IT services and software vendor Anite Group Plc will pay AUD 24m ($18m) to end its ill-fated contract with the Australian state of Victoria.
Following the payment, Anite will be freed of all obligations and liabilities relating to the deal, and will hand over the completed sections of the project software, as well as source codes and operating licenses. Just three months ago, Anite said that stage one of the contract had successfully gone live.
Slough, UK-based Anite will also incur additional costs of approximately 4m pounds ($7.4m) related to the restructuring of its Australian business, which was set up to handle the state of Victoria contract.
In April, Anite announced that it faced further losses from the contract, but said it was in detailed negotiations regarding options to finish the final stages of the project on the most efficient basis with least cost and risk. Following these negotiations, Anite concluded that it would continue to incur one-off costs totaling several million pounds over the next couple of years, which, whilst reducing risk, would not have given certainty or capped [Anite’s] liabilities.
Anite’s CEO Steve Rowley said the settlement would give shareholders complete certainty. He said: While the costs relating to the settlement and restructuring are high, the compelling logic of withdrawing from this troubled contract and relationship, compared to the costs and risks of continuing until completion, was clear.
Anite’s deal with the state of Victoria’s human resources department was signed in October 2002. The five-year agreement, valued at about 11m pounds ($20.3m), involved the provision and support of an integrated system for the Office of Housing in Melbourne, with the Anite application lined up to replace the existing in-house service.
The contract soon ran into major difficulties. In 2004 Anite’s head of Australian operations left the company, citing problems with the deal. A spokesperson for Anite said the contract was poorly bid from the outset and completely under costed and delayed.
The state of Victoria contract is not the only area in which Anite has struggled recently. The company has also made significant losses on a deal to supply the UK government sector with its Pericles product for revenue and benefits administration. In its most recent update to investors three months ago, Anite said that Pericles implementations would continue for another year, during which time the provision will be under continual review.