Letter to the Chair from the Secretary
of State, 28 September 2010
ATOS HEALTHCARE CONTRACT RENEWAL
During the Select Committee's evidence session
on 15 September, I promised to write concerning the renewal of
the Atos Healthcare contract.
The original Medical Services Agreement was
awarded in 1998 by the then Department of Social Security to Sema
Group (which subsequently changed its name to SchlumbergerSema
and latterly to Atos Healthcare). At that time the services delivered
were to the Department for Social Security but following machinery
of Government changes in 2001, the administration of some of the
benefits covered by that contract migrated to other Government
Departments, for example War Pension transferred to an Agency
of the Ministry of Defence and Statutory Sick pay to Her Majesty's
Revenue and Customs. The Department for Work and Pensions (previously
the Department for Social Security), remained responsible for
the management of the overall Agreement.
The Medical Services Agreement between Atos
Healthcare and the Department for Work and Pensions was awarded
on 15 March 2005 by the Secretary of State for Work and Pensions
following a competitive tender. The Agreement commenced on 1 September
2005 for a term of seven years with options to extend for consecutive
terms of three and then two years. Such extensions were conditional
on the evidence that they brought clear benefits to the Department
outweighing competition. There is also provision to allow for
up to twelve months extension if required, for example during
a competition of the services.
The Department for Work and Pensions may exercise
a break option at any time, giving ATOS healthcare twelve months
written notice. In addition the Agreement may be terminated early
if Atos Healthcare is in default of its obligations under the
The scope of the Medical Services Agreement
is to provide medical advice to, the Department for Work and Pensions;
Her Majesty's Revenue and Customs, Service Personnel and Veterans
Agency and Tribunals Service, to support decisions in relation
to a number of benefits and pensions. These include but are not
Employment and Support Allowance.
Industrial Injuries Disablement Benefits.
Disability Living Allowance.
Statutory Sick Pay/Statutory Maternity
Vaccine Damage Payment Scheme.
Financial Assistance Scheme.
Compensation Recovery Scheme.
Appeals Tribunal Service.
The Agreement was amended in 2008 to incorporate
Employment and Support Allowance. The Department has negotiated
the terms of an extension to the contract to 2017 in order to
allow for the completion of Incapacity Benefit to Employment Support
Allowance migration. The extension will be subject to Atos Healthcare
delivering substantial savings against the current estimated cost
of £100 million per annum. I am still considering the merits
of whether to extend the contract with Atos Healthcare. A final
decision will be taken in the Autumn.