Leader: EDS back in spotlight with £4bn MoD deal

EDS' victory in the bidding war for the Ministry of Defence's £4bn outsourcing contract to run the UK's armed forces' IT infrastructure is certain to set the cat among the pigeons in government IT circles.

Had the EDS-led Atlas consortium not bagged the landmark deal it would have almost certainly signalled the end of the Texas company as a major force in the UK public sector, as it had failed to get a piece of the £6bn National Health Service IT programme and been ousted from the £3bn Inland Revenue outsourcing deal by Capgemini.

As it is EDS is still under fire over the Child Support Agency computer system fiasco, with MPs calling for the agency and the computer system to be scrapped altogether. Handing the running of the UK's defence IT to the company for the next 10 years will almost certainly prompt further political and media backlash

All of which means, quite simply, that both EDS and the MoD cannot afford for anything to go wrong with the Defence Information Infrastructure project to create an integrated IT platform for the armed forces.

Given EDS' recent track record in UK government the CSC-led Radii consortium must have fancied its chances in the final head-to-head, a view backed by many industry observers.

In the end it was more likely EDS' experience in defence IT and its formidable alliance partners – Fujitsu Services, LogicaCMG, EADS, HP and IBM Global Services – proved the difference.

The CSC-led bid lacked defence expertise and although EDS made a bit of a hash of its US Navy IT contract that experience will still prove invaluable as long as the lessons have been learned.

But some key questions remain. Given that this was a 'must-win' bid for EDS, one wonders what its margins are on the deal and indeed whether they have been sacrificed in any way in order to make sure it won the contract.

Certainly the tough penalties and service level agreements imposed by the MoD proved too much for two other consortia – most notably one led by Lockheed Martin, which said it could not justify it commercially to its shareholders and dropped out.

It certainly makes it a more risky prospect for the MoD if EDS ends up struggling to make its margins. EDS for the record said it won't reveal any of the financials around the deal until its next trading update in April while the MoD said it is comfortable that the numbers stack up.

In the meantime, however, one simply has to say well done to EDS and the rest of the Atlas consortium.