back to article Pennsylvania sues IBM for fraud over $170m IT upgrade shambles

IBM has been accused of fraud for under-delivering an over-budget IT upgrade to Pennsylvania's unemployment compensation systems. The US state's governor Tom Wolf (D) has sued IBM over the upgrade, which saw Big Blue collect millions of dollars in cost overruns on the $110m contract. The contract was issued in June 2006 but …

  1. Your alien overlord - fear me

    Sounds like Tom Wolf has never dealt with a large computer project before. All his complaints are (sadly) par for the course.

    1. Ian Michael Gumby Silver badge
      Facepalm

      @Alien fear not!

      More than likely senior people who were to be on this project left IBM. (You figure out the hows and whys)

      Their junior replacements weren't up to snuff.

      I know nothing, but just an educated guess on IBM's recent RIFs.

      1. Anonymous Coward
        Anonymous Coward

        Re: @Alien fear not!

        It is also an issue with many large consulting projects. Organizations typically bring in consultants for projects that no one wants to touch at the organization because the requirements are poorly defined, there is an undocumented legacy system, etc. High risk projects. Rare though is the consultancy that will take a look at a mess which will result in $100 million in revenue and no bid.

    2. Swarthy Silver badge
      Thumb Up

      Re:

      Or maybe he has, and has decided enough is enough. I would like to see governments and purchasers of large IT projects start slinging sue-balls at contractors (and contractors slinging sue-balls at piss-poor project management) and bringing some accountability (ooh, that's a dirty word) into these large projects.

  2. sjsmoto

    Management never learns

    "Big Blue's representations that it was the only vendor with the type of proprietary databases capable of providing a totally integrated computer system."

    That's what happens when you don't invite tech people to the sales pitch.

    1. Anonymous Coward
      Anonymous Coward

      Re: Management never learns

      "That's what happens when you don't invite tech people to the sales pitch"

      They probably couldn't find the time to make it to Hawaii...

    2. Anonymous Coward
      Anonymous Coward

      Re: Management never learns

      Do IBM even have any technical people left now? They've done so much "resource action" it's hard to tell sometimes.

      1. Marketing Hack Silver badge
        Devil

        Re: Management never learns

        There must be at least one HR person still there, preparing all the severance packages and separation agreements. That HR person is probably on contract though....

  3. Anonymous Coward
    Anonymous Coward

    Only Me

    " according to the complaint was thus awarded because of Big Blue's representations that it was the only vendor with the type of proprietary databases capable of providing a totally integrated computer system."

    So, lack of due diligence or exercise of rudimentary intelligence during the THREE YEAR bidding process.

    1. Ian Michael Gumby Silver badge
      Boffin

      Etatdame Re: Only Me

      I don't know if you've ever been thru such a procurement process.

      You end up going through several rounds of RFIs RFPs interrogatories and interviews.

      In many cases IBM could be helping to write the RFIs RFPs such that they become the obvious choice.

      When you have an RFP process that runs 3 years, it requires an investment on the part of the bidding company. Not many companies have the stomach to go through a 3 year process.

      When you consider that the state probably has both mainframe and Unix/Linux with some AS400 tossed in, it will end up being IBM or an IBM partner. Again, not many IBM partners can go across the board on these platforms. They will either have to partner or outsource / subcontract specific skills. The long due diligence will source these shortcomings out and force them to drop out.

      Its not a fault of due diligence, but a desire for a single vendor to do it all thus a single throat to choke.

      1. Anonymous Coward
        Anonymous Coward

        In many cases IBM could be helping to write the RFIs RFPs....

        Well, I've run into that sort of thing before, in the early 1980s.

        I worked for a refrigeration company that bid on and supplied outside coolers for the US Military to be installed at Reyjavik, Iceland. When all was installed and working, I got a call from the Navy: the magnetic door gaskets called for in the specs (written by a competitor) were not installed. I explained our panels were made of aluminum which would render magnetic door gaskets useless, but I might as well as saved my breath. Guess who got to fly to Iceland and install magnetic door gaskets?

        1. Nolveys Silver badge

          Re: In many cases IBM could be helping to write the RFIs RFPs....

          Guess who got to fly to Iceland and install magnetic door gaskets (for aluminum fridges)?

          The worst part was when you got on site and realized that they accidently sent you boxes of diesel spark plugs instead.

      2. John Smith 19 Gold badge
        Unhappy

        A few points. Ian Michael Gumby

        "In many cases IBM could be helping to write the RFIs RFPs such that they become the obvious choice."

        True. Which is why any smart customer should be very wary if they let this happen.

        "Not many companies have the stomach to go through a 3 year process."

        I'd say all of "The Usual Suspects" in UK government f**kups would be there.

        "When you consider that the state probably has both mainframe and Unix/Linux with some AS400 tossed in, it will end up being IBM or an IBM partner. "

        Except that's a problem in Extraction Translation and Loading.

        The idea that only IBM has a database that can do what they asked smells like the rankest BS to me.

        "Its not a fault of due diligence, but a desire for a single vendor to do it all thus a single throat to choke."

        But IRL no vendor can do it all and IRL they farm it out to a bunch of no-name contractors on condition they don't let on they don't really work for IBM/CSC/SAIC/SVC/Crapita/Atoss etc.

  4. Eduard Coli

    In for a penny...

    Ahh, the wonders of outsourcing. IBM outsourced this to various maggot wranglers cum sub contractors and they got what they paid for. It is fraud, anytime you read outsourcing, think fraud.

  5. Howard Hanek Bronze badge

    Oh Dear

    Another, 'Only we can......' unhappy ending.

    The 'we' changes so often nowadays doesn't it?

  6. Anonymous Coward
    Anonymous Coward

    SOP

    Part of the problem is that the existing staff are so overloaded (because they "resourced" too many people) that even if they bring in new people, no one has the time to even train someone to take on some of the load. Don't ask me how I know. And often when IBM claims to have "experts" in a technology, it means they'll ask some tech of they've ever heard of a product, and then declare that person an expert on it. (again, don't ask how I know).

    AC because, obviously.

    1. Doctor Syntax Silver badge

      Re: SOP

      "Don't ask me how I know."

      We don't need to ask. It's Brooks's law.

      The irony, of course, is that Brooks worked for IBM before turning to academia.

    2. ecofeco Silver badge

      Re: SOP

      Been there, seen it myself. Fuck IBM.

      1. Anonymous Coward
        Anonymous Coward

        Re: SOP

        I applaud the sentiment, but it's generally the other way around

  7. MidLifeCrisis
    FAIL

    KickStart it

    ...the odds of successful completion of MegaBuck projects are about the same...

    RIP TIKO. ;-)

  8. Anonymous Coward
    Anonymous Coward

    IT project failure is now structural

    The IT consulting industry, with IBM at the head of the pack, has completed their long promised transformation of IT project processes to the point that failure is now structural, "baked in", thus guaranteeing a never ending supply of failed projects requring a bailout by IBM or one of its peers. All the better if a given project suffers multiple failures, requiring multiple emergency bailouts. The parallel crapification of IT services using many of the same strategies (outsourcing, offshoring, fake integration and continual gutting of the knowledge base) was of course completed some time ago, and has already been accepted as the "new normal" by global executives everywhere. Clearly IBM has every reason to believe the same will soon be true for project work. The Commonwealth of Pennsylvania is tilting at windmills: "Abandon hope, all who enter here".

    1. Anonymous Coward
      Anonymous Coward

      Re: IT project failure is now structural

      IT project failure is now the norm...

      1. Anonymous Coward
        Anonymous Coward

        Re: IT project failure is now structural

        Its the norm because most people in IT can't do their job properly.

        Its the dumbing down of the industry and hiring cheap unskilled or under skilled labor.

        1. Anonymous Coward
          Anonymous Coward

          Re: IT project failure is now structural

          "Its the norm because most people in IT can't do their job properly."

          How many times have you found out that Management or Marketing have made promises for delivery schedules or functional requirements that are impossible to meet?

          And of course, it's never their fault when you fail to make good on their unrealistic promises, now is it?

          1. John Smith 19 Gold badge
            Unhappy

            "Management or Marketing have made promises for..requirements that are impossible to meet?

            Blame where blame is due.

            Con-sultancy management certainly but it's usually the Sales (or pre-Sales) guys in those slick Powerpoint presentations in exotic locations that usually promise the world for $0.02 to the potential marks clients

            This sort of s**t always starts with unrealistic expectations.

            Usually on both sides.

          2. Alan Brown Silver badge

            Re: IT project failure is now structural

            "And of course, it's never their fault when you fail to make good on their unrealistic promises, now is it?"

            The best thing to do when you discover such promises have been made is to start writing your resignation.

            You can do it now with a reference or do it later when they're blaming you, but if you do it now you can parachute in later for a large sum, perform a heroic rescue and be handsomely paid.

        2. Anonymous Coward
          Anonymous Coward

          hiring cheap unskilled or under skilled labor.

          The failures I see generally start with not understanding what needs to be done and not being able to put together a plan to implement it. It's hard to find people who can get that part right. I'm in the position of trying to find my replacement and it's discouraging what is available.

          1. Anonymous Coward
            Anonymous Coward

            Re: hiring cheap unskilled or under skilled labor.

            "I'm in the position of trying to find my replacement and it's discouraging what is available."

            When I started in the business it was still possible to be a generalist. I don't think life is long enough now.

        3. Lord_Beavis
          Linux

          Re: IT project failure is now structural

          "Its the norm because most people in IT can't do their job properly.

          Its the dumbing down of the industry and hiring cheap unskilled or under skilled labor."

          I blame the point and click admins.

    2. ecofeco Silver badge

      Re: IT project failure is now structural

      After 15 years of marketing telling the suits that IT is a new kind of utility that just be thrown onto the cloud, never needs maintenance and any kid can fix your computer, is it any surprise that project failure is the new norm?

    3. Blank Reg

      Re: IT project failure is now structural

      Well, this is the 3rd major IBM project failure that I can remember from the last year or so, They screwed up something with the census in Australia, they screwed up a payroll system in Canada and now this.

      They excel at colossal project failures, they have the best failures :)

  9. Herby Silver badge

    Changing requirements...

    Probably contributed to the problem. Most likely on both ends of the contract. The original specifiers had no knowledge of the scope of the project, and as careers go, people came and went. High priced consultants (on both sides) came up with the "right way" of doing things, and it went downhill after that.

    Sounds like there were a LOT of cooks making this broth, and spoiled it as they went. Everyone trying to protect their little fiefdom created over many years.

    Typical government...

  10. Anonymous Coward
    Anonymous Coward

    Govt

    I have worked for several "agencies" in govt over the years and if there is one thing to be sure of....none of them know what they have, what they want, or the level of effort it will take to get it. Dont worry though they want it done in a year, and then are surprised when they fail miserably. Most of the time they cant even define what problem they are trying to solve, and will throw loads of money at the undefined problem. It actually works out in the vendors favor usually because they collect tons of money while delivering a substandard product (not entirely their fault), but since lawsuits are so rare it makes sense to promise the world knowing the customer will muck it up and keep paying for years and years in most cases.

  11. Anonymous Coward
    Anonymous Coward

    Sorry Mr Wolf, you've confused base incompetence with criminal intent. If you understood what a shambles IBM is, you'd understand that actually planning to defraud you is well beyond their capabilities.

    And in my experience, to IBM's defence (choke), projects that go this way typically indicate a thoroughly screwed up customer who can't settle the project scope, can't take responsibility for decisions, thinks all unforeseen issues should be handled by the supplier at their cost.. that's just my opinion. Based on a bit of experience. You know, like 16y working there.

    1. Ian Michael Gumby Silver badge
      Boffin

      @Codysydney ...

      You need to learn US law.

      This isn't a criminal lawsuit but a civil lawsuit.

      So this isn't anything about a plan to defraud, but about the claims IBM made during the procurement process to win the contract. Its more of a question on their ability to actually deliver the promised solution.

      These suits are hard to win and end up either in arbitration or settled out of court. As you point out, scope creep is one issue, however it depends on the contract.

      Having written quite a few SOWs and negotiated MSAs, you'd be surprised what goes on.

      (Yes, I escaped from the borg many moons ago)

  12. anody

    We have similar problem in Canada:

    https://www.theregister.co.uk/2016/07/28/doh_canada_canucks_bungle_payroll_system/

    The problem is still ongoing, thousands of people have still messed up payroll.

    Thanks IBM!

    1. Well Known Cowherd

      I have to laugh... 8 years after getting RA'ed by those Aholes and im still getting screwed over by IBM... missed three paychecks due to the phoenix debacle.

  13. JMiles

    3 year bidding cycle?

    Customer deserves to get shafted. No sympathy for them - and it's clear they're not even clued up to know what they were buying or how it was going to work. It doesn't matter what IBM told them - the customer just isn't qualified to make an assessment of whether it was genuine or fraudulent

    1. Ian Michael Gumby Silver badge
      Boffin

      Re: 3 year bidding cycle?

      Au contraire mon ami.

      You have to understand the larger the project, the longer the due dillgence cycle because there are so many moving pieces and when it involves the government, there's a complex dance which is supposed to show that there wasn't any special favors done.

      The problem isn't being able to prove that IBM mislead the State during the procurement process, but to show that it was why they couldn't get the job done. IBM will make arguments that it was the State they mislead IBM in their representations. The law isn't black and white but gray. And in a civil trial things can get wonky. It depends on the judge, the lawyers and even interpretations of the facts.

      IBM will end up with a slap on their wrist.

      The failure here was in trying to get a single throat to choke and relying on internal IT folks to mange the program office.

      1. a_yank_lurker Silver badge

        Re: 3 year bidding cycle?

        I would suspect one the major culprits is the state had no defined idea of what they wanted from day 1. Adding to the misery is every mismanager added their own pet project/peeve to what were supposedly the specs The result is a set of specs that probably contradicted itself multiple times with no one at the state taking a responsibility for sorting out the mess.

        Also, remember Itsy Bitsy Morons are doing the project so you colossal incompetence on both ends.

  14. Anonymous Coward
    Anonymous Coward

    Look on the bright side. Since it's State Government, they didn't have to deal with half a** East Indian Outsourced Techs, who barely speak English and didn't have the skills to do the job, or maybe they did and that's why this project failed?

  15. ecofeco Silver badge

    Typical IBM

    And this isn't their first time.

    Why does anybody still use these clowns?

    1. Anonymous Coward
      Anonymous Coward

      Re: Typical IBM

      Because only they can afford the bidding process.

      It's around a million per year in work.

      Fujitsu, Capita, Accenture... Etc are others who fail but when no one else can risk a mill or so on bidding you get the same people.

      The government in the UK even tried to make their own in house dev company but that's not really working out too well.

    2. Anonymous Coward
      Anonymous Coward

      Re: Typical IBM

      "Why does anybody still use these clowns?"

      Fat expense accounts is my bet. IBM - much like Oracle - are a slowly dying beast that no one sane would use in a greenfield site, but this sort of stuff keeps them going...

  16. CujoDeSoque

    What did they expect? This is par for the course.

    That's not just IBM, it's most large consulting companies. It's not all their fault, I've dealt with government customers at the state level and they all have some basic issues that are part of their basic makeup.

    1. Their systems are poorly maintained and often outsourced to the cheapest vendor.

    2. While the bureaucracy is entrenched, the political climate is subject to wild changes at any time.

    3. Nobody is willing to take charge in a large project.

    4. They have no idea of the scope or their own systems and have no experience negotiating this type of thing.

    5. These fools wanted to use *proprietary* databases? That implies choosing hardware and software that's also just as proprietary. Locking yourself into the tender mercies of IBM is a very bad idea.

    6. Allowing a negotiation to go on for three years?

    That said, IBM is a horrid employer and their track record on large projects and outsourcing is terrible for a number of reasons:

    1. Even the slightest revision of a specification is an "opportunity" to bill extra.

    2. They roll in good people at the start and they will roll out to be replaced by whatever they can get cheaply. (They always seem to be losing money on a project from day one.)

    3. There's a ridiculous amount of overhead that is part of any project, these guys are more top heavy than most.

    4. IBM has become an employer to avoid in the US. People are constantly being pushed out the door and replaced with inexperienced people from some other part of the planet. Imagine being billed for someone experienced at 250 an hour and having him replaced by someone in Malaysia with zero experience. It happens.

    5. People to fix troubled projects are becoming fewer and fewer and they are stretched thin. They're also deployed too late. IBM has lost a lot of contracts that way. There are many documented instances of their long term contracts that never get to the end of the contract without being cancelled or penalized. (Easy enough to find.)

  17. jonnyo

    Shocking!

    The only actual work going on at IBM these days involves improving Watson, contributing to the ultimate goal of IBM becoming world's first employee-less company. Anything to cut costs.

    1. Anonymous Coward
      Anonymous Coward

      Watson

      Artificial intelligence since we don't have the real thing. Hey - that Watson bastard wouldn't fire our incompetent asses would he? Bastard.

  18. Anonymous Coward
    Anonymous Coward

    Governments are still a lot more effective on "big picture" discussions then they are on accepting responsibility for realistic designs and accompanying time-frames.

    It is interesting that the same governments that can order massive dams, canals, rockets to the moon, satellites etc. can still treat software production as if it is something "others" should be creating and using. Ownership is hard if you only want to write high-level plans.

    1. Anonymous Coward
      Anonymous Coward

      The industry has successfully brainwashed government officials into believing that big bucks can be saved by

      (a) contracting everything out

      (b) consolidating and "modernizing" government IT; and

      (c) getting rid of in-house staff.

      Of course this leaves the affected government entities in a hopeless situation when it comes to following through om this agenda.

  19. John Smith 19 Gold badge
    Coat

    Superb opportunity for headline sadly wasted.

    "Tom Wolf" orders "Bonfire of Insanities" following review of project more than fifty percent over budget"

    and assorted variations.

  20. EveryTime

    Companies often don't

    When a company bids on a project, especially a jumbo-sized project, they are bidding a team. They are showing the customer specific people with demonstrated expertise.

    Later a different set of management comes along and decides those people are expensive. They can be replaced with lower paid ones with nominally the same skill set.

    Hilarity ensues.

    What almost no company acknowledges is that the team put together immediately becomes more valuable when a contract is won. And they continue to increase in value until close to the end of the contract. Acknowledging that works against the company's perceived interest in having a competitive market for substitutable labor, despite having a locked-in contract.

    One way to address this is to include a contract penalty for each substitution on the development team. Unless the contractor is taking 100% of the risk for cost overruns, the cost of bring a new developer up to speed, which we can assume is 5-12 months of work, needs to come from the company. That time can't be just billed to the government as if nothing had happened.

    Companies are going to scream. They will say it doesn't give them management flexibility. By which they mean employees have some leverage in getting raises, and some protection from being outsourced. In the long run having experienced committed developers helps the project, the customer, and the company. It just doesn't serve the purposes of short-term, cost-cutting managers.

  21. theniginator

    We dream of only a $60M overrun

    IBMs implementation of the Queensland, Australia governments Health Dept payroll system went $1b over and still doesn't really work properly. Im sure the dept changes spec several times but to sign away their right to sue was the most incompetent thing they did.

  22. Anonymous Coward
    Anonymous Coward

    Queue the Nazgul!

    Does IBM still retain them, or has the newly formed US Government picked them up?

  23. halogen
    IT Angle

    don't people analyze the risk of a large project and someone somewhere signs it off before committing the company etc?... Reading about IBM's layoffs, I guess that "someone somewhere" has probably been laid off now so no escape goats about to crucify...

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