suffered a major blow after it was unexpectedly struck off the list of companies vying for a £4bn government project.

The Inland Revenue is searching for a company to develop software and run its 73,000 desktop computers for the next 10 years, in one of the country's largest IT projects. But last week it rejected BT's bid, leaving two groups vying for the contract.

The move caused surprise in the IT industry as BT's bid had been one of the favourites. BT bid through its IT arm, Syntegra, and had teamed up with America's Computer Sciences Corporation and the Anglo-French group SchlumbergerSema.

The Revenue is weighing offers from IT services consultancy Cap Gemini Ernst & Young (CGE&Y) and the incumbent computer operator Texan giant EDS, working with consultancy Accenture.

Many industry observers expected BT's bid to survive because the Treasury has indicated it was keen to see groups of companies running government IT systems. Last week the Treasury went a step further by serving notice on the use of the Private Finance Initiative for IT projects. But officials have indicated the Revenue project, known as Aspire, is safe because technically it is not a PFI scheme.

CGE&Y and Accenture will this week separately meet tax officials to discuss Aspire. Both bidders will be issued with a revised brief for the project. However, well-placed sources said that rumours of wholesale changes to Aspire were untrue. The Revenue will select a winner in December.

Martin Cook, heading the bid for CGE&Y, said: "We are pleased that we have been selected... But we have to be realistic; there is a long way to go before the project is won." The failure of BT's bid is a major boost to CGE&Y as many analysts had predicted it would fail to make it to the shortlist because it lacked experience of similar projects. EDS and BT declined to comment.

Aspire has been dogged by controversy since it was announced last year. Companies such as IBM and Lockheed Martin refused to bid, fearing the contract would be awarded to EDS. The Revenue has now agreed to pay the bidders' costs, estimated at £3m apiece.