NEWS from http://www.zdnet.co.uk/news/regulation/2010/05/14/id-card-contract-cancellation-could-be-costly-40088937/
The new government's plans to scrap the National Identity Scheme, biometric passports and ContactPoint could be expensive if they involve prematurely cancelling contracts.
Vendors including IBM, CSC, Thales and Capgemini hold existing contracts relating to programmes like the National Identity Register (NIR), the next generation of biometric passports and the ContactPoint children's database. All are set to be cancelled by the new coalition government.
Capgemini hosts ContactPoint for the Department for Education (formerly the Department for Children, Families and Schools) under a £40m contract. A spokesperson for the provider told GC that it "remains unclear" what will happen with the deal, which runs until 2014, as talks with the new government have not yet taken place.
"We are open to whatever they want to discuss, whether that means managing a switch-off or not," the spokesperson added.
Labour, Tories, Lib Dems and other parties outline their tech policies on open source, government IT and other issues
The Liberal Democrats and Conservatives believe that dumping the schemes would save billions of pounds, but terminating the contracts midway may present some expensive hurdles.
"Despite grasping at the cost savings from reducing and cancelling the schemes, the government is likely to face implications for the lengthy contracts awarded to suppliers such as CSC for the application and enrolment of passports and identity cards and IBM for the National Biometric Identity Scheme (NBIS)," said Clare Hirst, a senior analyst at Kable.
"Although it is likely that contracts will have been negotiated with a clause for early termination of the scheme, vendors will still expect compensation of a percentage of the full cost of the total implementation. The NBIS will still remain, albeit at a reduced scale," she added.
Hirst estimates that the cost of the IBM contract will fall from £265m to £53m if it were to be cancelled, resulting in penalties for the government as IBM will have been contracted for the full scope of the project.
IBM was awarded the contract by the Home Office in May 2009, whilst CSC has a 10 year contract with the government worth £385m.
As detailed in its election manifesto, the Lib Dems believe cancelling fingerprint passports would save £1.83bn over the five financial years from 2010-11 to 2014-15, with savings from terminating ID cards coming to £550m.
That party's manifesto also said that ditching the Interception Modernisation Programme, which aims to expand data held on individuals' email, web and other internet traffic, would generate savings of £800m, whereas ContactPoint's cancellation would save £190m.
A detailed analysis of the NIS's costs for UK citizens, published by Kable in 2009, agreed that substantial savings could be made if the schemes were dropped. The report suggested that the £4.95bn cost over 10 years could be reduced by £3.08bn to £1.88bn if ID cards, the NIR and fingerprints on passports were abandoned.
During Labour's election campaign former home secretary Alan Johnson argued that getting rid of the ID card scheme at this stage would be counterproductive. "The money all comes back because we charge for ID cards. If we stop now you've wasted all the capital investment and you get no money back because we will charge for the ID card," Johnson said at the time.
Hirst said that the key areas that will be affected if the schemes were scrapped would be the card design and production — for which the contract had not been awarded — programme management, enrolment offices and customer contact centres.
During the election, Labour MP for Blaydon Dave Anderson said that hundreds of jobs at a local De La Rue Systems passport making plant would be under threat if Lib Dem proposals were implemented. A similar argument was made by Labour MP for City of Durham Roberta Blackman-Woods, where the voluntary ID cards scheme is administered.
"One thing is for sure, and that is that the national identity scheme is unlikely to leave quietly," Hirst concluded.
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