IBM facing $159m bill over botched govt project

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IBM facing $159m bill over botched govt project

Breached contract, but still given $66 million in damages.

IBM is facing a potential US$120 million (A$159 million) damages bill for its role in a bungled project with the state of Indiana, after losing a battle through the courts against the state government.

This week, the Indiana supreme court ruled IBM had breached its contract with the state to deliver a core systems overhaul [pdf].

In 2006 the state government awarded IBM a ten-year, US$1.3 billion contract to overhaul its welfare eligibility system, with a remit to deliver things like centralised service and call centres for welfare application processing, an online portal for citizen access, and a paperless document management system.

But the contract was terminated three years later after coming up against issues like "inaccurate and incomplete data gathering", "scheduling problems", a "failure to follow proper procedures", and "untimely application and redetermination processing times for various welfare programs", according to the court ruling.

Both sides launched legal action against each other for breach of contract the following year.

IBM was initially successful in its claim against the state in a district court, but an appeals court overturned that decision.

The case then went to the Indiana supreme court, which this week upheld the appeals court ruling.

It said IBM failed to perform satisfactorily in the project, "consistently failed to meet" certain timelines, and "failed to assist the state in achieving its policy objectives".

The supreme court did, however, award damages of US$50 million to IBM for equipment and assignment fees, but has left it up to a lower to court to rule on the state's US$170 million damages claim against the company. 

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