HMRC attempts to enforce penalties on a supplier

HM Revenue & Customs (HMRC) is preparing  to sue a supplier, EDS, for failure to pay agreed penalties in respect of a botched computer system. The trouble is … EDS has not breached the terms of their penalty payment agreement, according to Computer Weekly 16 October (print edition). Check http://www.techworld.com/news/index.cfm?RSS&NewsID=10359 for more details.

According to Techworld:

Problems with a computer system provided to implement tax credits at HMRC led to millions of pounds of overpayments. HMRC signed the £71.25 million ($146 million) compensation deal with the firm in November 2005, with more than £25 million of the settlement dependent on the contractor winning future government work – a provision strongly criticised by the Public Accounts Committee.

According to Computer Weekly: “By the end of 2006 EDS had paid less than £250,000 of the [contingent part of the settlement] – at that rate it would take about 100 years to pay off the full amount”.

Computer Weekly quote HMRC chairman Paul Gray as saying that “It is quite clear that over the past two years EDS has been less successful in winning contracts for provision of public sector IT support in the UK than it was expecting”. He goes on to say, “I am determined to ensure that we obtain the full amount of the settlement, even if the flow of new business to EDS is not enough to generate the full payment to us.”

It is great to see the government standing up to bad suppliers (so much of the time the stories are about the government meekly handing over more taxpayers cash to pay for delays and errors).

But given that the penalties were imposed because of poor performance, it seems that linking the penalty payments to EDS’s ability to generate more revenue from the government was a bit of a daft move on the part of HMRC: “You’ve screwed up royally and we’ll make you pay for your mistakes, but only from any profits you make from future screw-ups work you do for us.”

Looks like HMRC are going to have their work cut out to get EDS to cough up.

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