HP dragged to court after it failed to complete $49 million project

There seems to be no end to Hewlett-Packard’s problems. The company, which has been undergoing a massive reorganisation, has been with a new lawsuit filed by the state of Michigan.

The state of Michigan sued the struggling HP in Kent County Circuit Court after it failed to deliver on a $49 million contract despite having 10 years to complete the project to replace aging computer systems at Secretary of State offices around the state.

“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,” Secretary of State Ruth Johnson said. “We have no choice but to take HP to court to protect Michigan taxpayers.”

The suit comes after months of negotiations which culminated in the state issuing a termination for cause letter on Aug 28. Despite requirements in the contract that – even if terminated – HP still must provide support to ensure services to Michigan are not affected, HP staff has failed to report to work since Aug 31.

Since 2005, HP has been the contractor for the Business Application Modernization project, which was supposed to replace the Secretary of State’s mainframe-based computer system used by all 131 offices and many internal work areas. The legacy system, which was largely built in the late 1960s with now-outdated programming languages, is costly to maintain and update. The 2010 deadline for HP to deliver the system replacement was not met and the department continues to use legacy systems.

Shortly after taking office in 2011, Johnson publicly addressed the project’s lack of progress after the state had already paid out $27.5 million for a system that, at the time she took office, had not delivered a single function to the state.

In partnership with Michigan Department of Technology, Management and Budget, Johnson successfully demanded HP reset the terms of the contract to put in place clear timelines for delivery and penalties if HP was unable to deliver. HP agreed to the renegotiated contract.

Based on media reports, Michigan joins the motor-vehicle agencies in five other states – California, Minnesota, New Jersey, New Mexico and Vermont – who have also parted with HP after attempting similar computer modernization projects.

“Our DTMB partners and I are gravely disappointed that this action to sue is necessary, but HP simply failed the state of Michigan,” Johnson said.

The state seeks $11 million in damages along with attorney’s fees and the funds needed to rebid and reprocure the contract.

Last month, Hewlett-Packard Co, which is splitting into two listed companies later this year, said it expects to cut another 25,000 to 30,000 jobs in its enterprise business as the tech pioneer adjusts to falling demand. The latest cuts, on top of layoffs of 55,000 workers previously announced under Chief Executive Officer Meg Whitman, notably will be in the company’s faster-growing corporate hardware and services operations, to be spun off as Hewlett Packard Enterprise, or HPE, on Nov. 1. The latest job cuts indicate a reduction of the company’s total workforce by at least 10 percent, based on the company’s most recent number of more than 300,000 employees as of Oct. 31, 2014, and reflecting the previously announced reduction of 55,000.

Earlier this year, the US tech company also entered into a settlement deal with PGGM Vermogensbeheer. HP paid $100 million to settle a lawsuit brought by a Dutch pension fund over its controversial $11 billion purchase of British software firm Autonomy.