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EDS - Electronic Data Systems
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EDS - Electronic Data Systems

The quotes provided are normally directly from the original article, but typically whole sentences and paragraphs are omitted, often without indicating where the omission is, but without altering the order of presentation.

Date & reference Extracts (not necessarily contiguous)


In May 1989, the State of Florida signed an agreement for EDS to supply a system to manage welfare benefit payments for the disadvantaged. The system was based on IBM 3090 mainframe and was intended to integrate six software modules, covering social security payments made for food stamps, child support payment enforcement, and Medicaid, which offers federal care to the poor.

In its original specifications, Florida said it would prefer a distributed system that would not depend on a single processor. However, in its requests for proposals, it gave the prospective suppliers the freedom to propose any equipment configuration, provided it guaranteed that the system performance could cope with at least a 120% increase to the projected 1993 departmental caseload level of more than 2.3 million cases.

In outlining its complaints against EDS to the Florida courts, the state's Department of Health and Rehabilitative Services (HRS) insisted that, because of the expected growth in social service programs, the system should have been designed to cope with any further loads without adversely affecting the overall configuration. The state said that EDS had insisted that its proposed CRIS-E system design offered "tomorrow's solution today".

EDS found that a fear culture within HRS inhibited decision-making. To support this claim, EDS quoted from a report by the Florida Governor's Chief Inspector General: "The corporate culture at HRS seemed to promote and reward those who didi not raise problems; and thus the Secretary [head of HRS] was often the last, not the first, to know."

Things deteriorated as Florida's caseload continued its exorable growth. Because of the additional cases, HRS's required CPU capacity now reached over four million transactions a day.

In March 1992, the two sides clashed again, this time over a benchmark test intended to show that the chosen hardware was up to the job.

HRS claimed that, from March 1992 until June of that year, the Florida system experienced stability and reliability problems with frequent crashes. During the crashes, the system could not be used for any business purpose, and the state was forced to turn away its customers. Poor response times meant that claimants had to queue for hours to receive benefits, leading to unfavourable publicity.

By the contract termination date of June 1 1992, HRS claimed EDS had delivered a system based on a configuration that was "unproved, inflexible and insufficient to meet the capacity requirements, either present or future". The state insists that because of the stability of the welfare system, some old systems had to remain in use to provide backup or to supplement existing operations, leading to financial losses.

Three months after the termination of the contract, the two sides resorted to legal action. In September 1992, EDS sued HRS, seeking damages of more than $40 million because the State of Florida had stopped making payments. HRS immediately counter-sued for $65 million in damages, alleging breach of contract and warranty.

Two years into the legal battle both sides agreed to alternative dispute resolution (ADR) which avoided a full blown court case. A "Special Master" in this case the former CIA head William Webster was appointed to adjudicate between them.

His judgement was that the state owed EDS $50 million and, late in December 1995, a circuit judge backed EDS and said the state should be held to Webster's ruling. The state siad it would appeal to the district court and, if necessary, to the state's Supreme Court.

EDS was awarded much of the money it had sought from the state. Eventually a court ruled that the state of Florida should pay EDS $42.8 million (approx. £30m) to settle all disputes relating to the system developed and implemented by EDS. This compares with the $55 million originally sought by EDS. The case is now over.

Privacy International Outsourcing Big Brother

A Look Behind EDS' Takeover of the UK Government

By Simon Davies

(Simon Davies is a visiting fellow at the London School of Economics and Director General of Privacy International. An earlier version of this article appeared in the October 1996 edition of Wired (UK)).

Perot founded EDS in 1962 with a US$1,000 cheque. In 1984 he sold it for an undisclosed sum somewhere in the very low billions to General Motors, a customer which by then accounted for nearly three quarters of the company's revenue, and which, ironically, had no intention of handing over the administration of its business to an outside organisation. Since then it has blossomed into a multinational with an annual turnover on the better side of thirteen billion dollars and growing at 25 percent. EDS activities span IT provision, system integration, data processing and business consultancy. In June of this year it became a listed company on the New York and London stock exchanges. It has 100,000 employees in 42 countries and it has contracts for 40 billion dollars worth of business.


Enter Civita

Jonathan Eunice

EDS will consolidate its position as the UK's leading public sector IT outsourcing company with a little help from Bull Information Systems. The two have joined forces to sell into local government, a market that Bull is already strong in, with a joint venture called Civita.
Civita will likely dominate the UK local government IT space for years to come. Of course, PFI contracts, by their nature, ally themselves to the growing trend for ASP-style provisioning, where it is services rather than infrastructure that is paid for. Even so, new services entrants beware: persuasive localization puts EDS and Bull ahead of the game.

NDAD Newsletter #8

Process re-engineering: a brief history of Government computing

Kevin Ashley, NDAD Project Manager (UK National Digital Archive of Datasets)

Helen Margetts, Information Technology in Government (Routledge, 1998)

What particularly interests Margetts is the way outsourcing may involve more than simply having someone else run your computers for you. In the US, and increasingly in the UK, it leads to the outsourcing company wanting to take a greater and greater degree of control over the entire process of which the computer system is a part. This type of relationship is shown to have worked well in the past, ICL and the Inland Revenue being seen as a useful and symbiotic partnership. But Margetts points out that companies such as EDS and SEMA see running the computer systems as only Phase One: eventually they see the chance to make real money by taking over the entire process, civil servants and all. Phrases such as 'vertical integration' and 'process re-engineering' are commonly heard. PFI contracts lead to the suggestion of what is effectively profit-sharing: 'we'll collect more tax for you if you allow us to change the tax system', perhaps.


Business targets defence contracts

Under PFIs, the government leases a service, rather than investing in equipment and personnel, at a fixed yearly cost for a period of 15 to 30 years.

The PFI transfers the risk of delivering on time and on budget to the contractor, who can lease out the equipment and personnel to other customers when its not being used by the MoD to generate extra income.

Chasing deals can cost contractors several million pounds in the bidding process but that is more than compensated for by the regular income.

The results so far of PFIs have been mixed.

Last month, serious problems emerged in a £300m PFI to supply the MoD with a computer payroll system, which threatened to halt pay to over 300,000 personnel, including the special forces in Afghanistan, and 800,000 pensioners.

US software solutions company Electronic Data Systems (EDS), the UK government's largest IT contractor, could not deliver the system and reportedly received a government bailout.

Simulated flight training is considered a PFI success

The deal had to be renegotiated and showed all the signs of PFI failures in the public sector.

The Independent

EDS bust-up exposes its dirty linen

By Jason Nissé

EDS, the Texan technology firm that runs the Inland Revenue and Child Support Agency computers, has been accused by a former senior director of manipulating its figures, putting pressure on executives to resign and spending millions on lavish entertainment for clients and staff.

Fred Steingraber, the former chief executive of EDS's consulting arm, AT Kearney, details the accusations in a damaging legal document, lodged in a US court last year. The deposition says that EDS chairman Dick Brown and finance director James Daley inflated the group's profits by early recording of income from contracts, failing to record the risk factors on contracts and hiding problems with deals.

The row has blown up at a tricky time for EDS. Last week Andrew Smith, the Secretary of State for Work and Pensions, said he had negotiated a settlement with EDS in the long-running dispute about the Child Support Agency computer system. EDS will have to pay the DWP up to £30m for delays to the system.

EDS is also close to making a joint bid, with Accenture, for the £7bn Aspire contract to run and modernise the Inland Revenue computer system.

Page last updated: 18 December, 2003 © Copyright Barry Pearson 2003