20. ICL was in breach of the contract when it failed to deliver the core application to the first site in Suffolk by the target date of July 2001. But the Department did not terminate the contract and sue for damages.20 The Department had seriously considered termination but considered that renegotiating the contract was the least worst option. Termination would have led to the need for re-procurement and the loss of service to magistrates' courts. There would also have been the cost of litigation itself, with claims and counter claims, and arguments about whether or not one side or the other had fulfilled the contract.21
21. The potential cost to ICL of walking away from the contract was lower than the loss it was forecasting. The agreed limits of liability within the contract grew by £5 million for every six months the contract was in existence, up to a maximum of £40 million. The Department had considered, on advice from its lawyers, consultants and bankers, that in the circumstances of IT projects, which are inherently risky, these limits were reasonable. In October 1999, when ICL first threatened to walk away, it could have done so with a liability of only £10 million, though a further £11.6 million in sunk costs would have had to be written off.22
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21 Qq 18, 26, 28