TechnologyOne (ASX:TNE) has warned the Brisbane City Council (BCC) that it will pursue legal proceedings worth $50 million or more over project “delays”.
In January, the BCC revealed it would move to renegotiate a large local government systems (LGS) IT project with TechnologyOne after uncovering project delivery issues that could result in a cost blowout of $60 million.
The publicly-listed enterprise software provider quickly returned fire, telling its shareholders that the majority of the project’s estimated costs blowout had been entirely at the hands of the council.
In May, the BCC issued TechnologyOne with a ‘notice to show cause’, effectively giving the company 28 days to prove why it should keep the contract. It is understood that such a notice is the first step taken when a party wishes to pursue legal action.
As of late June, the ongoing dispute had reached a point where it looked as though it would either result in termination of the contract or potentially a full-blown legal battle if the two organisations were unable to find an alternative way forward.
Now, TechnologyOne has told shareholders that it believes certain “actions and inactions” by the BCC are causing the IT project to proceed “more slowly” than planned, effectively preventing the system being implemented and becoming operational by the contracted date.
It is understood that such a scenario could potentially give the BCC the right to terminate its contract with TechnologyOne.
The specific “actions and inactions” by the BCC that TechnologyOne claims are delaying the project include significant additional scope and the councils “failure” to reform the project, along with its “unreasonable and bureaucratic conduct.
Further the technology company claims that the BCC’s business processes are “poorly defined”, its process catalogue is “deficient”, and that it is “in breach of contract”.
While TechnologyOne said it continues to recommend expedited arbitration to resolve the issues, it has levelled a warning to shareholders and the BCC alike, confirming that it will take legal action to the tune of $50 million or more if the council “wrongly” terminates the contract.
“BCC has made it clear through both its actions and its statements that it does not want to complete this project, and is endeavouring to engineer a termination of the contract for breach,” the company told shareholders.
“TechnologyOne has now made it clear to BCC if they proceed with a wrongful termination, TechnologyOne will immediately commence proceedings for a $50+m damages claim,” it said.
The company said that it has told the BCC that if it no longer wishes to proceed with the project, it is open to BCC paying all outstanding invoices and to part ways. This option, the company said, would be “substantially less than the cost of a long and drawn out court case that exposes Brisbane ratepayers to a $50+m damages claim”.
“TechnologyOne at all times remains ready, willing and able to complete the BCC contract,” TechnologyOne executive chairman, Adrian Di Marco, said.
“If BCC lawyers had not assumed control of this project after the Lord Mayor's inaccurate press conference in January, and common sense had prevailed, we would still be on track to meet the contracted ‘go live date.
“Though the Lord Mayor has on many occasions publicly stated that the project needed to be reformed, and that he was committed to doing this, BCC has taken no steps to achieve this, and has hindered TechnologyOne from doing so,” he said.