Raytheon seeks £500m e-Borders payoff

US defence contractor Raytheon is seeking over £500m from the UK government in compensation for a contract for the e-Borders passenger-processing project that it says was wrongfully terminated.

Raytheon revealed it has lodged a claim for over half a billion pounds in a letter to the Home Affairs Select Committee (PDF), published on Friday.

"We maintain that the purported termination was unlawful and that Raytheon is entitled to recover substantial damages for wrongful termination," the company's chief executive Robert Delorge said in the letter. "We have made counterclaims in the arbitration in excess of £500 million in respect of these matters."

Raytheon's action comes at a time when the UK government has slashed public-sector budgets across the board. The government announced IT spending cuts worth £500m in 2009, while more recently it has proposed reductions of £500m each in police salaries, legal aid, improvements to schools, and bus-fare subsidies.

In 2007, Raytheon signed a £650m deal with the government as the lead supplier in a consortium to develop and implement the e-Borders system, which would perform checks on passengers entering and leaving the UK. The Home Office ended the contract in July 2010, saying the company was in breach. At the time, immigration minister Damian Green said the government "requires the highest standard of performance from its suppliers".

In July, Raytheon received a £5m payoff from UK Border Agency (UKBA) for the termination of the contract and any possible infringement of intellectual property rights.

e-Borders project

On Monday, Green said the first phase of the project under Raytheon, to increase the data collected from carriers to 100 million passenger movements by April 2009, did not deliver a number of elements. The e-Borders project was split into phases called 'release projects'.

"The first release project had been only conditionally accepted as having been achieved, given that important capabilities were missing," Green said in a letter (PDF) to the Home Affairs Select Committee.

We maintain that the purported termination was unlawful and that Raytheon is entitled to recover substantial damages for wrongful termination.

– Robert Delorge

Raytheon did not finish any of the further stages in the remaining three phases of the project, according to the minister. Each phase had a target and cumulatively would result in the Border Agency being able to track 100 percent of passengers by 2014.

By comparison, Green noted that two of its current e-Borders contractors, Serco and IBM, are hitting their delivery targets.

Raytheon gave a different version of events in its letter, sent to the Home Affairs Select Committee on 3 August. Delorge said the company had completed the majority of the work for phase one and noted the delivered capabilities are still being used by the Border Agency.

It did not complete the work in phase two "because of various breaches of contract by the UKBA which are the subject of the arbitration and because the UKBA was never able to settle upon the scope of its requirements for that phase of the programme", Delorge said.

The Home Office declined on Friday to say which capabilities Raytheon failed to deliver, citing the ongoing legal procedures.