Bristows' SnippITs - TCS v DBS: Lessons from Major IT Dispute (Part 1)

This post is part of the Bristows’ SnippITs series, which pulls together the key practical takeaways from recent court decisions for the tech sector and beyond.

Delays, critical path and “unconscious pacing”

On 17 May 2024, the Technology and Construction Court handed down its judgment on one of the largest IT disputes in recent years: Tata Consultancy Services Limited v Disclosure and Barring Service. The 243-page judgment (summarised here) provides a relatively rare and detailed insight into the court’s determination on a broad range of issues that often arise when a complex IT project goes wrong. 

In this series of posts, we consider some of the key issues from the perspective of both suppliers and customers of large-scale IT projects. This first post focusses on the delay aspects of the case and considers potential pitfalls for IT suppliers seeking relief for missed milestones. 

Key takeaways

1. Complexity of Delay Claims: Establishing and evidencing delay claims on complex IT projects is challenging, particularly in determining the “critical path”.
2. Importance of Documentation: While documenting delays meticulously is an essential part of managing the project, contemporaneous project plans were not considered to be conclusive evidence of critical delay by the court, as they reflected anticipated, not actual, events.
3. Beware of Pacing Activities: Suppliers should avoid slowing down work in response to customer delays. It may be a natural reaction for a supplier when faced with its customer delaying a contractual delivery date to deprioritise certain activities. However, maintaining momentum and documenting readiness to meet milestones, even if delayed by the customer, is crucial to mitigate risk.

Background

The dispute centred on the modernisation of an IT system for the Disclosure and Barring Service (DBS), the UK government body responsible for issuing criminal records checks and maintaining official lists of barred individuals.

Following significant issues and delays of over a year on the project, followed by the termination by DBS of part of the services, DBS’s IT supplier (TCS) brought a claim of over £110 million in damages. Most of this claim related to the cost of the delays to the project.

Due to provisions in the contract, TCS's delay claim could only succeed if it could show that it would have been able to achieve the contractual milestone dates but had failed to do so because of an “Authority Cause”. In other words, “but for” DBS delay, TCS would have achieved the milestone. This meant that the court not only had to consider delays to the project but also needed to determine which of these delays were on the “critical path”.

DBS also brought a counterclaim against TCS, which included claims for delays that it said had been caused by TCS.   

Decision

• The delay analysis performed by the court involved:
  • understanding the history of the work on the project to determine why certain activities were replanned; 
  • determining which events or workstreams caused delay to ascribe responsibility for each delay event; and 
  • establishing which activities were driving the critical path at any time.
• The court was presented with three different delay analyses by the parties’ programming experts concerning how to identify the “critical path” on the project. These models produced vastly different results in terms of what events and issues had been the cause of critical delay.

TCS’s delay claim

• The court rejected the evidence of TCS’s expert, who based his analysis on the projected delays by the parties in the various project plans. These plans were forecasting delays and did not take into account what had actually happened on the project. 
• One of TCS’s arguments was that when faced with DBS delays to milestones, its teams had carried out pacing activities, meaning that they had worked more slowly as they had more time to fill. This included “unintentional pacing” where there had not been a deliberate decision to slow down but instead the work did not pick up speed when it fell behind. The court rejected these arguments, finding that TCS had not shown that it would have been ready to deliver the milestones “but for” other delays. The court also commented that pacing (unintentional or otherwise) was not a “sensible strategy” for a supplier in TCS’s position and was “entirely counterproductive to its interests.”
• In relation to the element of the project terminated by DBS, part of TCS’s delay claim succeeded as the court found it had been prevented from delivering that part of the project due to DBS’s failure to cooperate with TCS (in breach of the Agreement). However, all other elements of TCS’s delay claim failed. TCS was awarded just over £2 million in relation to these delays, representing a fraction of its total claim.   

DBS’s delay claim

• The court found that DBS’s delay claim failed as it had not fulfilled a condition under the contract to issue a non-conformance report to be entitled to delay payments. DBS’s delay claims were dismissed in full.