Politics

Technology company sued by state claims ETF wrongfully terminated contract, will seek damages

Complaint: Only 7 percent of work completed

MADISON, Wis. - A technology company being sued by the state of Wisconsin for breach of contract says it had intended to sue for damages instead, claiming that the state had violated their contract by "wrongfully terminating" its work on a technology project last year. 

Vitech Systems Group says it will seek dismissal of a lawsuit filed March 8 by the Wisconsin Department of Justice, which claims the company did not live up to a contract to create a new benefits system that would administer programs to public employees. 

The state's lawsuit claims that the Department of Employee Trust Funds paid the company $14.3 million and only 7 percent of the project was completed. 
 

A News 3 Now investigation first reported that the project had halted in March 2018, but lawmakers weren't notified until a July memo.  Even after the memo, some lawmakers were not aware of the issue with the major project until asked by News 3 Now.  

The system, called myETF, aimed to upgrade aging computer systems that administer benefits to state workers.  In December 2018, state auditors found there was a "significant deficiency" in internal controls following halting of work on the project, and said the lack of an update posed risks to the department. 

Vitech, in a written response Thursday, says it had filed an intent to seek $14.3 million in damages from the state, contending that the state terminated the agreement after the company sought payment for "out-of-scope work."

"The reality is that ETF's refusal to pay Vitech what is owed under the agreement is what gave rise to this dispute," the statement said.  "During the course of their four-year relationship, ETF made near-constant changes to the benefits system design, resulting in both project delays and cost overruns."

The state, in its lawsuit, claims that it could not agree to Vitech's demands during the project. 

"ETF could not agree to Vitech's attempt to use its own failures to extract even more money from Wisconsin taxpayers for a product that was likely never to be delivered," the state's lawsuit claims. 

Documents released to News 3 Now by ETF also show that Vitech leadership raised issues as early as January 2018, saying that state officials had significantly expanded the scope of the project, raising urgent concerns. 

"While some degree of expansion is common to projects of this size, what we are seeing in this case is so far outside of industry standards and our historical norms that it warrants our collective urgent attention," Vitech Senior Vice President Chris Lodge wrote in a letter to ETF. 

In the lengthy letter dated Jan. 12, 2018, Lodge details other issues, including too many ETF employees being given a voice in changes, and says that they would need to be paid an additional $10 million for the work. 

In response, Robert Martin, director of the Department of Employee Trust Funds told Vitech that the state intended to "begin assessing liquidated damages" for failure to complete the project.

On April 26, 2018, ETF sent a letter to Vitech saying it was terminating the contract because it believed the company was in default of the agreement.  

Vitech's statement says that letter was issued in violation of the contract terms, and intends to bring arguments to a court to argue it is instead owed money by the state. 

News 3 Now has reached out to officials at ETF to find out the status of the myETF project, but has not received a response. 
 

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