CF and IBM in legal spat over IT project – Both suing each other for sums running into tens of millions of dollars

CF and IBM in legal spat over IT project – Both suing each other for sums running into tens of millions of dollars


By MICHELLE QUAH

 
(SINGAPORE) Singapore’s Central Provident Fund Board (CPF) and computing giant IBM are embroiled in one of the biggest IT lawsuits here in recent history.


Court documents show the spat dates back to December 2001 when IBM bid for – and won – a contract to design and build a new IT system for CPF. The deal was worth more than $32 million.

 
CPF is suing IBM – and IBM is counter-suing – for sums running into tens of millions of dollars.

 
BT has obtained documents submitted by the two parties to the High Court last year.


CPF’s writ claims that IBM failed to complete a contracted IT project and it is asking the court to assess the damages that could amount to more than $40 million.


In its counter-suit, IBM claims it was unable to complete the IT project because CPF radically changed its requirements after the contract was signed. It is counter-claiming more than $38 million from CPF.


Both parties have declined to comment on the matter.


Court documents show the spat dates back to December 2001 when IBM bid for – and won – a contract to design and build a new IT system for CPF.


The deal was worth more than $32 million.


Things turned rocky when, 10 months into the deal, IBM was said to have told CPF it would take much more time and effort to deliver the new system than initially budgeted for.


CPF subsequently decided to terminate the contract when it felt IBM was unable to deliver, despite reminders and time extensions.


CPF says in its statement of claim that IBM failed to undertake the design, development and management of the IT system in a professional and competent manner – and that it breached their agreement because it ‘refused, neglected or failed to deliver’ a key module of the new system by the stated deadline, and the new system for the contracted price.


CPF also claims that IBM would not have been able to deliver the new system even by the extended deadline of December 2005. CPF, therefore, terminated the contract with IBM.


It is suing IBM for loss and damage it says it suffered as a result of IBM’s failure to deliver the new system on time and as needed.


It is claiming the $3 million it paid IBM for the first stages of work performed – because it had ‘obtained no benefit from the expenditure of these sums’.


It is also suing for wasted and additional costs, such as the cost of manpower, hardware or software provided by CPF for IBM’s use.


CPF is also suing for the additional costs it will incur to engage a new vendor to supply the IT system it needs.

So if, for example, a new vendor charges CPF $70 million to set up a new system, CPF will claim $40 million from IBM – the difference between what the new vendor will charge and the original sum contracted with IBM.


CPF is also asking for costs to cover its legal expenses stemming from the suit.


IBM, in its defence and counter-claim, alleges the fault lies with CPF. IBM is represented by Thio Shen Yi of TSMP Law Corporation It claims it was unable to deliver the new IT system on time because CPF kept changing its ‘vision’ of what it wanted – departing radically from requirements agreed in the contract.


It claims CPF subsequently wanted a much more interactive system than it initially contracted for – it wanted a portal-based IT system, rather than a mere upgrade of its existing systems.

 
IBM said the changes required new system architecture, hardware, software and application design – and a lot more work than was initially expected.


IBM also claims that it was unable to deliver the needed results in time because it experienced constant delays and ‘acts of prevention’ by CPF in its work – such as CPF’s failure to provide needed documents and data and requisite approvals.


IBM is counter-suing CPF for the work it has performed on the IT project – such as the various studies it undertook to determine the stat board’s needs – and is looking to claim over $38 million from CPF.


CPF is represented by a team led by Senior Counsel K Shanmugam and partners Andrew Yeo and Kenneth Pereira of Allen & Gledhill.

 

 

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