TechnologyOne says "strong" profit growth won't be affected by Brisbane City Council dispute

TechnologyOne has announced an ongoing dispute with the Brisbane City Council will not affect the company's "continuing strong profit growth".

Following Brisbane lord mayor Graham Quirk's announcement that TechnologyOne was put on notice over delays of the local government systems replacement, the Brisbane-based software vendor responded to the claims made by the Brisbane City Council (BCC).

Accused of running 18 months late and potentially $60 million over budget, TechOne clarified that the contract with the company was for $50 million, and not $122 million as stated by the BCC.

In a statement, TechOne said: "The $50m to be paid to TechnologyOne covers the cost of the development, configuration, implementation, interfaces, and data migration from BCC’s legacy system; as well as operating and supporting the production system for BCC in the TechnologyOne cloud, and providing ongoing support and enhancements.

"The additional $72m referred to in the statement is not part of the contract to TechnologyOne, and are costs associated with BCC staff and contractors."

TechOne said that the possible $60 million cost overrun was not being charged by the vendor and were not part of its contract, but costs associated with BCC staff and contractors.

The impact of this dispute was not material and should not affect this year's earnings, TechOne stated.

TechnologyOne's service costs breakdown are: an initial license fee which was already paid in the previous year; a consulting fee of approximately 20 consultants out of the vendor's 350 consultants, which would not have a material effect on the business; and the annual cloud service fee, which the company claims is also not material based on the size and scale.

The ongoing annual support and cloud fees included in the 10-year contract should also not have a material impact "for a company the size of TechnologyOne".

In regards to the delay, TechOne said it was expecting the BCC's "detrimental" statement because more than 500 business processes had been requested by the BCC, a more than 100 percent increase on the number originally agreed to. According to the vendor, this was all documented, signed by both parties and filed with the council on 9 January.

A BCC independent review committee briefed TechOne senior executives about the announcement. TechOne's major concern is that the report, which was not "negative about TechnologyOne’s role in the project, and critical of BCC" would not be made public.

TechOne chief executive Adrian Di Marco said: "This event is being seen by the market as unique to BCC, because it has been made public by BCC without ever initiating the normal contracted remediation processes. In my 30 years in business I have never seen this before.

"To date, BCC has not initiated any of these contractual mechanisms [dispute resolution and mediation processes] so TechnologyOne was not aware of a contract dispute until the detrimental media statement made by BCC."

Di Marco said it was unfortunate BCC had taken the issue public before following contractual protocol but was confident the project could be resolved with no impact on the company's "strong momentum".

TechnologyOne has notified the council that it cannot continue to frustrate the vendor's ability to complete the project.

"For bureaucratic reasons council is not engaging with TechnologyOne during the time-critical configuration stage by not providing the business input we require to configure their new business processes in our software. This bureaucratic approach will delay the project needlessly and contribute significantly to a blowout in costs."

On the day of the council's announcement, TechnologyOne shares closed at $5.52, dropping to $5.16 on 27 January.