Latest trends and cases in procurement Belinda Doshi Partner, Field Fisher Waterhouse LLP Belinda.Doshi@ffw.com +44 (0) 7976 351553 18 May 2011
Overview • Latest trends • Fall out from BSkyB v EDS (2010) • Other latest ‘must know’ cases • Where next?
Latest trends: (1) green shoots? • Cautious rise in confidence • New financial year – new budgets • Financial services – first into the crisis – first out • Insurance and Solvency II • Value is still ‘the new black’ • Good procurement practice has never been so important
Latest trends: (2) flexible contracting • Number one trend • Decline of the monolithic services contract • One provider does not have all the solutions • Reluctance to lock-in for long term • Scalability of service and service recipient • Future flexing • COTs and Cloud • Impact on contracting models • The rise of the flexible framework and non-exclusivity
Latest trends: (3) privacy and data security • Sony • Rise of privacy and data security as key customer concern • Not just a compliance issue – branding and reputation • Importance of building into contracts • Do your contracts reflect your privacy and security policies? • Breach notification and remedial action • How secure are your suppliers? • The data security of your supplier chain is only as strong as the weakest link
Latest trends: (4) supplier consolidation • Multi-sourcing malaise • Multiple contracts, multiple costs? • BP as a case study • Greater flexibility/collaboration requires more consolidation • Data security and impact on supplier base • Opportunity to renegotiate • Don’t move, improve • Contract consolidation
Latest ‘must know’ cases • Landmark case on fraud and liability • Supreme Court on “subject to contract” • Battle of the forms • Termination
Landmark case: BSkyB v EDS (2010) • Landmark case • £740 million claim for fraudulent misrepresentation • Failed CRM/contact centre system and services • Fraud: limitation of liability does not apply • Court found in BSkyB’s favour • What it means for suppliers • What is means for customers
Supreme Court on ‘Subject to contract” • RTS Flexible Systems Ltd v Molkerei Alois M ü ller GmbH & Co KG (UK Production) 2010 – ‘ The M ü ller Yoghurt case ’ • When is a contract not a contract? • And if it is a contract…what are its terms?! • Letter of intent followed by an agreement ‘subject to contract’ • Work started with no written contract agreed • Risks to the customer: waiver, quantum meruit, liability • Court of Appeal: no contract • Supreme Court: binding agreement • Lessons for managing risks?
Battle of the forms • GHSP v AB Electronics 2010 (High Court) • Where each party states their terms apply, whose really do? • Last shot doctrine – not always conclusive • Court finding – neither Customers nor Supplier’s Terms applied – Terms implied from SGA 1979 • Impact: Caps on liability in the Supplier’s contract did not apply! • Lessons for managing risks?
Termination • Shell Egypt West Manzala GmbH and Shell Egypt West Qantana GmbH v Dana Gas Egypt Limited 2010 (High Court) • Mistake over termination: Shell failed to recover US$15million • Dana Gas Egypt broke contract with Shell • Shell used the contract terms to terminate giving 30 days notice • Shell should have claimed this was a repudiatory breach and rescinded contract • Following the contract procedure = Shell affirming the contract • Result: Shell failed to recover • Lessons for managing risks?
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