Crystal Umbrella

The ruling in the largest case ever heard in London’s Technology court has now set a precedent for end users to claim large payouts from contractors who exaggerate their skills and experience.

Mr Justice Ramsay who presided over the case accepted that EDS had made unsubstantiated claims in order to win the £48million contract to build a customer management system for BSkyB. The contract was awarded ten years ago and EDS have since become part of HP.

However two years after awarding the contract, BSkyB terminated the agreement between themselves and EDS due to their failure to fulfil the obligations in their contract. The project had been hit by numerous delays and rising costs. BSkyB were then forced to appoint their own team of IT workers to complete the project which reportedly cost £265million.

The original contract had damages capped at £30million but Mr Justice Ramsey, in an unprecedented move, ruled that this figure should be disregarded. Speaking of this ruling to ContractorUK, Jeremy Drew from law firm Reynolds Porter Chamberlain said: “This is a major decision that’s going to have a huge impact across a broad range of businesses. Any service company that bids for customers will have to be much more careful about avoiding loose sales talk and exaggerating its past experience and capabilities, otherwise it could find itself on the receiving end of a similar claim.”

However, Mr Justice Ramsey did not actually set the amount of damages payable but BSkyB believe it will be in the region of £200million despite their original claim for £709million.

Mr Drew concluded: “IT and other service providers will now have to be more careful that they can back up any sales claims with hard evidence. In the past it’s always been the case that the customer has had to make a judgement call on the sales pitch of a bidding company to assess whether they are competent and capable, but this decision means the burden will now be shifted to the bidding company to rein in any exaggerated claims.”

HP are now expected to appeal the ruling. It would appear that an agreement between HP and BSkyB is still some time away.

Source: ContractorUK

Following an alarming trend within big companies, Electronic Data Systems has confirmed that IT contractors within their workforce will have their pay reduced by 10% – a figure not subject to negotiation.

The pay cut announced earlier this month to the freelance IT suppliers at EDS is the latest measure in an ongoing economic plan designed in September last year. Already 3,000 people have been made redundant within the company workforce and contractors who do not agree with the pay cut will face termination upon renewal.

Part of the blame has been placed upon Hewlett Packard and their decision after the takeover of EDS to reduce its combined workforce by 24,600 as part of their three-year restructuring plan, predicted to save the IT giant £1.8bn a year. Union estimates at the time of the acquisition saw one in five EDS contractors losing their jobs, and now it appears the prediction has become reality.

In addition to the pay cut, further measures to reduce company costs include an invitation from EDS to its staff and contractors for a week off without pay. Staff salaries and pensions are also affected.

This is one of the latest examples of how large companies’ plans for cost reductions result in reduced pay and unemployment for IT contractors. BT announced earlier this month that they would be reducing IT contractor pay by up to 30%, and Toshiba said it would eliminate 3,000 temporary roles by March 2010.

STATEMENT FROM EDS, AN HP COMPANY – 23/04/2009

EDS does not have a direct relationship with its contractors around pay and contracts. Rather, it works with a group of suppliers and it is these suppliers who determine the pay rates and contracts for their employees. Therefore the assertion that EDS has enforced a blanket 10% pay cut for its IT contractors is misleading.

It is standard business practice in EDS and HP to continually evaluate the competitiveness of all of our suppliers and we are in constant dialogue with them. We do this to ensure a world-class cost structure, which allows us to deliver a best value, high quality service to our clients.

As the recession intensifies, like many companies, we are looking at our costs and are intensifying our efforts to get the best possible value from our suppliers. As a consequence, our suppliers are willing and able to offer greater flexibility and more competitive rates.

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