The government has paid Raytheon £224 million to settle a dispute over the termination of its e-Borders contract in 2010.
In a letter to the Home Affairs Select Committee chairman Keith Vaz MP, Home Secretary Theresa May said an arbitration tribunal found that the process of terminating the contract had been “flawed.”
The £224 million figure comprises £126 million for assets the company delivered before being sacked, such as IT systems, £50 million for damages, £9.6 million for disputed contract change notices and £38 million in interest payments.
The government originally signed a nine-year contract worth £750 million with Raytheon in 2007 to help deliver its e-borders programme, a scheme to collect and store information on passengers and crew entering and leaving the UK.
The government cancelled the deal in July 2010 due to delays in delivering certain milestones.
Raytheon announced plans to sue the government a year later, blaming officials for failing to make targets and objectives clear.
The entire fiasco has cost taxpayers £483 million in total as, on top of the money awarded today, the contract cost £259 million before it was cancelled, £195 million of which was for ‘supplier costs’.
May said that the ruling, which has not been made public, “does not pass any judgement on whether Raytheon had defaulted on the contract nor whether the Home Office was therefore justified in terminating it”.
The government will now examine if it has any grounds to challenge the award and will work to ensure the payment does not have “any impact on frontline services”, May said.
The Home Secretary said that she stood by the decision to terminate the contract.
May said: “This decision was, and remains, the most appropriate action to address the well-documented issues with the delivery and management of the programme.”
She claimed that all other alternatives available would have cost more than the tribunal ruling.
The overall e-Borders project was cancelled in May 2014, although the intended aims of the programme- to record ‘advanced passenger information’- are still being delivered by the Home Office.
The department said that it is now collecting data on over 80 percent of passengers compared to 60 percent in 2009.
May said that the Home Office permanent secretary Mark Sedwill has asked the National Audit Office to conduct a full review of e-Borders from start to finish.
She added that there will be an internal review of the advice provided to ministers and the way the termination process was managed by the UK Border Agency.
May said that the government “would never enter into such a contract today” and “has already taken steps to make sure this kind of thing should not happen again.”
She pointed to policies such as shortening contract terms and limiting the scope of IT contracts as making it easier to manage performance and providing resilience to supplier failure.