US computer giant Hewlett-Packard rakes in £140m a month from Whitehall

Billions are being spent on ‘over the odds’ IT contracts but ministers say hands are tied by long-term deals

Whitehall Editor

Private IT companies are being paid almost £5bn a year by the taxpayer to run Government computer networks, startling new figures reveal today.

An analysis of contracts across Whitehall shows that the American computer giant Hewlett-Packard alone was paid £140m a month last year by the Department of Work and Pensions (DWP) and the Ministry of Justice for computer services. 

Another IT firm, Capgemini, holds contracts worth £1bn a year to supply and maintain computers across central and local government.

In total the Government paid £10bn to its top 20 contractors in 2013. Almost half of this was spent on IT.

The sums paid out to major international IT firms dwarf the £2.2bn paid to ‘outsourcing’ companies like Serco and G4S, who have been subjected to the most ferocious public criticism over their state contracts.

The figures were uncovered by the Whitehall think-tank, the Institute for Government, and Spend Network, which aggregates raw Whitehall spending data to show which private companies are the biggest recipients of taxpayer largesse.

Researchers studied 38 million transactions with over 180,000 suppliers. The project required over 16,000 hours of analysis over two years.

It reveals that out of the top 20 private sector contractors in Whitehall, six are IT firms who between them receive around £3bn a year from central government and another £1bn a year from local councils.

Among the biggest departmental spenders on IT were HM Revenue & Customs (HMRC), DWP and the Ministry of Defence. HMRC for example spent 86 per cent of its contracting budget with Capgemini.

Overall there are at least eight IT suppliers receiving more than £100m every year from a single government department, and at least 15 suppliers receiving more than £100m in annual revenues from multiple Government departments.

The largest contractor – the American IT giant Hewlett-Packard – has contracts worth £1.7bn a year.

The firm was one of the contractors given money by the DWP to develop its so far ill-fated Universal Credit project. £34m of that has so far been written-off.

Last night Cabinet Office sources said ministers were well aware that they were paying “over the odds” on a significant number of IT projects across Whitehall.

But they said there was currently very little they could do as the Government was locked into long-term contracts signed under the last Labour administration.

They added that a number of these were due for renewal in 2015/16 at which point they expected central government IT spend to fall very significantly.

“This is a problem which we raised on day one when we went into Government,” they said. “But many of these contracts were signed to run for many years without break clauses.

“We have a clear strategy in place to ensure that all future contracts will represent much better value for money and we expect very significant savings as these contracts come up for renewal.”

A spokeswoman for HP said the company was “a proud and longstanding supplier of IT products and services to Her Majesty’s Government” and provided “vital public services to UK citizens”.

“HP supports the drive for greater transparency and subcontracts around one quarter of its UK public sector ICT services work to other vendors of all shapes and sizes, including more than 700 small and medium enterprises,” she added.

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