DI MARCO SLAMS BRISBANE CITY COUNCIL IN DISPUTE OVER IT COST BLOWOUTS

DI MARCO SLAMS BRISBANE CITY COUNCIL IN DISPUTE OVER IT COST BLOWOUTS

TECHNOLOGYONE CEO Adrian Di Marco has slammed the Brisbane City Council (BCC) over its handling of a contract dispute with the company.

The Brisbane-based tech company (ASX: TNE) fell by more than $0.25 per share on the ASX on January 25 when BCC revealed cost blowouts related to the execution of a new IT system in a press release.

In a statement, Di Marco (pictured) says the council did not activate any of the contractual dispute resolution processes set out in the contract and the company was not aware of a dispute until the press release.

"Unfortunately, BCC has taken this into the public arena without first following contractual protocol, and allowing us the opportunity to resolve the matter," he says.

"This has caused needless angst to our shareholders and impacted our share price which is disappointing and totally unnecessary.

"In my 30 years in business I have never seen this before.

"Having said this, I am confident that this project can be resolved and have no impact to our strong earnings momentum"

The total value of the contract to TechnologyOne is around $50 million over 10 years, which is "substantially below the $182 million that has been inferred in the BCC press release" and is immaterial to the company's earnings.

The remainder of the $120 million contract, and the reported $60 milllion cost blowout, is down to BBC staff and contractors.

Di Marco says that TechnologyOne has had challenging projects like BCC in the past and they have been resolved to both parties' satisfaction.

"Because there are dispute resolution and mediation processes built into all contracts that can be initiated by a client if necessary, including the ability to issue a breach notice, this has allowed for the orderly and professional resolution of disputes, without going public, which is normally in both party's interest," he says.

"To date BCC has not initiated any of these contractual mechanisms so TechnologyOne was not aware of a contract dispute until the detrimental media statement made by BCC."

TechnologyOne says it has extensively documented the implementation process and is confident that it would defend any legal action brought against it.

However, the Brisbane City Council says that the Lord Mayor Graham Quirk was made aware late last year that the IT systems replacement project was up to 18 months behind schedule with potential cost overruns, and in October halted payments to Technology One before commissioning a review to "get the project back on track".

"Following a briefing from this review last week, the Lord Mayor directed Council officers to renegotiate the contract, with a six month deadline for Technology One to provide an acceptable IT system to Council," says the council in a statement.

TechnologyOne secured the contract through tender in early 2015, but says the project quickly increased in scope when a further 500 business processes were identified that needed to be included in the system.

The company, which is a premier provider of IT systems to councils across Australia, says BCC is frustrating its ability to complete the process, as its staff are not engaging during the configuration stage of the project.

"This bureaucratic approach will delay the project needlessly and contribute significantly to a blow out in costs."

The company says it has not charged BCC any additional costs and has remained in the contracted amount of $50 million.

TechnologyOne is trading up 1.45 per cent this morning at $5.25 per share.
 

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