IBM took $27m hit on Customs deal
Technology company IBM saw the value of a $118 million contract with Customs cut by $27m because it missed a project deadline on a new computer system in 2016, the department says.
The settlement was confidential. However, Customs agreed to release details after Stuff complained to the Office of the Ombudsman, which ruled after a 19-month investigation that disclosure was in the public interest.
IBM won a contract with Customs in 2011 to develop the Joint Border Management System (JBMS) and to provide support for the system until 2021.
The deal marked the end of a spell in wilderness for IBM with the Government, following the unravelling of the $110m Incis Police computer system in 2000.
The primary purpose of JBMS is to smooth trade and reduce red tape, and much of it has been successfully delivered.
But in 2016, IBM advised Customs that it would be late delivering a crime-fighting tool that Customs described as ‘‘the icing on the cake’’ of the project.
The intelligence tool was intended to analyse up to about 150 pieces of information on each incoming shipment to New Zealand within a couple of minutes and give Customs a ‘‘percentage chance’’ of it involving an illegal activity.
Customs renegotiated its contract with IBM and took back responsibility for delivering the risk and intelligence tool in July 2016 because of the delay and what it said was an opportunity created by new technology.
Chief information officer Murray Young said at the time that the department was disappointed the project was significantly late, but refused to say whether it would pay IBM less money, citing a confidentiality clause.
JBMS became a political football under the last government, with Labour MP David Shearer saying in 2014 that the project was unfolding as ‘‘another Novopay’’.
Customs spokesman Helen Keyes said in the wake of the Ombudsman’s ruling that the ‘‘descoping’’ of the crime-fighting tool reduced the sum payable to IBM by $27.4m. ‘‘This includes a $15m reduction in capital costs and $12.4m reduction in ongoing operating maintenance and support costs over the years remaining in the contract.’’
Keyes said the risk and intelligence tools were still under development.