Member Article

At the end of January, the 468-page judgement of BSkyB v EDS was published, nearly eighteen months after the court hearing closed.  Many, varied and worrying predictions as to the potential impact of this judgement had been made, but ultimately the judgement is unlikely to lead to radical changes in the relationship between IT and other suppliers and their customers.

A key aspect of the dispute related to statements made by EDS employees in the course of a competitive tender process both as to the time required to complete the proposed project and as to resource requirements and costs.  The question of whether these "sales" statements were fraudulent misrepresentations became critical as it is not possible to limit liability for fraud in a contract.

BSkyB were claiming a total of £709m in damages for the four-year delay in their project and related costs.  The contract limited EDS liability to £30m.  To overcome this limit, BSkyB argued that certain statements made by the EDS bid team were fraudulent misrepresentations, and that the liability cap would not apply. 

In the end, BSkyB have been partially successful in this claim.  The judge singled out the actions of one particular EDS employee, the bid team leader for EDS. Particular statements made by him were deliberate and knowingly false and were therefore fraudulent misrepresentations for which EDS was liable.  Although the hearing on damages has yet to be held, EDS have apparently already agreed to an interim payment of £200 Million to BSkyB. 

However, contrary to predictions, the judgement may not have a radical impact on sales activities across the IT and other sectors.  In this case it appears that the actions of one individual have been singled out.  A number of other claims made by BSkyB did not succeed.  A complete rethink of sales processes appears unnecessary.

That said, companies who routinely respond to competitive tenders should consider how their sales teams operate. Large financial incentives for sales personnel are useful but if they create insecurity this may lead to inappropriate behaviour. 

If the BSkyB/EDS case prompts suppliers to review their sales processes to ensure that common sense rules, this can be no bad thing.