Essex faces damages claim after terminating BT contract

15 Jun 09
Essex County Council is facing a claim for ‘substantial’ damages after terminating an IT contract with BT worth at least £250m.

By Tash Shifrin

Essex County Council is facing a claim for ‘substantial’ damages after terminating an IT contract with BT worth at least £250m.

Essex County Council is facing a claim for ‘substantial’ damages after terminating an IT contract with BT worth at least £250m.

The row between the council and the telecoms giant comes as Essex moves forward with controversial proposals to contract out ‘any or all’ of its services in an outsourcing deal worth up to £5.4bn.

Essex signed the ten-year contract with BT’s Syntegra subsidiary in 2002, with 130 council staff and 200 third-party contracts transferred to the company.

The strategic partnership contract, valued at £25m a year when it was signed, extended well beyond basic IT services.

A 2003 report on the deal by IT industry analyst Gartner highlighted the central elements as transformation projects to re-engineer internal processes and customer services, and the plans to identify opportunities to provide services to other councils. Transformation projects included the introduction of new payroll and human resources systems.

But the two partners could face each other in court after Essex axed the contract this week.

Neither side would confirm whether the deal had a break clause, but the Gartner report reveals that it had ‘one formal break point that allows it to be terminated in the seventh year’ – 2009 – as well as provision for a two-year extension.

A BT spokesman said the council had ‘unlawfully terminated our contract’. He added: ‘Having discussed the position with our lawyers, we can confirm we will be seeking substantial damages.’

A council spokeswoman countered that the deal had been terminated because the council was ‘determined to deliver better services at a better price for Essex taxpayers’.

Trade union Unison, which opposes the outsourcing plans, seized on the contract dispute as evidence that the council could not hold its own with ‘the big boys of the private sector’, as it staged a lobby of councillors on February 10.

But the council spokeswoman denied that the row with BT raised question marks over the outsourcing plan.

Essex would ‘act decisively when we judge that any contract is not delivering value for money’, she said. ‘We won’t lock ourselves into anything we can’t get out of.’

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