The Queensland government has accused technology giant IBM of misrepresenting its credentials in delivering a $6 million payroll system that cost $1.2 billion to fix.
It said if IBM hadn't talked up its credentials to design, build and deliver the payroll system for Queensland Health before it signed a contract in 2007, it would have awarded the deal to its archrival Accenture, court documents reveal.
The state government is attempting to sue IBM for damages over the botched health payroll debacle, which partly contributed to the demise of the Bligh Labor government in 2012.
IBM has vowed to fight the claim and is blocking an attempt for the Queensland government to sue for damages in a four-day trial starting in the Supreme Court in Brisbane on Tuesday.
The technology system debacle – which overpaid some workers, underpaid others or paid them not at all – was described by former Supreme Court Richard Chesterman, QC, during his $5 million inquiry as possibly the worst failure in public administration in Australia.
The legal action against IBM was initiated by the Newman government, which blamed Labor for not pursuing the company for the botched payroll system for 80,000 health workers.
Despite speculation the Palaszczuk government would let the legal action lapse, it continued the compensation claim after winning office in January.
IBM is trying to block the action, saying it was cleared from future litigation during a 2010 agreement with the state.
In its submission to the courts, the Queensland government alleged it had suffered significant loss and damage as a result of the contract it signed with IBM in 2007 and the failed implementation of the payroll system for Queensland Health, which went live in 2010.
"The state alleges further that it would never have entered into the IBM contract and incurred the resulting losses had it not been for negligent and misleading representations made by IBM prior to the entry into the IBM contract," the submissions said.
It says the supplemental agreement with IBM in 2010 – where the IT company was paid a final payment of $718,861 to help fix remaining problems in the payroll system – did not terminate the IBM contract.
Lawyers for IBM claim the company was granted a release by the 2010 deal.
'NEGLIGENT AND MISLEADING' CLAIMS
The Queensland government is attempting to sue IBM not for breach of contract, but for what it alleges was IBM's falsely representing its credentials before the 2007 deal which its says is a breach of the Trade Practices Act.
It says IBM talked up its capability and expertise to design and build the Queensland Health payroll system, which would be able to be delivered by the original 2008 deadline and on budget.
Lawyers for the Queensland government said had it not been for the representations by IBM it would never have entered into the contract with the company and would have given the contract to Accenture.
"The state claims damages in the misrepresentation proceeding for all of the loss and damage suffered in connection with the appointment of IBM as prime contractor under the IBM contract and the implementation of the QH payroll system," they said in their submission.
"The state alleges that these losses would not have occurred had it not been for the appointment of IBM under the IBM contract."
The Queensland government claims it has made about 481 defect fixes to the computerised payroll system for Queensland Health since October 2010.
In its submission, IBM said the 2010 agreement was an attempt by both parties to resolve the dispute and included mutual releases and covenants not to sue.
"There is no claim for breach of contract. IBM's position is that the damages proceedings is within the scope of the release by the state. The state takes the contrary position," it said.
IBM also claims the Queensland government's damages proceeding is not just focusing on alleged pre-contractual misrepresentations, but also makes allegations about the quality of the IT system IBM delivered and the costs incurred in dealing with that system.