Atos, the controversial outsourcing company, is facing a government review of all of its major Whitehall contracts, which amount to more than £500m, following another serious IT failure.

The Cabinet Office told the Guardian it would undertake a full re-examination of every contract worth more than £10m operated by the French-based firm.



Such a review of a single contractor is a rarity in Whitehall and is a reflection of the levels of exasperation both from civil servants and the public accounts committee at the programmes overseen by Atos.



It will come as a blow to Atos, which has faced many public sector IT disasters. Criticisms include its role in implementing the employment and support allowance (ESA), the replacement for incapacity benefits and delays in assessing disabled people for personal independence payments (PIPs).

The decision to launch the review follows severe criticism by the National Audit Office of Atos’s role in the development of an IT system designed to allow the extraction of data from GP practice systems.



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MPs on the public accounts committee examined the auditors’ report and found that Atos, the supplier contracted for a key part of the system, “did not show an appropriate duty of care to the taxpayer” and “appears to have acted solely with its own short-term best interests in mind”.



They suggested that although Atos may have complied with the letter of its contractual obligations, it took advantage of a weak client by taking the client’s money while knowing that the system had not been properly tested.



The expected cost of the system rose from £14m to £40m during the planning and procurement phase, and has since risen further.



In its recommendations, the committee urged the Cabinet Office to review Atos’s relationships as a crown supplier and also to ensure that the reasons for the project’s failure “are disseminated widely to reinforce the steps that need to be taken to avoid such mistakes being repeated again”.



Atos was one of seven firms working on the GP extraction service and told MPs that they were not able to see the entire programme that they are now being punished for. The firm has also defended itself from claims that it misled the PAC over PIPs, saying that senior civil servants defended the firm’s actions to parliament.

Atos is currently working within HM Revenue and Customs, the Home Office, Department of Health, NHS Scotland and the Ministry of Justice, according to its website. The firm first came to prominence in the UK after winning the £500m contract to implement the “fit for work tests”.



It became a lightning rod for anger over the health test, known as the work capability assessment. The assessment was criticised by MPs and campaigners as inhumane. Thousands of vulnerable people were found to have been wrongly judged to be fit for work and ineligible for government support. Atos eventually stepped down from the contract a year early.



In 2014, the firm was singled out again for criticism by the committee for misleading the Department for Work and Pensions (DWP) about its capabilities when bidding for the £1bn contracts connected to PIPs.



The Cabinet Office confirmed on Friday that it had accepted the PAC’s recommended review – a decision that observers of Whitehall believe may be part of a new attitude towards outsourcing firms.

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A spokesperson said: “In line with the PAC’s recommendation the Cabinet Office is undertaking a review of all current Atos contracts with central government with an annual spend over £10m.”



Reacting to the review, Tom Watson, Labour’s deputy leader, called on George Osborne, the chancellor, to take responsiblity for poor outsourced services and open them up to the Freedom of Information Act.

“Until private providers of taxpayer-funded services are subject to the same transparency and accountability rules as their public counterparts, whatever steps the Cabinet Office takes to improve services are bound to fail,” he said.



Daniel Thornton, programme director at the Institute for Government, said the review of a single supplier was unusual but may be seen as the start of a harder line taken against outsourcing firms by the government.



“As part of its drive to save money, [the government] now relies on outside providers to deliver essential public services, despite repeated problems with managing outsourced services. So while it is unusual to recommend a review into all contracts with a single provider, it isn’t unheard of – and we might expect more of this in future.”



An Atos spokeswoman welcomed the Cabinet Office review. “We look forward to working with the Cabinet Office with whom we have a transparent and open relationship and we look forward to maintaining our green rating for delivery across Whitehall,” she said.