High Court to determine whether council has the right to terminate major outsourcing agreement
A simmering dispute between a group of west country local authorities and outsourcer BT over the contractor’s alleged failure to meet performance targets is to be heard in the High Court in December.
Cornwall County Council is attempting to terminate a £260m strategic partnership with BT Cornwall because of what it calls “material breach particularly in respect of KPI’s (performance) and jobs (guarantees)”. However last month BT sought an injunction to prevent the council from unilaterally walking away.
The BT Cornwall Strategic Partnership contract was signed in 2013. At the time the partnership promised “a better future for Cornwall by bringing together the best of the private and public sectors”. The 10-year deal covered back office services for a community health and NHS trust as well as the council. However earlier this year the council reported than only one tenth of the 351 new jobs promised under the contract had materialised.
Standstill agreement
A report to Cornwall’s Resources Policy Advisory Committee last week revealed that:
- On 24 June, the council formally notified BT Cornwall (BTC) in writing of its intention to seek the necessary approvals to terminate the service delivery agreement for material breach "particularly in respect of KPI’s (performance) and jobs (guarantees)".
- On 8 July, the cabinet gave authority to terminate alone or in combination with the other public sector partners the service delivery agreement with BT Cornwall Limited.
On 20 July, the council entered into a “standstill agreement” with BT Cornwall. Two meetings took place between BT Cornwall and senior council officers during this standstill period; however an amicable termination could not be negotiated.
On 12 August BT Cornwall filed an application with the High Court to seek an injunction preventing the council from terminating the agreement. The council submitted evidence in response to defend such an action and requested that the full future trial be held as soon as possible to prevent any delays. An expedited trial is now listed to take place on 1 December, to determine if the council has the right to terminate the agreement or not.
Possible outcomes
The document says there are two possible outcomes from the trial. First, that the council is able to terminate the contract; this would also allow the council to claim damages and legal costs from BT.
The second outcome is that the council is unsuccessful and, therefore, cannot terminate the contract for material breach as at 20 July. This would mean that the contract continues with BT and the council might be required to pay BT’s court costs.
“The council continues to robustly monitor and manage the performance of BT Cornwall under the terms of the agreement and will continue to do so until conclusion of the trial,” the report says.
It is highly unusual for this kind of dispute to come to open court. Whatever the verdict, the experience is likely to cast a shadow over large scale strategic partnership deals.
Photo: iStockphoto/Mark Goddard
