HP Enterprise Services UK Limited (formerly known as Electronic Data Systems Limited) (“EDS”) has agreed to pay BSkyB Limited (“Sky”) a total of £318m in settlement of a long running legal battle in which EDS was found liable for deceit, misrepresentation and breach of contract.

In 2000, Sky awarded EDS the contract to design and implement a customer relationship management system following a competitive tender process. Sky claimed that EDS had lied during the tender process by describing the system as "proven" when it was not, by overstating its capabilities in relation to resources and implementation methodologies and by understating the amount of time and cost required to implement the system. This led Sky to select EDS in favour of other bidders.

The judgment, which was handed down in January of this year, upheld Sky’s claim that EDS had lied in respect of the amount of time required to complete the project. As a result the £30 million contractual cap on damages in the contract did not apply.

The £318million settlement figure covers damages costs and interest and includes the £270 million interim payments which were paid by EDS during February of this year.

Although there is emphasis in the judgment on the dishonest conduct of the person who led the bid team and confirmation that only one of five allegations of fraud against EDS succeeded, suppliers of IT systems should take great care in writing tenders and making sales proposals – to ensure that they do not mislead prospective customers.

In particular, suppliers should learn from the decision in Sky v EDS by taking the steps to guard against any risk of fraud. These may include:

  • Vetting people engaged to take up senior sales roles, taking up references and validating qualifications and experience. If an applicant is willing to lie during the job application process, he may lie during the sales process particularly where there is financial incentive linked to volume or value of sales.
  • Reviewing of any sales / bid team training programmes, flagging up the risks to the business if any member of the sales team makes fraudulent misrepresentations during any part of the sales process.
  • Reviewing bid templates and checking representations or claims made in the standard text within them.
  • Instituting an independent review process to check and seek validation for the claims and representations made in bid documents prior to submission.