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Mike Nowatzki, Forum News Service, Published April 15 2014

ND workers' comp agency sues software firm, says it botched $17 million project

BISMARCK – North Dakota’s workers’ compensation agency is suing a software vendor, claiming the firm failed to deliver on a software project that cost about $17 million but produced few tangible results.

Workforce Safety and Insurance filed the civil lawsuit against Aon eSolutions Inc. and its predecessor, Valley Oak Systems Inc., on March 27 in Burleigh County District Court.

WSI Director Bryan Klipfel said in a statement that WSI paid about $17 million for the software project that Aon failed to deliver, “and we are seeking to recover all that we are entitled to under the law.” The agency is requesting a jury trial.

“Aon promised to deliver a state-of-the-art integrated software package that would replace WSI’s existing software system and meet all of the agency’s business needs,” Klipfel said in the statement. “WSI intends to prove that Aon did not follow through on its promise.”

Chicago-based Aon has not filed a response to the lawsuit. Company spokesman Glenn Peake replied to a request for comment Tuesday with an emailed statement.

“We are disappointed that WSI chose this course. We delivered substantial value to WSI and we did nothing wrong. We look forward to telling our side of the story in court,” the statement read.

WSI had hoped replacing its software system would save the agency $3.4 million annually and provide injured workers, employers and medical providers with 24/7 online access to account and claims information.

But the project, which began six years ago with a budget of $12.8 million, became fraught with delays and cost overruns, leading WSI to let the contract with Aon expire on Dec. 31, 2012, and terminate the project before it was finished.

Klipfel said WSI tried to help Aon deliver the promised product but after five years recognized the company “was either not willing or unable to deliver,” despite a progressive set of disciplinary actions that included withholding partial payments from Aon starting in August 2011.

As a result of Aon’s actions, the lawsuit claims WSI suffered damages including about $6.74 million in costs paid to Aon, $7.31 million paid to HCL Technologies for additional project services and an additional $3.25 million in costs, most of it paid to other vendors. The agency also cites additional damages resulting from “the continued lack of a workable system from Aon.”

Clare Carlson, deputy director of WSI, told a legislative committee in December that the project produced “a few successes,” namely the scanning of 14,000 policy-related documents into electronic form and upgrading WSI’s document management system at a combined cost of about $791,000. He said WSI was continuing to use its old claims system and catching up on making subtle improvements that were deferred during the project.

Carlson said Tuesday that WSI is still examining the possibility of using another software system that would essentially do the same thing, but added, “We’re being real careful,” given past experience.

The North Dakota Legislature appropriated $750,000 last session to cover the potential costs of legal action.

Reach Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com.