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Australian State to sue IBM over $AUD1bn project blowout

Queensland pulls out the big stick to whack Big Blue

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The Australian State of Queensland has reportedly filed a statement of claim against IBM to recoup some cash from an SAP disaster.

Queensland's keen to bash Big Blue because its Health Department engaged the company to build a new payroll system. IBM quoted $AUD6m for the SAP-based project, then upped the quote to $27m. A few years down the track the payroll still wasn't working properly and had racked up $1bn of bills and more than a little pain for employees who weren't paid properly, if at all.

The State launched an inquiry that found IBM did not act ethically in pursuit of the contract. That inquiry also found that public sector workers in Queensland were less-than-stellar managers of their suppliers. To make things worse, a previous State government settled with IBM because it feared that if it was hostile to Big Blue it would walk away and leave it with an even smaller chance of delivering a working payroll.

That sequence of events led the Judge who headed the inquiry to describe the project as “in the front rank of failures in public administration in this country,” before adding, “It may be the worst.”

It now appears that Big Blue will have a day in court. Australian outlet ITNews.com.au reports that Queensland has filed a statement of claim in the State's Supreme Court, a jurisdiction that considers claims of unlimited size.

Government sources did not reveal any details of the claim to ITNews.com.au, citing confidentiality requirements of the process. Nor is it known when, or if, the matter will reach court.

Vulture South imagines cash-strapped Queensland may prefer the quick kill of a settlement, especially if IBM offers up an appropriately-sized cheque. Whether IBM decides to fight, and thereby risk its sharp business practices again being aired, will be interesting to watch. ®

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