July 6, 2006
CPF sues IBM over failed IT project
But IBM claims board continually changed specifications it wanted;
damages may go over $40m
By Chong Chee Kin
THE Central Provident Fund (CPF) Board is taking computing giant
IBM to court in a civil suit over a failed IT project it claims the
company did not complete.
The saga began with IBM winning a $32-million contract in 2001 to
design and build a new IT system for CPF. Court documents obtained
by The Straits Times show that the dispute arose not long after the
project began.
The contract required IBM to 'design, develop and supply' a new
software system to replace its existing system by December
2004.
However, CPF claimed that 10 months after IBM secured the contract,
the company said it needed more time to work on the system.
The date for completion was then pushed to December 2005.
The first phase of the project was due to be completed in December
2003, but IBM did not deliver, CPF claims. Despite giving it more
time - first by extending the deadline to April 2004 and then to
August - IBM was unable to complete the project.
The contract was terminated in August 2004.
CPF is asking the court to assess the damages caused by the delay,
an amount that could go over $40 million.
In its suit against IBM, CPF claims it suffered as a result of
IBM's failure to deliver the new system on time and as
needed.
It is also trying to recover the $3 million it paid IBM for the
first stages of the work, because it 'obtained no benefit from the
expenditure' of this sum.
The board is also claiming for additional costs, such as manpower,
hardware or software provided by CPF for IBM's use and wants IBM to
cover the additional costs it will incur to engage a new vendor to
supply the IT system it needs.
In its defence and counterclaim against CPF, IBM says that CPF
caused the delays by continually changing the specifications it
wanted in the new system.
It claims that instead of an upgrade, the board demanded changes
that required more time and effort, which delayed the completion of
the project.
IBM is claiming more than $38 million from CPF for the work it
carried out.
CPF is represented by a team led by Senior Counsel K. Shanmugam,
and partners Andrew Yeo and Kenneth Pereira of Allen &
Gledhill, while IBM is represented by Thio Shen Yi of TSMP Law
Corporation.
The lawyers are due to return to the High Court on Aug 11.
