Change of personnel might be necessary to salvage failing outsourcing arrangements, says expert

IT contracts expert David McIlwaine of Pinsent Masons, the law firm behind Out-Law.com, said such a move can help salvage the relationships between parties to outsourcing agreements that are necessary for contracts to continue to be performed in light of a dispute.

McIlwaine was commenting after it emerged that BT and Cornwall Council will go to the High Court in London in December this year in dispute over a major outsourcing deal.

Computer Weekly reported that BT has applied for an injunction to prevent Cornwall Council terminating their 10-year £260 million outsourcing deal. Cornwall Council has claimed that BT is in "material breach" of the contract, which was signed in 2013, and wants to end its agreement with BT.

It has said that BT has "failed to meet its performance obligations in respect of ICT services or to achieve its commitments to create new jobs in Cornwall" and that the company has also "failed to deliver key projects effectively or on time”, according to the Computer Weekly report.

In response, BT has said it has "commenced legal action to ensure fair and proper handling of the issues which have arisen about BT Cornwall".

"To get an injunction to prevent termination of an outsourcing agreement you need to show there is a serious question to be tried, that damages are not an adequate remedy and that the balance of convenience favours the continuation of a contract," McIlwaine said. "It is unusual for courts to consider damages as not being an adequate remedy for a breach of an outsourcing contract."

"However, if the High Court orders the continuation of the contract then it will raise major questions about how BT and Cornwall Council will work together for eight more years, especially as these type of contracts, involving multiple obligations on both sides, demands collaboration to ensure delivery of services," he said. "Outsourcing contracts are like marriages. They are relational in nature and require parties to get along to deliver the contract."

McIlwaine said that the High Court will not set out how the parties will need to behave to ensure continuation of the contract if it makes such a ruling at the trial.

"It will be thrown back to BT and Cornwall Council to work out the detail in those circumstances," McIlwaine said. "It may be that a change of senior personnel involved in the partnership is required to remove any baggage there has been in the breakdown of the relationship and ensure the parties can work together to perform the contract over the next eight years."

"A view may be taken, though, that it is in the best interests of both parties to terminate the agreement altogether as a result of the broken relationship. This would likely require a settlement to be reached that is acceptable to both parties," he said.