Following protracted negotiations, French outsourcer Atos has scooped up a £474.4 million ($612 million) contract without competition to build systems for a UK state bank at nearly three times the annual rate initially advertised three years ago.
Last month, National Savings and Investments (NS&I) awarded Atos the deal for core banking, payment, reporting and business-to-business services from 23 December 2024 until 31 March 2028.
The state-owned savings bank said the opportunity was not advertised, because "only one supplier is capable of delivering the requirement, or due to extreme urgency brought about by unforeseen events."
It had originally gone to market to kick off the competition for a new core banking, payments and reporting system, which together with business-to-business services for government payments was worth £480.3 million over nine years, an annual rate of £53.3 million compared with £146 million annually (over the three years and three months that the contract runs) for the agreement Atos won.
A further procurement note explained the new Atos contract is an extension of the outsourcing deal originally awarded in 2013 for £600 million over seven years, with a three-year extension option worth £300 million. NS&I told The Register in 2023 it was further extending the arrangement until March 2025.
In the procurement notice, NS&I said competition was absent from the latest Atos award for "technical reasons."
"As the incumbent service provider Atos and its key sub-contractor(s) are the providers of the existing NS&I core banking platforms, which rely on interdependent leveraged technology and resources. The process of dis-aggregating these at the same time as building and deploying a new core banking instance would be sufficiently complex that it can only be practicably carried out by Atos IT Services UK without very significant disruption to NS&I customers," it said.
In a transparency statement in January, Dax Harkins, NS&I accounting officer and chief executive, said Atos had been named preferred bidder for the competitive deal to replace its NS&I core banking systems in December 2023.
"However, progress towards a final contract award was challenging, with negotiations to finalize the contract protracted. They took place at a difficult time for Atos: the company was going through a period of well-documented corporate restructuring," he said.
In July last year, Atos secured a rescue package with its creditors worth €1.675 billion ($1.82 billion). The French government has also considered purchasing key assets of the outsourcing provider after a prolonged period of financial difficulties. But the parties failed to reach an agreement on this late last year.
Justifying the new award to Atos without competition, Harkins said, "Un-picking and re-integrating 25 years of complex IT infrastructure has been more challenging than originally envisaged. NS&I requires further support to ensure the transition phase is fully resourced and managed effectively."
He said NS&I was implementing a recovery plan involving re-negotiated elements of its business transformation timeline, and had re-forecast the cost over the ten-year life of the programme. It aims to deliver the new solutions across all packages by Autumn 2028.
He said the new agreement was based on contractual provisions within the original NS&I-Atos business process outsourcing agreement and will run until March 2028. This was a shorter term than the competitive procurement envisaged, "which would have also seen Atos run the modernized banking engine through to March 2032, with an option to extend to March 2034." In parallel, NS&I plans to launch a competition for a provider to run the new banking systems from the end of the new Atos agreement for a "multi-year period to be defined."
In 2024, the Public Accounts Committee, Parliament's public spending watchdog, found that the initial bidders for one of the contracts did not meet NS&I's requirements, and the Atos contract was extended.
The new Atos deal for a new core banking system follows a number of tech outsourcing deals struck by the state bank as part of its "Rainbow Program."
In December 2023, IBM won the competition for the "Digital Experience and Digital Enablement" component, reaching an agreement worth £99.8 million (c $116 million). Big Blue had already secured the contract for "Digital integration and ServiceOps" worth £34.2 million (c $41.2 million).
French outsourcer Sopra Steria won the work for "Customer Contact Centre and Operations" in a £276 million (c $322 million) project announced in December 2023. It had already won a contract for "Business to Business Outsourced Services" worth £200 million ($254 million), announced in July 2023.
Data released with the government's Infrastructure and Projects Authority annual report in January shows the Rainbow Program remained at a red rating for the year 2023/24, meaning "successful delivery of the project appears to be unachievable."
The IPA report noted the delays to awarding the competitive core banking contract, originally part of the Rainbow Program.
"Finalizing end to end solution designs, agreeing detailed dependencies and finalizing commercial agreements has been challenging and continues to prove so. Delays achieving alignment in these areas and in contract signature for NS&I's new Banking Engine have impacted transition delivery milestones. Atos's market position has deteriorated and continues to be monitored carefully. A recovery route on an Integrated Delivery approach and plan continues to be the Programme's focus, working collaboratively with all strategic partners and with technical, legal and commercial experts," it said.
In Irish mythology, rainbows have an unreachable pot of gold at their ends. That may be the case for NS&I, but Atos has found a way to secure an important source of revenue. ®