Government urged to review £2bn in Fujitsu contracts amid Horizon scandal

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Pressure is mounting on the government to review more than £2bn in new contracts awarded to Fujitsu since a court ruling in 2019 found its Horizon IT system caused accounting errors that were blamed on more than 900 post office operators who were then wrongly prosecuted by the Post Office.

The Japanese company, which continues to hold the prestigious status of being a key “strategic supplier” making more than £100m annually from government work despite the scandal, has won 101 new contracts worth £2.04bn since the landmark legal ruling.

These include new contracts with the Home Office, HM Revenue and Customs, the Foreign, Commonwealth and Development Office and the Department for Work and Pensions, according to the government procurement analysts Tussell.

The figure does not include the £2.4bn lifetime contract with the Post Office for the faulty Horizon system, which prompted what has been described as the most widespread miscarriage of justice in UK history.

On Wednesday, the Scottish government moved to review some contracts awarded to Fujitsu after criticism of its role in the scandal. Angela Constance, Scotland’s justice secretary, said she would discuss a deal signed in 2020 with Fujitsu to support electronic vote counts for local elections with fellow ministers.

The Cabinet Office did not respond to questions about whether it would follow Scotland’s lead and review Fujitsu contracts or the company’s strategic supplier status, or why it had continued to be awarded business after Horizon was proved to be faulty.

“I have no idea why the government is continuing to give Fujitsu contracts – very, very big contracts,” said the Conservative former cabinet minister David Jones. “I can’t understand why the government wants to continue to deal with them.”

The 2019 court of appeal ruling determined that the Post Office had been in “denial” about “bugs, errors and flaws” in Horizon in the “21st-century equivalent of maintaining the Earth is flat”, marking a turning point for victims.

Fujitsu has made almost £7bn from 200 IT contracts since 2012. Its four biggest repeat customers are the Ministry of Defence, the Home Office, HMRC and the Financial Conduct Authority, which gave it 68 contracts between them worth more than £2.7bn since 2012.

The company, which has never faced any form of punishment for its role in the Horizon scandal, has £2.9bn worth of public sector contracts due to expire over the next two years.

On Wednesday, Kevin Hollinrake, the UK minister with responsibility for postal affairs, said Fujitsu could face “financial sanctions” to help fund compensation for subpostmasters and their families if it is found at fault.

Fujitsu executives have been summoned to give evidence to MPs on the Commons business and trade committee next week.

The Metropolitan police have interviewed two Fujitsu employees under caution in relation to allegations of perjury and perverting the course of justice related to Post Office trials.

In 2013, the security companies G4S and Serco handed back their contracts to electronically tag criminals after fraud allegations over the way they charged the government for their services.

The government has a list of 39 strategic suppliers, with each assigned a crown representative, who are members of the commercial relationships board (CRB), which meets monthly and assigns an overall performance rating of black, red, amber or green (RAG) to each company.

The Cabinet Office ultimately oversees suppliers and contracts.

Vincent Kelly, who has held roles at Logica, the mobile phone company Orange and music royalties collection body PRS for Music, is the crown representative for suppliers including Fujitsu and Virgin Media O2 and has worked in the role for the Cabinet Office since 2018.

In 2018, after the collapse of the outsourcing company Carillion, the public accounts committee (PAC) moved to investigate “weaknesses” in government contracting. The subsequent report criticised the government for running a procurement process that incentivised cost controls and not ensuring the right supplier was selected.

“It must look with fresh eyes at the motivations of companies currently bidding for central government work, and develop a strategy that requires contract-awarding bodies to look beyond bottom-line costs,” said Meg Hillier, the PAC chair, at the time. “Crucial to this will be to embed procurement best practice across departments.”

It also criticised the RAG rating system as not working “either as a carrot or a stick” and said there must always be “effective oversight” of the crown representative system and the close relationship enjoyed with suppliers.

“Without effective oversight of these relationships there is a risk that strategic suppliers become secretive ‘sub-departments’ of Whitehall,” said Hillier.