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IBM, State Head Back To State Supreme Court Over Welfare System Update

By Lauren Chapman

Posted February 21, 2019

Indiana Supreme Court

Indiana Supreme Court (Lauren Chapman/IPB News)

IBM and the state of Indiana returned to court Thursday for oral arguments on a 10-year old contract dispute. The case involves a failed project to modernize the state’s welfare system.

IBM wants the court to recalculate how much money it has to pay to the state, and the state doesn't want to pay interest on what it owes to IBM.

In 2006, then-Gov. Mitch Daniels signed a $1.3 billion contract with IBM to modernize Indiana’s welfare system. But in 2009, the state terminated the contract and bolstered its human workforce.

The state Supreme Court ruled in 2016 that IBM owes Indiana money, to pay for an alternative to IBM’s project.

Attorney for IBM Paul Clement says the company shouldn’t have to pay because the state replaced a computer system with human workforce – therefore IBM isn’t responsible for the cost difference.

“You can’t get reprocurement damages for something that IBM–that was never procured from IBM in the first place, because it was providing different services.”

Attorney Peter Rusthoven, representing the state, says Indiana had to replace IBM with something substantially different, because it had to work.

“If we did nothing different than what you did, we would still not be in compliance with federal law and possibly in danger of losing our funds.”

Lower courts have awarded IBM nearly $50 million, and the state $128 million.

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