Michigan sues HP over $49 million project that's still not done after 10 years

State employees are stuck using a legacy system from the 1960s, Michigan says

Hewlett-Packard has faced no end of financial and legal woes in recent months, and on Friday it was hit with one more: A new lawsuit filed by the state of Michigan over a $49 million project the state says is still not completed after 10 years.

The contract dates back to 2005 and called for HP to replace a legacy mainframe-based system built in the 1960s that is used by more than 130 Secretary of State offices.

HP was given a 2010 deadline to deliver a replacement, but it failed to do so, the state says, leaving the Michigan Department of Technology, Management and Budget and SOS staff dependent on the old technology for functions such as vehicle registration.

Michigan has paid HP a total of roughly $33 million.

Following months of negotiations, Michigan issued a termination-for-cause letter on Aug. 28. Though the contract requires that HP must continue to provide support for up to 270 days after termination, the technology giant's staff have not reported to work since Aug. 31, Michigan said.

Through the suit filed in Kent County Circuit Court, the state seeks $11 million in damages along with attorney's fees and the funds needed to rebid and reprocure the contract.

“I inherited a stalled project when I came into office in 2011 and, despite our aggressive approach to hold HP accountable and ensure they delivered, they failed,” said Secretary of State Ruth Johnson in a press release. “We have no choice but to take HP to court to protect Michigan taxpayers.”

The state also seeks the source code for an online services portal HP delivered as part of the project.

Last week, HP announced that revenue declines have prompted it to cut 25,000 to 30,000 jobs in its enterprise division. Earlier this year the company agreed to pay $100 million in a  settlement agreement with PGGM Vermogensbeheer B.V. as a result of its 2011 acquisition of British software maker Autonomy, which ultimately led to an $8.8 million impairment charge and a lawsuit by HP shareholders.

"It’s unfortunate that the state of Michigan chose to terminate the contract, but HP looks forward to a favorable resolution in court," the company said in a statement via email.

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Katherine Noyes

IDG News Service
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