IBM has outbid Capita for the deal to run London’s congestion charging and low emission zone from 2009.

Transport for London, which awarded the deal, stated IBM was an “economically advantageous” choice over the British outsourcer. The other bidder for the contract, Thales, lost out after a year long bid process. It had planned to subcontract to Accenture and Vertex.

Proceeds from congestion charging are reinvested in London’s transport system, and last year the scheme generated provisional net revenues of £123m.

Capita has run the system since its inception in 2002, and also handled the extension of the zone to west London last year. TfL said it “expected to continue our excellent working relationship with Capita” until 2009, when IBM takes over for a five year period, and there is also the option for a further five year deal extension under IBM.

The value of the contract has not been disclosed. It will involve running the extensive array of technology that underpins payments and customer contact.

Winning the bid is significant for IBM, as it carries a high profile. TfL calculates that under the scheme, traffic levels in the original congestion charging zone were reduced by 21% in 2006 compared to before the scheme was introduced. This year, traffic in the new western zone was down over 20% on 2006.

Paul Robb, IBM public sector executive, said IBM would use its “unique transformational capabilities and extensive experience of road charging and intelligent transportation systems”, which it gained from other traffic schemes in Stockholm and Singapore.