Nats to pay EDS millions of pounds to settle Oceanic project
lawsuit
A High Court hearing lasting 44 days ended suddenly last week when
airlines running the loss-making National Air Traffic Services
(Nats) agreed to pay millions of pounds to computer services
supplier EDS.
The settlement came minutes before the most high-profile witness in
the case, Civil Aviation Authority chairman Sir Roy McNulty, was
called to the witness stand. He was due to be asked about evidence
he gave to the Commons transport committee when he was chairman of
Nats.
EDS sued Nats and sought compensation after the air traffic
organisation cancelled a private finance initiative contract to
build an air traffic system to control the flights across the
Atlantic.
The High Court case began in January with Nats maintaining that the
contract was cancelled because EDS had missed an important project
milestone, but the case ended suddenly last Thursday.
The settlement means that Nats will not face paying anything like
the £42.7m sought by EDS. Computer Weekly understands that the
payment to the supplier will be substantial, and will run into many
millions of pounds, although the terms of the agreement are
confidential.
The payment to EDS will add to the financial pressures facing Nats.
It has emerged that Nats has paid Lockheed Martin up to £40m in
compensation for aborted work on an air traffic control system for
the New Scottish Centre at Prestwick.
The contract was terminated when the Airline Group, which part-owns
Nats, decided to opt for off-the-shelf software instead of the
system that was installed at the New En Route Centre at Swanwick,
Hampshire.
The payment to Lockheed will be declared as an exceptional item in
Nats' annual accounts which are due to be published in the next few
months. When it is added to the EDS payment and the legal costs of
the High Court case, believed to be about £5m, the total sum could
approach the £60m figure requested by Nats from the Government and
the banks as emergency aid. Nats is also seeking a 5% increase in
charges to airlines.
Responsibility for the payment to EDS will ultimately fall to the
airlines and so may be recouped from charges to passengers.
Last week's settlement came days after Judge Toulmin indicated he
might force the Government to release documents requested by EDS
solicitors in the case. Some of these documents could have revealed
whether the 14-year EDS contract was cancelled 11 years early in
part because it was signed under the private finance initiative
which could have threatened the planned partial privatisation of
Nats.
In March 2000, four months before EDS Oceanic contract was
terminated, an internal Nats document said, "Oceanic represents a
PPP risk - 14-year PFI locked into EDS - performance risk with
non-ATM [air traffic management] supplier. HMG [Her Majesty's
Government] CSFB [Credit Suisse First Boston, the Government's
adviser on the partial privatisation] want these uncertainties
removed".
Nats and EDS declined to discuss the settlement. Both sides said
the "terms are satisfactory to all concerned".
Case notes
- Nats is to pay supplier EDS millions of pounds to end a legal
feud lasting nearly two years
- The costs, when added to compensation paid to another IT
supplier - also for aborted IT work - could total £60m which will
be recouped through charges to airlines
- Days before the settlement, the judge warned he might force
Whitehall to disclose key PFI documents
- The settlement came minutes before a high-profile witness was
due to give evidence at the High Court.