Written evidence from Raytheon Systems Ltd

During the course of my oral evidence on 16 December 2015 regarding the e-Borders programme, you requested that I follow up with an explanation of the amount it cost Raytheon Systems Limited ("RSL") to handover the programme to Serco following termination (Q145).

By way of brief context:

1.                   Our contract with the Department contained so-called "exit management" provisions whereby, after termination, RSL was required (i) to continue to operate the e-Borders system for an interim period; (ii) to transfer assets created during the course of contract to the Department and/or a replacement service provider and (iii) to assist with the transfer and setting up of the live service. 

2.                   Because the Department was found to have terminated the contract unlawfully, RSL was under no legal obligation to perform any exit management services.  RSL nevertheless took the decision when the contract was terminated to do all that was necessary in the interests of UK national security to maintain the service and to execute the hand-over to Serco. As I said in my evidence to the Committee, that is part of Raytheon's corporate philosophy: despite our differences with the Department, we continued to provide the necessary assistance and support to execute the hand-over process, even under the very trying circumstances of a disputed termination.   

3.                   RSL devoted considerable time and resources to the hand-over.  The process lasted around 9 months and was completed in April 2011.  The process took as long as it did for a number of reasons, but primarily because the Department needed time to work out how it wanted to take the programme forward following termination and because there was a protracted period of tripartite negotiations between the Department, Serco and RSL to agree and document the new arrangements.  RSL also had to educate and train Department and Serco on how to run the e-Borders service.

4.                   The process was further complicated by the fact that the amount which RSL was entitled to be paid for these exit management services was disputed. The Department paid RSL some of its costs, but less than the amount RSL believed it was entitled to recover. We claimed the shortfall in the arbitration.  There was also a much larger dispute as to the RSL was entitled to be paid for the many millions of pounds worth of assets to be transferred to the Department following completion of the exit management process. The Department refused to make any payment for those transferred assets at all; but as you know the Tribunal held against the Department on that point in the arbitration.     

5.                   As for the costs of conducting the handover itself and continuing to provide the live service:

(a)                The total handover cost incurred by RSL was £7,998,877, of which the Department paid us £4,164,315.  The unrecovered amount, which we claimed in the arbitration, was £3,834,562.

(b)               The Tribunal awarded RSL an overall amount of £186 million, plus interest.  However, the Tribunal's Award did not specifically allocate damages to specific elements of RSL's claim.  It is not, therefore, possible to ascertain how much of the total sum awarded by the Tribunal related to RSL's claim for the £3,834,562 handover costs.

(c)                Similarly, the settlement sum of £150 million was a global amount and did not allocate specific amounts to individual elements of RSL's claim.

I trust this provides you with the information you need.  If the Committee has any questions about this or any other matter, please do not hesitate to contact me and I will make every effort to assist.

Richard Daniel

CEO

7 January 2015