Under-fire Capgemini lands £250m deal

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Capgemini has been named preferred bidder on a new Government outsourcing contract despite the recent furore about the company's deal with HM Revenue & Customs over massive cost over-runs.

Capgemini, the French IT services provider, has secured a new outsourcing deal with the Learning & Skills Council which could be worth nearly £250m over the five-year contract.

Capgemini will replace the existing suppliers Fujitsu and Xansa from 2008 to 2013. It will become the prime contractor for the Learning & Skills Council's IT infrastructure, applications and networking needs, and will support 3,000 desktop users across a variety of locations. It expects to finalise the deal in mid-November.

Government outsourcing has been a tricky business for a number of IT services companies over recent years due to the complexity of the IT systems being put in place and changing needs of government departments. Over the past two years, the massive project to upgrade the National Health Service's IT infrastructure has been in the spotlight due to delays to rolling out the new systems, cost over-runs and the collapse of some of the software suppliers.

Capgemini has come under fire from MPs as part of the Aspire contract to run the HM Revenue & Customs department's IT system which supports services in areas such as child benefit payments, income taxation and minimum-wage enforcement.

Capgemini won the near-£3bn contract in 2004 after the Inland Revenue dropped the previous supplier, EDS, but the cost of the deal has spiralled to three times the original cost due to the merger of government departments.

MPs criticised the department for subsidising the cost of interested suppliers during the bidding process, and argued that Capgemini was set to make a profit of around £1.1bn – four times that originally anticipated.