The dirty laundry from a massive, $1.34 billion IT deal gone bad is being aired very publicly as the state of Indiana has cancelled the remaining seven years of a 10-year deal with IBM while Big Blue says Indiana still owes it $125 million, including a $43 million "annual fee" as part of a deferred-payment plan.

Some of the expense items in that $125 million invoice have stirred the profound indignation from a very surprising source—politicians and bureaucrats—who generally think the only thing wrong with spending $125 million of other people's money is that it could have and should have been $1.25 billion.

A news article detailing the messy breakup notes that Indiana levied "fines" against IBM for underperformance in five separate months during 2009. And now that the 10-year outsourcing deal calling for IBM to manage welfare benefits in 59 of the state's 92 counties has been cancelled, the two parties are going through the difficult and highly contentious morning-after process of determining what is owed to whom.

According to a news story in Sunday's Fort Wayne Journal Gazette, non-elected "advocate" working for the Indiana Home Care Task Force took particular umbrage at IBM's contention that the state owes it $9.3 million for computers and related furniture purchased by IBM as part of the wide-ranging contract.

"Advocate" John Cardwell said the state failed to oversee IBM's expenditures properly:

"IBM has already walked away with a goldmine worth of taxpayer money, and we've gotten very little out of it," he said according to the article.

Global CIOs: A Site Just For You

Visit InformationWeek's Global CIO -- our new online community and information resource for CIOs operating in the global economy.

Early last year, Indiana cancelled the megadeal with IBM because, three years into it, only about one-third of Indiana's welfare recipients were being covered by the system, the newspaper said. And now, in one of those situations that makes one wonder if perhaps Homer Simpson is making the big decision-maker here, the very same state agency that originally brought IBM in—the Family and Social Services Administration—is now reaassuming control over the entire process.

In addition to the $9.3 million for computers, phones, and furniture, the $125 million bill from IBM to the state includes the following: