French tech giant Atos has confirmed it is the firm at the centre of covert government talks to prevent a collapse in critical IT system across a raft of public services after i revealed the secret discussions on Wednesday.

Investigations by i unearthed confidential documents codenamed Project Aztec, which showed the Cabinet Office is concerned by financial issues facing Atos and the impact on public services including the NHS, benefit assessments and the Home Office.

While Atos released a statement on Wednesday morning confirming it was the firm at the centre of Project Aztec, it also claimed a financial restructuring was underway to secure both the future of its Paris-based parent group and its UK subsidiary.

However, i has now learned that the Cabinet Office remains concerned over the future of Atos’ UK arm and is scrambling to line up alternative IT suppliers should Atos’ restructuring plans fail.

The documents reveal the Cabinet Office is warning of “severe implications” for the continuity of “critical” public services, such as benefits payments and NHS appointments, should the firm’s UK arm collapse.

The Cabinet Office has been working on contingency plans since February, with experts examining the extent of the supplier’s financial difficulties and how the delivery of “critical” contracts can be protected if it cannot recover, the documents show.

Atos has invoiced the government for contracts worth about £6bn since 2016 and currently has more than 40 government contracts worth almost £1bn.

While the extent of Atos’s work in the UK public sector may be unknown to many, it involves the technology around sharing NHS health records in hospitals, disability benefit assessments for personal independents payments (PIP), and the secure storing of records for the Student Loans Company.

It also runs a critical and sensitive Home Office file sharing system, provides IT services for the Ministry of Defence and Ministry of Justice, and runs critical software testing for His Majesty’s Revenue and Customs (HMRC).

If the contractor’s financial problems hit its ability to provide services, the Government is concerned there could be disruptions to NHS appointments and the sharing of health records, as well as delays to the assessments that help determine benefit payments, court trials, and tax refunds from HMRC.

The documents reveal that the Government recruited advisory firm PwC to work with the Cabinet Office on a risk assessment project codenamed Project Aztec.

PwC was asked to assess the likelihood of the contractor surviving its financial difficulties, and if it does not, what the impact of its collapse would have on the running of key services.

Atos contracts with the UK Government

The financial issues facing Atos, one of the UK’s main IT suppliers, could have “severe implications” for UK public services, according to internal Government documents.

Atos currently has more than 40 government contracts worth nearly a billion pounds. 

Since 2016, the French company has invoiced the British taxpayer for just over £6bn, according to analysis by Government contracts website Tussell.

The company’s largest contract was worth £1.5bn and was awarded to them by the National Employment Savings Trust to develop new systems to manage the group’s pension scheme. 

This deal ended, however, just two years into the 18-year contract in February 2023.

The group has a £124m deal with the Department for Work and Pensions, and is also involved in the delivery of Personal Independence Payment and Work Capability Assessments. However, this deal runs out in September.

Atos also has a deal worth up to £126m to run the technology powering the Student Loans Company, a £90m deal with His Majesty’s Revenue and Customs to provide critical testing of software, and a £72m deal to provide IT services to the Home Office.

As well as contracts with the Ministry of Defence, the Ministry of Justice and Met Office, the group runs technology services for NHS England and a range of NHS hospitals around the UK.

Government talks around the financial issues facing Atos were mistakenly released into the public domain by the Cabinet Office in May.

Despite rapidly replacing the document on a Government contracts website with a blank page, i has seen the original.

Labour slammed the government’s ‘breathtaking incompetence’ over the affair.

Labour’s shadow Paymaster General, Jonathan Ashworth, said: “The fact that a contract of such extreme commercial sensitivity was published by accident is not just evidence of breathtaking incompetence, it is also a disturbing indication that the grip the government should have on this issue is completely lacking.”

A spokesman for Atos said: “Atos is currently undergoing a financial restructuring and reached an agreement with a Consortium and its creditors which will create a stable financial future globally and in the UK. The provision of services to our customers has remained unaffected and we will continue providing high-quality services to the UK public sector as it has for over 30 years.”

In April, the French government announced it would come to the aid of Atos, offering a series of loans to help it through the following months.

The IT service company struck a deal with the French state and some of its creditors for €450m (£380m) in interim loans to allow it time “to identify solutions to stabilise its financial situation”, according to France’s finance ministry.

Last Friday, President Emmanuel Macron’s administration made a €700m (£589m) bid for the group’s data and cybersecurity division.

The Cabinet Office declined to comment.

‘Project Aztec’

Records of secret government talks around the financial issues facing French IT giant Atos were mistakenly released into the public domain by the Cabinet Office in May.

Despite rapidly replacing the document on a Government contracts website with a blank page, i has seen the original.

A Cabinet Office source said: “The notice was published in error and has been republished in an appropriate form.”

The May document followed previous contracts that pointed to fears over Atos’s financial future, although the company’s name was absent and replaced with the codename “Aztec”.

In April of this year, PwC, which is being paid a fee of up to £500,000 for the urgent work, was asked by the Cabinet Office to assess the likelihood of “Aztec” surviving its financial difficulties, and if it did not, what the impact of its collapse would be on the running of key services in the public sector.

Concerns around the collapse of the IT firm emerged in February, when the Cabinet Office first approached PwC to carry out the risk assessment. At first the work was codenamed “Project Inca”, but it became known as “Project Aztec” over the following months.

PwC, which is understood to be reporting to a financial analyst within the Cabinet Office, is understood to have won the lucrative work without a full tender process taking place.

On 15 May, another contract document was published that referred to “Consultancy support for a Special Situation (Project Aztec)”.

This document was initially published without redaction by the Cabinet Office, but then hastily removed from the Government’s website and replaced with a blank white page.

However, i has obtained the original document, which provides PwC with instructions to “review and comment on Aztec UK’s and Aztec Group’s short term cash flow forecast”.

Aztec UK is understood to be Atos’s London-based subsidiary, while Aztec Group is believed to be the group’s Paris-based parent company.

The contract also calls on PwC to look into the restructuring options for the firm being considered by the French government, and whether these would include the financial rescue of the UK arm of Atos, which holds the public sector contracts.

The May document also sets out the Cabinet Office’s position on the search for alternative contractors to replace Atos should the UK arm of the company not be financially supported by the French government in any restructuring.

The contract states PwC should “review and comment on” the “likelihood that an alternate supplier could provide the services currently provided by Aztec”. 

A further document, dated 10 June, spells out the extent of Government fears around the consequences of “Aztec” falling into a position where it can no longer fulfil its public sector contract obligations.

This revised contract stated: “The case has severe implications for the delivery of public services. The objective is to ensure continuity of critical public services.”