New British govt may cut outsourcing to India

A 600-million-pound contract won by Tata Consultancy Services from Britain's Personal Accounts Delivery Authority has come under renewed media scrutiny.

This was after the new government's chancellor (finance minister), George Osborne said on Tuesday all major expenses approved by the former Labour government after January 1 would be reviewed.

No contract was named in this regard. However, speculation began on this one. Some details of the cost cuts the new government proposes would emerge only next week.

Media reports also hinted that British Prime Minister David Cameron-led government in the United Kingdom is likely to review five more such outsourcing contracts.

Osborne and his team are hoping to cut expenses worth 6 billion a year. The new government is to also present an emergency budget on June 22.

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In March this year, the UK's pension manager, Pada, had awarded the 600 million deal to TCS as the only remaining vendor who had bid for this contract, after other bidders withdrew.

Both Pada and TCS refused to comment on the outcome of a possible review. A TCS spokesperson in India said, "We, just like Pada, are also under an obligation to not comment on any speculation."

Pada released the contract to TCS in two parts -- the designing and implementation part. The designing part is to end this October. The 10-year implementation part starts after that, subject to a go-ahead.

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"The contract is divided into two stages and runs for 10 years, with possible extensions for up to a further five years. The first stage will run to October 2010, allowing TCS to begin the activity required to set up and administer NEST (National Employment Savings Trust). Prior to the expiry of the first stage, a decision will be made on whether to proceed with the contract for the remainder of the contract term," Pada had said in March.

"Clearly, whoever approved this contract, had obviously provided for the possibility of a non-Labour government in UK after May 2010 and also expected that the new minister in-charge might want to review it," said a source.