Lawsuits on the horizon after Brisbane council terminates TechnologyOne contract

Brisbane City Council pulls out of IT systems replacement contract

Brisbane City Council has terminated its IT systems replacement contract with TechnologyOne.

A statement from the council said that BCC advised the ASX-listed software vendor of its decision today. The move came hot on the heels of a TechnologyOne warning that it would launch a $50+ million damages claim if BCC backed out of its contract.

The council in June 2015 awarded TechnologyOne the contract to replace 13 of the council’s core IT systems.

BCC said it terminated the contract “due to TechnologyOne's persistent and ongoing contract breaches,  significant and unacceptable delays in progressing the contract and a complete loss of faith in the company’s ability to deliver a replacement system for Council's IT systems”.

The matter will now head to arbitration, with BCC indicating it will seek damages.

In January Brisbane Lord Mayor Graham Quirk launched a withering attack on the software vendor, saying that he would seek to renegotiate the contract, claiming that the project could end up being delivered 18 months late and costing $60 million more than anticipated.

The two parties have since traded show cause notices. In its response to the council’s most recent notice, issued in June, TechnologyOne blamed the project’s woes on BCC.

TechnologyOne has said that the scope of the project had blown out after the council in October provided the company with its process catalogue, which contained at least 40 per cent more process patterns and “many more processes” than were in the scope of the original contract.

In addition, the company has said that it had been instructed in December by the council to not proceed past a significant project milestone.

“This decision is about the effective use of ratepayers’ money and ensuring that council's core services are not compromised,” Quirk said in a statement released after the council’s decision.

“In the past six months, Council offered TechnologyOne the opportunity to reform the contract and met with their representatives on many occasions to assist the company to get the project back on track.

 “TechnologyOne has for a number of months been making public claims that in Council’s view are misleading and inaccurate.”

The lord mayor said that TechnologyOne had not previously worked with a local government the size of Brisbane and had “struggled with the complexity of council’s operations”.

“Council manages more than 2.2 million transactions each year for activities such as rates payments, infringements and waste collection,” he said. 

“Based on what we have seen of the TechnologyOne system, this is a product still very much in development. After initially promising the product would be operational by March 2017, TechnologyOne has requested several extensions for the Go Live date with the most recent advice that it won’t occur until January 2019.

“This continual slippage is unacceptable and Council lacks confidence that even the most recent deadline will be met.”

The council will continue to rely on its existing IT systems while it conducts an evaluation on “additional work” on them.

TechnologyOne responded to news of the council's decision by saying it was a “positive step”.

The company said that the council was not genuinely pursuing a resolution of the conflict with the company but the contract between the parties did not allow the software vendor an effective mechanism to terminate it.

The company is able to pursue the matter in court, it said.

“I personally find BCC’s behaviour both disingenuous and unprofessional,” said TechnologyOne executive chairperson Adrian Di Marco.

“BCC had made it clear through both its actions and its statements that it did not want to complete this project, and was endeavouring to engineer a termination of the contract for breach. This charade has now come to an end, but unfortunately this now exposes the ratepayers of Brisbane to a $50+ million damages claim for wrongful termination by BCC.”

The matter should never have been put into the public arena by the lord mayor, he said, arguing that if “BCC lawyers had not assume control of this project in January” it would be on track to meet the contracted go live date.

“I also remind shareholders that at the time of the Lord Mayor’s announcement there was no dispute between BCC and TechnologyOne, and both parties were still working to the contracted ‘go live date’. TechnologyOne was at the time caught by surprise by the lord mayor’s announcement and remains bewildered and disappointed by his actions,” Di Marco said.

“Projects at times have problems, and in my 30 years in business, when this happens people get in a room to discuss it and find a commercial resolution. People do not go public until all avenues have been exhausted, especially if they have not previously raised a problem, let alone attempted to resolve the matter.”