Government // Enterprise Architecture
Commentary
5/12/2010
08:52 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: Indiana To IBM: Drop Dead

IBM says Indiana owes it $125M from a huge deal canceled before completion. But Indiana says IBM's not getting another dime.

While that particular phrase might be more closely associated with IBM's New York home than with midwestern Indiana, that's precisely the message delivered by a state agency following IBM's claim that Indiana still owes it $125 million from a canceled contract originally valued at $1.34 billion.

Following Indiana's cancellation of the contract six years into its planned 10-year duration, IBM, as part of the typical back-and-forth disengagement discussions that occur after such terminations, sent Indiana a bill for $125 million for computers, phones, and related furniture the company says it supplied per the terms of the contract.

But Indiana says otherwise, according to an article on the website of the Indianapolis Star:

Gov. Mitch Daniels fired IBM in October, canceling the company's $1.34 billion contract for a centralized welfare intake system. IBM, though, had been paid more than $437.5 million by the end of January, and an additional $2.64 million in "disengagement" costs as of the end of March as the state transitioned to a new welfare system.

IBM, though, wants more money, and has billed Indiana for more than $125 million for computers, furniture and various fees.

Murphy, though, told the budget committee—a panel of both legislators and the state budget director—that the only money IBM will be getting is some additional funds for its assistance in transitioning to the new welfare system, and those payments will end in June. ("Murphy" is Anne Murphy, head of Indiana's Family and Social Services Administration.)

But those bills that IBM has sent will not be paid.

"We have not paid them," Murphy said. "We're not going to."

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It's hard to see how this situation's going to have a peaceful outcome. As we wrote recently when this story broke ("Global CIO: IBM Took 'Goldmine Of Taxpayer Money,' Claims Bureaucrat"), Indiana believes IBM did not deliver on its contractual obligations, leaving Indiana no alternative but to cancel the 10-year deal four years before it expired.

And Indiana state officials apparently believe that IBM has been paid all that it deserves to be paid—in fact, Murphy believes any additional payments will be flowing in precisely the opposite direction as noted in the indystar.com article:

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