No contract but Co-op still sues ICL

Co-op goes to court after an informal deal fails to deliver core retail software and loyalty card system.

Co-op goes to court after an informal deal fails to deliver core retail software and loyalty card system.

One of the UK's largest retail chains is locked in a legal battle with ICL, now Fujitsu Services, over the alleged failure of a major systems installation for which no contract was ever signed.

The Co-operative Group, which operates about 1,100 supermarkets, is demanding compensation for loss of profits and costs in a row over the installation of an ICL Globalstore retail automation package in 2000.

The retailer is believed to be hoping for several million pounds in compensation, although ICL is disputing the action and has issued a counter-claim.

According to documents filed with the Technology and Construction Court, the disputed project was initially driven by the Co-operative Retail Society's (CRS) year 2000 IT overhaul.

It was then developed to provide a joint IT backbone for the takeover in 2000 of CRS by the Co-operative Wholesale Society, which formed a £4.7bn business.

The merged Co-operative Group alleges that in 1999 ICL entered an agreement with CRS to install an integrated system to link electronic point-of-sale systems to back-office stock management systems. The agreement also included the provision of a loyalty card system, in more than 500 stores.

Despite alleged problems with the system that ICL was implementing for CRS, the Co-operative Wholesale Society entered into further negotiations for it to provide a unified system for the merged organisation, based on Globalstore software.

The Co-operative Group alleges that, "ICL failed to deliver at any time any working system/back-office system to former CRS stores, whether comparable in functionality to that in operation at historic CWS stores or otherwise, and failed to produce at any time a system based on Globalstore which would perform the functions required of it."

Tony Savage, director of consulting at retail automation consultancy RMDP, cited several other cases where ICL faced claims from users about its retail systems.

Savage, who spoke as an expert witness in several such cases, said some had been settled out of court, while others were continuing. In 2001, for example, car repair specialist Kwik-Fit scrapped a £5m electronic point of sale project and launched legal action against ICL. Savage said some users believed that ICL had effectively withdrawn from the retail systems software market. Company sources said there was a period during ICL's transformation into Fujitsu Services when the future of the retail software operation was in doubt.

But a Fujitsu spokesman said Globalstore was one of its key products and pointed out that the system is used by retail giants such as Marks & Spencer.

The dispute with the Co-op Group has been complicated by the failure to nail down a written contract.

Court papers note that, "Both CWS and ICL intended throughout that the CWS agreement should be reduced to writing" but the terms were never agreed and no written agreement was ever completed.

Mike Dodd, vice-president of analyst firm Giga Information, urged firms to take external legal advice before signing IT contracts. "In-house legal teams are not always the right people for IT procurement projects," he said.

How the Co-op/ICL contract turned sour
  • ICL brought in to build system with no written contract
  • Project survives merger of the Co-op groups and is due to support loyalty cards in 500 stores
  • Co-op alleges ICL failed to deliver project and seeks substantial compensation via the courts

  • ICL issues counter-claim.

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