David Blunkett's new home, the Department of Work and Pensions, has renegotiated its swathe of contracts with EDS, bringing them all under one umbrella.

The move will give EDS a lot more certainty about where its money is coming from, and should reduce the DWP's annual costs. The terms of the new deal include infrastructure upgrades, better system availability and faster system response times, the DWP says.

The DWP was created by combining the Department of Social Security and Department for Education and Employment. Each had existing contracts with EDS that were costing the new department around £700m annually.

The new contract structure means the DWP will spend a more modest £520m with the company each year, over the next five years. In total the deal is worth an estimated £2.6bn, with the potential for an additional £180m, subject to performance reviews.

Sir Richard Mottram, Permanent Secretary at the DWP said that the deal would contribute to the government's planned cost savings of £1bn annually, as outlined in the Gershon report.

"Compared with present practices, we expect a better, more robust service and substantial savings," he said. ®

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