Work of the Department for Work and Pensions - Work and Pensions Committee Contents

Letter to the Chair from the Secretary of State, 28 September 2010


  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 Agreement.

  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 limited to:

    — Incapacity benefits.

    — Employment and Support Allowance.

    — Industrial Injuries Disablement Benefits.

    — Disability Living Allowance.

    — Attendance Allowance.

    — Statutory Sick Pay/Statutory Maternity Pay.

    — Child Trust Fund.

    — War Pension.

    — 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.

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