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Commercial Guidance - Applicability of Liquidated Damages to the Red
Alert that occurred on 27/07
Incident Summary
The deployment of an incomplete set of Reference Data updates on the
evening of 26/07 resulted in PIN Pads across the estate being unable to
perform Banking Functions from start of business until approximately
14:30 on 27/07.
Liquidated Damages and the Contract in General
Contract defines the Liquidated Damages in Clause 18 of the Contract. Liquidated Damages are a
“reasonable and genuine pre-estimate of the loss likely to be suffered by Post Office”
Liquidated Damages Thresholds (where LD’s are triggered) is defined in Schedule C1 para 1.2.2 as “the
level of Service which, if not achieved by Fujitsu Services, shall give rise to payment of liquidated
damages by Fujitsu Services (the “Liquidated Damage Threshold” or “LDT”). Payment of liquidated
damages notwithstanding, a failure of any LDT shall not (on its own) constitute a Default;”
LD’s are included in the individual Service Descriptions.
There is a cap introduced in Para 2.7.2: “The liquidated damages payable by Fujitsu Services in respect of
any Failure Event in respect of the Counter Availability SLT shall not exceed £400,000 (four hundred
thousand pounds).”
Liquidated Damages and individual Services in the Contract
1. Reference Data Management Service: (described in SVM/SDM/SD/0013) does not have any
Service Levels for which LDTs apply, ie no LD’s apply to a failure in this service
2. Counter Availability SLT is relevant to the outage: is defined in the Branch Network Service
Description (SVM/SDM/SD/0011). The payment of liquidated damages is linked to a Failure
Event.
a. A Failure Event is defined as : “an event or series of connected events which causes one
or more Counter Positions to be deemed Unavailable due to a Network Wide Failure or
Local Failure. Ongoing failures will be deemed to be part of such Failure Event until the
Failure Event is closed in accordance with the Incident closure process which is set out in
the Working Document entitled "Major Incident Process" (SVM/SDM/PRO/0001)
(‘Incident Closure Process');”
FUJITSU CONFIDENTIAL — Document prepared by Marc DANIEL LAMAZIERE
2/08/2011
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i. Network Wide Failure is defined as: “means a failure of the HNG-X Central
Infrastructure and/or the Central Telecom Infrastructure which results in a loss
of the availability of one or more Branches and Counter Positions;”
ii. HNG-X Central Infrastructure means “all of the equipment installed in the Data
Centres to provide the Business Capabilities and Support Facilities;”
The incident is therefore NOT a Network Wide Failure hence this is not a Failure Event
for the service under the contract.
iii. Local Failure is defined as “a failure of the Branch Infrastructure and/or
the Branch Telecom Infrastructure”
The incident is therefore NOT a Local Failure hence this is not a Failure Event for the
service under the contract.
Conclusion:
Fujitsu does not appear to be liable for Liquidated Damages as a result of the Major Incident of 27" July
since there is no LD trigger for the Reference Data Management Service and the outage of the Counter
Availability was not caused by a Network Wide Failure or a Local Failure.
However it would appear that Fujitsu may be in Default against its Reference Data Service obligations
(See Para 2.1.3.1 of the Reference Data Service Description SVM/SDM/SD/013):
“To ensure the number of Reference Data delivery failures is kept to a minimum thereby mitigating risk
to Post Office, Fujitsu Services will ensure all Reference Data is properly checked and validated before
distribution to the Branch Infrastructure. In the event that a Reference Data delivery causes disruption
at one or more Branches, Fujitsu Services will as soon as possible identify the Incident and work with
Post Office to resolve the Incident. If the Incident has been caused by the Post Office, its employees,
agents or contractors, Post Office will ensure replacement Reference Data is supplied for distribution by
Fujitsu Services.”
Liability for damages may be incurred by Fujitsu as a result of this default; the value would depend upon
the POL assessment.
Further Legal advice is being sought.
FUJITSU CONFIDENTIAL — Document prepared by Marc DANIEL LAMAZIERE
2/08/2011 2IPage