BSkyB / EDS Litigation : Managing Risks Common to All IT Projects

Author:Mr Mark Rasdale and John O'Connor
Profession:Matheson Ormsby Prentice

On 27th January 2010, the English High Court delivered its judgment in one of the costliest, longest running and most notable IT disputes in recent years. Significant IT disputes have been few and far between in Ireland, largely explained by cost and reputational concerns. However, if an IT supplier or customer found itself before the Irish commercial court in similar circumstances, this decision may have a persuasive effect on the Irish court.

The Background

In 2000, BSkyB went to tender in relation to a multimillion pound "Customer Relationship Management" system to support a number of its UK call centres. BSkyB hoped to cut costs and improve service by rolling out this new system.

EDS (now HP Enterprise Services) was successful in the bid. Delivery commenced in July 2000 under what was known as the 'Prime Contract'. The project was ultimately unsuccessful. In particular the time critical delivery points were not met and the fixed budget was exceeded. The anticipated budget was £47.6 million, of which approximately £7 million comprised profit. The original implementation date was 1 March 2002. BSkyB claimed that the work wasn't completed until four years later and that the cost was some five times the original budget. Notably, BSkyB claimed damages of some £709 million. BSkyB have been awarded damages in excess of £200 million. Hewlett Packard is reportedly planning to appeal the decision.

The Case

In general terms, the core of the BSkyB case was:

EDS made various misrepresentations in relation to resources, time, costs, technology and methodology which were either fraudulent or negligent; To the extent that EDS was fraudulent, it should not be entitled to rely on the £30 million cap on liability under the contract. It is generally not possible to limit liability for fraud hence the high level of damages claimed; EDS breached the Prime Contract because it failed to deliver, to properly resource the project and to exercise reasonable skill and care or conform to Good Industry Practice. While BSkyB was not successful in relation to a number of its specific claims under the above general headings, it was substantively successful. In particular, the Court found that EDS was liable for fraud in relation to some of the representations it made leading up to being awarded the Prime Contract. If EDS had not made those representations, BSkyB would not have continued with EDS as a supplier.

Some Lessons to Learn

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