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North Carolina To Pay ACS $10.5 Million

The agreement was reached following two days of mediation and negates a lawsuit that ACS filed against the state.

The state of North Carolina has agreed to pay $10.5 million to outsourcer Affiliated Computer Services to settle a contract dispute.

Under the deal, the state's Department of Health and Human Services will pay ACS $6.2 million upfront and an additional $4.3 million after ACS finishes work on a Medicaid claims processing system.

The agreement also gives North Carolina proprietorship over all materials ACS produces during the work.

The deal resolves a number of issues that arose after North Carolina last year cancelled what was to have been a five year, $171 million deal under which ACS was to revamp the state's Medicaid systems. The deal was originally inked in 2004 and was slated to run through 2009.

The agreement was reached following two days of mediation and negates a lawsuit that ACS filed against the state, according to a statement released Thursday by the North Carolina Department of Health and Human Services.

North Carolina has said it canceled the contract because ACS was failing to meet deadlines, while ACS has argued that the state's cumbersome bureaucracy worked against the timely implementation of IT projects covered by the deal.

On Monday, ACS -- currently the subject of a takeover bid from its chairman and a group of private investors -- said it signed a $75 million contract to provide a range of back office services to the U.S. Department of Labor.

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