IT giants face investigation over Whitehall contracts

Government IT suppliers are in danger of a competition investigation after the trading watchdog turned its spotlight on the £10.4bn public sector computing market.

The Office of Fair Trading is calling for information on the market amid concerns over the dominance of larger suppliers, higher barriers to entry for smaller firms, and the difficulty of switching between suppliers.

It will also look at whether some firms seek to limit the compatibility of their systems with rivals', and if the public sector's dependence on suppliers affects its ability to gain value for money.

The biggest players are Hewlett Packard, Capita, CapGemini, Fujitsu and BT's global services arm.

In 2011 the Cabinet Office pledged to "put an end to the oligopoly of large suppliers that monopolise its ICT provision" as well as "break down the barriers that impede SMEs from bidding for contracts".

An inquiry by the Public Accounts Committee (PAC) heard from smaller firms who claimed a "cartel" was operating in the sector, although this was denied by the bigger firms. Its report said it was "ridiculous that some departments spend an average of £3,500 on a desktop PC".

Margaret Hodge, PAC chairwoman, said: "This is an area where there has to be better value for money for the taxpayer. Too many projects cost too much and too many go wrong."

The watchdog will examine whether the practice of bundling contracts together by different local authorities acts as a hurdle to smaller firms unable to deliver aggregated deals. It is also worried that framework agreements could restrict the number of firms able to win contracts.