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Vodafone Sues U.K. After Losing Bid for Hack-Proof State Hotline

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(Bloomberg) -- Two bidders for a contract to provide hack-proof communications for Britain’s diplomats around the world failed to meet the government’s own minimum quality standards, yet one of them won the tender anyway.

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Tokyo-based Fujitsu Services Ltd. was unfairly awarded the 184 million-pound ($254 million) contract to upgrade the secure network connecting 532 U.K. embassies and other locations, according to Vodafone Group Plc, which has sued the government over the process.

The Echo 2 contract is designed to connect Britain’s Foreign, Commonwealth and Development Office’s ministers, staff and agents in more than 170 countries, as well as the British Council, the U.K.’s international cultural outreach body.

Both bidders failed to meet minimum quality thresholds, with a London judge saying Vodafone’s scores were worse than Fujitsu’s, according to a judgment published Wednesday. A spokeswoman for the Foreign, Commonwealth and Development Office declined to comment.

England-based Vodafone turned to the courts after losing the long-term embassy contract held by Cable & Wireless, the firm it acquired in 2012. A spokesman for Fujitsu declined to comment on the proceedings.

“We do not believe this procurement process has been run properly,” a Vodafone spokesperson said. “The procuring authority themselves stated the Fujitsu Solution is ‘not fit for purpose.’”

Fujitsu’s application had issues related to two requirements but it didn’t make the overall tender unfit for purpose, lawyers for the Foreign Office said in court documents.

The judge decided in the ruling to expedite a full trial to take place in January 2022, and also allowed the U.K government to enter a “conditional contract” with Fujitsu. The judge was not convinced by suggestions of security deficiencies in the current system.

System Upgrade

The U.K. is upgrading the system and suggested there are risks by sticking with the current one run by Vodafone, which is “outdated”, which the mobile carrier disputes, according to the ruling. Full details of the contract weren’t disclosed in the decision, after Judge Timothy Kerr cited national security concerns and said the information “could be useful to persons wishing harm to this country.”

Vodafone said the U.K. acted unlawfully in awarding the contract to Japanese rival Fujitsu Ltd after initial tenders without allowing further negotiation, according to court filings.

One civil servant cited the SolarWinds Corp. cyber attack as an example of the type of threat that the Foreign Office “would be in a better position to monitor under Echo 2,” according to the ruling. Russian hackers inserted a backdoor in software updates from Austin, Texas-based SolarWinds. The attackers ultimately infiltrated nine U.S. agencies and at least 100 companies using the backdoor and other methods.

Echo 2 will replace the Echo 1 contract awarded in 2010 to Cable and Wireless, a company with its origins in 19th century telegraph lines used to connect the British empire. Vodafone bought Cable and Wireless and inherited the contract in 2012.

The Foreign Office denied that Fujitsu was found overall to be unfit for purpose, according to court filings. It argued that although there were isolated concerns, that didn’t mean the service would be “unacceptably poor.”

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