Brisbane City Council "no longer committed" to commercial resolution: TechnologyOne

TechnologyOne has been handed its second notice to show cause by the Brisbane City Council in an ongoing contractual dispute.
Written by Tas Bindi, Contributor

TechnologyOne has said that the Brisbane City Council (BCC) is "no longer genuinely committed" to working with TechnologyOne in delivering a significant IT systems upgrade, and is "engineering a situation" where the company is unable to perform against the original contract.

The Australian-listed enterprise technology company was awarded a AU$122 million contract to deliver the Local Government Systems (LGS) Program by the BCC back in June 2015.

However, at the start of the year, Brisbane Lord Mayor Graham Quirk directed council officers to renegotiate the contract with TechnologyOne after learning of an 18-month delay in deployment and a potential AU$60 million cost blowout.

The BCC had stopped making payments to TechnologyOne between October and May, after it was decided the company needed to deliver "significant" milestones first. However, the council paid AU$750,000 in June after being issued a breach notice by TechnologyOne in May for failure to pay invoices.

The BCC has since issued a second notice to show cause -- the first was issued in May -- as to why the council should not terminate the contract to deliver the LGS.

According to a spokesperson from the BCC, the latest notice details material breaches of the contract which the council alleges have been committed by TechnologyOne.

The enterprise technology company said the June notice covers "many of the same issues" in the May notice that the council "did not act upon".

TechnologyOne said previously there appeared to be "confusion and misunderstanding" within the BCC on the history and status of the project, adding that the council had requested "substantially more" functionality than was originally tendered for, which was provided at no additional cost.

"For bureaucratic reasons council is not engaging with TechnologyOne during the time-critical configuration stage by not providing the business input we require to configure their new business processes in our software," the company said in January.

TechnologyOne has until July 17, 2017 to respond to the June notice.

"Council will then reassess its legal position," a spokesperson from the BCC told ZDNet.

"In the interim, Council will continue to perform its obligations in accordance with the contract in a bid to get the contract back on track.

"Council is committed to ensuring the best outcome for Brisbane ratepayers."

TechnologyOne said it will once again "vigorously defend" its position in its response to the June notice.

"Our attempts to resolve this dispute and reach a pragmatic and mutually beneficial arrangement with BCC continue," TechnologyOne executive chairman Adrian Di Marco stated in a disclosure to the ASX.

"However, BCC appears to be committed to resolution by way of legal proceedings rather than commercial negotiation."

The spokesperson from BCC confirmed it was a "legal matter between the two parties" and that further information cannot be provided at this stage.

Describing it as a "legal tactic", Di Marco said BCC is now "insisting" that the company configure a system that is "strictly in accordance" with the contract established in 2015 that does not "reflect" the council's current business requirements.

"BCC's business processes have changed since 2015. In October 2016, BCC provided updated business process requirements that expanded the scope of the project," Di Marco said. "BCC have refused to issue a contract amendment."

The executive chairman said termination of the contract by BCC continues to be the most probable outcome.

"Had BCC been commercially sensible and not been driven to improve their negotiating position, BCC would be on track for a new digitally enabled system by January 2018," TechnologyOne said in its ASX investor presentation in May.

In terms of litigation, the company said it remains confident of its legal and commercial position.

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