National Air Traffic Services (Nats) and services giant EDS will be
in the High Court next week, after Nats cancelled a £50m public
finance initiative (PFI) contract because the supplier allegedly
failed to meet a vital deadline.
EDS, which said it had met all the terms of the deadline, claimed
Nats had decided three months before the deadline to be "rid of
EDS", pull out of the contract and not complete the system.
The dispute could prove to be the IT industry's longest and most
expensive court battle.
In suing Nats, EDS is claiming at least £40m in damages and costs.
Nats is defending the writ and has issued a counter-claim for £8m.
The contract, the Labour Government's first PFI deal, was for a
replacement Flight Data Processing System at the Oceanic air
traffic control centre at Prestwick in Scotland. A new system was
needed to help control flights across the Atlantic.
Nats claimed that EDS failed to meet the terms of a key contractual
milestone in May 2000. But in evidence given by EDS to the Court of
Appeal, the supplier claimed that Nats decided to be rid of EDS in
February 2000, three months before the May 2000 deadline.
This claim by EDS was part of preliminary legal proceedings in
advance of the main hearing, which begins next Monday. Legal costs
for Nats and EDS could add up to many millions of pounds, as the
case is not due to finish until March.
The Oceanic contract started in June 1997 and was not due to expire
until 2011, but in July 2000 Nats cancelled it, insisting that EDS
had not only failed to meet a contractual milestone but that it was
not satisfied that EDS would meet the final "O" operational date in
March 2002.
EDS has won an Appeal Court judgement that allows the supplier to
include in its legal arguments the allegation that Nats had decided
to be rid of EDS regardless of whether money would be wasted.
Last year Computer Weekly highlighted Nats' antipathy towards PFI
contracts, particularly in the run up to the partial sale of the
organisation. Nats strenuously denied that its attitude towards PFI
had anything to do with the cancellation of the EDS contract.
EDS has never said why it believes Nats cancelled the contract,
although it now questions the motivation for doing so.
This week a Nats spokesman said the issues raised in the Court of
Appeal ruling could be raised by EDS only as a defence to the Nats
counter-claim, not as part of its main evidence. The ruling was
unlikely to benefit EDS' case, said the spokesman.