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Appeals Court Hears Indiana Versus IBM Case

The state signed a $1 billion contract with the company in 2006 but canceled the contract three years later.

IBM Headquarters

Photo: Simon Grieg (Flickr)

IBM and the state of Indiana sued each other for a cancelled contract that IBM had to process welfare applications.

The Indiana Court of Appeals heard arguments today in a case involving tech giant IBM and the state of Indiana.

Indiana signed a 10-year contract with IBM in 2006 worth more than $1 billion for the firm to modernize and manage the state’s welfare system. That modernization included a shift away from human case workers to a system more reliant on technology and automation.

But three years in, Governor Mitch Daniels canceled the contract, saying the system was beset by problems. The state and IBM have since sued each other, seeking lost costs and damages.

IBM says a contract for the company to run the state’s welfare system because Indiana did not like the system it asked IBM to use.

Attorney Jay Lefkowitz, who represents IBM, says the company delivered exactly what Indiana asked for.

“This was not a failure of implementation; it was a failure of design. The state recognized that it wanted this very modern system where you eliminated all human element, all human contact and do everything through the computers. And then there was a reaction to that,” he says.

But attorney Peter Rusthoven, representing the state, says the contract allowed IBM to switch gears and use a system that blended caseworkers with technology – the kind of hybrid system the state uses now.

“Providing the human dimension was something they didn’t want to pay the extra cost of providing,” he says.

A Marion County judge ruled in IBM’s favor earlier this year.

The Appeals Court did not set a timetable for its ruling.

Brandon Smith, IPBS

Brandon Smith, IPBS has previously worked as a reporter and anchor for KBIA Radio in Columbia, MO, and at WSPY Radio in Plano, IL as a show host, reporter, producer and anchor. Brandon graduated from the University of Missouri-Columbia with a Bachelor of Journalism in 2010, with minors in political science and history. He was born and raised in Chicago.

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