Brit pensions scheme flushed £74M when it walked from Atos deal
Annual report reveals 'challenges' around 'commercial and risk appetite'
A UK government pensions organization paid Atos £74 million for two years of a £1.5 billion ($1.8 billion) contract, which it then ended 16 years short of its potential 18-year term.
The National Employment Savings Trust (Nest) signed the agreement with the French IT and business process outsourcing provider in 2021 after a three-year search for a supplier to build and operate pensions administration services supporting auto-enrollment and digital channels.
However, in February, The Register revealed that the scheme overseen by the Department for Work and Pensions would end the agreement after just two years.
It has since reappointed Tata Consultancy Services (TCS) – its previous supplier still employed under a handover arrangement – to continue with the transformation program. Nest did not issue a competitive tender for the new deal.
In its annual report for 2022-23, Nest said Atos was paid £74 million "in one-off expenditure relating to the service transformation programme over the two-year period with Atos BPS as our partner." It includes a £28 million final payment to the service provider.
The report also offers an explanation of why it parted ways with the French company, even if detail was lacking.
"As we progressed our programme of work to develop the scheme administration service along with our contracted partner, Atos BPS, challenges arose in achieving our strategic aims within the commercial and risk appetite of both parties. This meant we took the decision, in agreement with Atos BPS, to end our contractual arrangement two years into the initial 10-year term," the report said.
The contract included options to extend to 18 years.
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The decision was made in agreement with Atos, the report said, and followed "a period of significant consideration, including external legal and professional advice, and was taken by the Board with the overarching interests of our members the priority."
Earlier this year, details seen by The Register revealed that Nest pushed the termination of the contract after Atos argued that product delivery deadlines should be extended because Nest insisted on last-minute design changes. Nest refused to renegotiate the delivery timeline and cited terms and conditions in the contract to try to keep the timetable on track.
The decision to reappoint TCS without competition followed a review by consulting giant PwC. It concluded that "apart from TCS, there was no single supplier or consortium in the market now or the short term to meet Nest's requirements," according to a contract notice.
The annual report said that while the commercial, technical, and service requirements for the Nest transformation remained the same, its approach to risk had changed. As a result, it would only consider suppliers with "experience in operating within the UK defined contribution pensions market" who were "able to evidence a digital-first service" and "show experience in delivering both a service transition and data migration" in that market.
"In assessing the market against our original procurement approach and updated risk appetite, including an objective, independent market review, we concluded our procurement exercise in June 2023, appointing TCS as our long-term scheme administrator," it said.
However, one outsourcing industry insider told The Register that appointing suppliers without competition creates additional risks for the wider public sector. IT and business process outsourcing providers might spend up to £1 million bidding for some of the largest contracts. Awarding contracts without competition discourages them from bidding for future work, driving up the prices paid by public sectors due to a lack of competition, he said. ®