Update: EDS scoops £4bn MoD outsourcing contract

The EDS-led Atlas consortium has won the £4bn Ministry of Defence (MoD) Defence Information Infrastructure (DII) outsourcing contract, one of the biggest outsourcing deals ever.

The Atlas consortium beat off the CSC-led Radii grouping. The latter comprised three well-known IT companies - BT and Thales as well as CSC - versus the six partners working with EDS.

Speaking at a press conference held at MoD headquarters in London today, a senior MoD official said the department is confident all the companies in the Atlas consortium will perform well. Besides EDS, Atlas includes Cogent, Fujitsu Services, General Dynamics and LogicaCMG as well as HP and IBM who were at one stage in separate competing consortia.

Well-documented failings by EDS at the Inland Revenue and Department for Work and Pensions meant that until recently Radii had been many industry watchers' favourite to win the giant DII contract. However, the MoD spokesman said due diligence had been done at reference sites at home and overseas and the department is confident past mistakes won't be repeated.

A senior consortium member said Atlas members are "obviously delighted that the prolonged effort" had ended with today's result, which had been tipped at the weekend.

A consortium led by Lockheed Martin of the US withdrew from the process last year but the Atlas spokesman said the DII cost "is commercially viable" and called the procurement process "realistic".

The fact that the two remaining consortia bids were both solid was emphasised by Government CIO Ian Watmore.

"The second-placed consortium was also very strong and would have made a good winner too," he said. "[There were] two very strong horses at the finish line."

Ahead of today's announcement, the National Outsourcing Association said that an Atlas win would do a lot to "polish up EDS' public sector image".

Features of the DII contract include replacing disparate legacy systems, interoperability across all the armed forces, access to new applications and - perhaps most importantly - no single point of failure, including transferral of roles of suppliers should one fail in a certain area.

Today saw Increment 1 of the DII awarded, accounting for around £2.3bn of the £4bn, 10-year deal, though it is expected Atlas will also end up winning Increments 2 and 3.

CSC, while riding high on a wave of large outsourcing and other IT services deals, isn't known for experience within UK defence.

CSC would not comment on the reasons why it was not chosen but said in a statement today: 'We are naturally disappointed not to be selected for this phase of the DII contract, but we do realise that we have been involved in a very competitive selection process."