Four lessons from the Raytheon victory in their IT contract claim against the Home Office

Another victory for a supplier over the UK Government. After Fujitsu won something around £400 million just a few weeks back in relation to their work on the National Health Service IT contract (reported here on Spend Matters ), now US IT firm Raytheon seem to have come out on top following a binding arbitration with the Home Office (the UK's domestic affairs ministry).

The dispute was over the IT programme for immigration control, called "e-borders". It all dates back to the last Labour government, and Raytheon won the contract in 2007, but when the new coalition came to power in 2010, they quickly cancelled the contract, claiming Raytheon had not met the agreed plan and was a year behind in terms of deliverables.

After lengthy negotiations, the matter went to arbitration. And the court has awarded Raytheon £224 million, including damages and interest payments. From the BBC report:

"In its ruling, the arbitration tribunal did not pass judgement on whether Raytheon had failed to meet its contractual obligations - but it criticised UKBA officials for failing to properly brief the home secretary on whether the company had an arguable case to hold on to the deal.

The full ruling has not been made public, but the tribunal said the Home Office should make the following payments to Raytheon:

  • £50m in damages for ending the contract
  • £126m for assets the company delivered prior to being sacked, such as IT systems
  • £10m to settle complaints relating to changes to the original contract
  • £38m in interest payments"

I had a mental picture, as I wrote this, that somewhere in the Marsham Street offices, a partner from a top law firm is getting the biggest kicking of his or her life. A senior official – maybe even the Home Secretary herself - is shouting "you f*****g idiot! You told us we would win this if we went to arbitration"!

But enough of the good news... what lessons can we learn for any contracting authority?

  1. In complex IT programmes, it is hard to prove supplier non-performance. The number of changes and other variables almost inevitably mean that a supplier will have many reasons outside their control to explain why things went wrong.
  2. So very careful definition of scope and deliverables, tracking of changes and variations, documenting every discussion and phone call, and well-structured performance management processes can all at least help if it ever comes to this.
  3. There is a suggestion here that officials did not properly brief the Minister on the case for terminating the contract. Was that the officials fault - or their legal advice? In any case, remember that lawyers will give you advice to the best of their ability, but it is not always correct.
  4. Suppliers are increasingly prepared to fight battles in the courts - the argument that "they won't because they don't want to upset the government" does not seem to be applying in many cases now.

Be warned - and be careful.

Voices (4)

  1. Dan2:

    It’s a shame that the details won’t be published as it would be useful for wider Government to find out where Home Office/UKBA went wrong and what points of legal attack were used (as reading the story, it doesn’t even look like they made a judgement on whether Raytheon delivered – just a faulty approach to terminating?)

  2. Ian Heptinstall:

    “You told us we would win this if we went to arbitration”, said the minister.
    “II think you will find Minister that what I actually said was that we stood a good chance of winning, at least 60-70%. It was just unfortunate that we got the judge on one of their 30% days” replied the senior partner.
    Thinks the lawyer… I know it was 60-70%, because that is what I always say – Business For Lawyers 101

  3. Secret Squirrel:

    Re: point 4: It seems to me that you reap what you sow. If you want to be adversarial as a client, expect the contractor to be adversarial.

    And I wonder if this will be included in the ‘savings’ made by the Crown Representatives. Of course, we’ll never know because any information below the headlines in covered by Clause 43 of FOIA (Commercially Sensitive Information)……unless Cabinet Office actually starts to deliver the transparency its masters trumpet

  4. Sam.Unkim:

    a top law firm who are getting paid ££millions either way…. What’s a little kicking compared to all that cash

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