Over $31.7 million recovered by the State in litigation over botched software implementation

Posted on May 18, 2021 in Highways News, Main, News

HONOLULU – The Hawaii Department of Transportation (HDOT) and the Department of the Attorney General are pleased to report that the State has successfully resolved its litigation stemming from a failed project to upgrade the HDOT Highways Division financial management system. The remaining defendants in the lawsuit recently agreed to pay over $20 million in settlement, bringing HDOT’s total recovery to $31,775,000.

The litigation relates to misconduct by Ciber, Inc., a Colorado-based technology firm that HDOT hired in 2008 following a competitive sealed proposal process. Ciber was hired to design and implement a financial accounting system, on an Oracle software platform, for HDOT’s Highways Division. Ciber’s work on the project was beset by delays, design defects, failed tests, and a shortage of skilled consultants. After five years of error-filled work and nearly $7 million in fees from the State, Ciber abandoned the project in 2014 without delivering a functioning system.

When HDOT demanded that Ciber complete the project for the agreed-to price, Ciber refused, sued HDOT for breach of contract, and demanded $17 million in alleged damages. HDOT fought those claims and pursued its own claims against Ciber for fraud, violations of the False Claims Act, breach of contract, and unfair business practices. During the litigation, HDOT eventually obtained from Ciber internal documents containing admissions by Ciber managers that Ciber’s team lacked necessary skills, made critical mistakes during the project, and misled HDOT about the quality of Ciber’s work and the ability of Ciber’s team to deliver a working system.

When Ciber sought bankruptcy protection in 2017, HDOT continued to pursue its claims in state and federal court. In December 2017, Ciber and its primary insurer agreed to pay HDOT a total of $11 million, and Ciber further agreed to assign to HDOT the rights to Ciber’s excess insurance policies.

HDOT sued Ciber’s excess insurers in Hawaii court in 2018, and the court directed that HDOT’s claims be arbitrated in Hawaii. The insurers fought HDOT’s claims for two years, disclaiming any responsibility to provide coverage. As HDOT geared up for an arbitration trial set to begin on May 17, 2021, the insurers agreed to settle the case for a total of $20,775,000. That settlement, on top of the $11 million HDOT previously obtained, brings the State’s total recovery to $31,775,000 – an amount that accounts for the State’s damages and exceeds the fees HDOT paid to Ciber for the failed project.

“When HDOT hires vendors on projects, it expects them to perform as required – and the department is committed to holding them to account when they fail to do so,” said Jade Butay, Hawaii Department of Transportation Director.

Butay’s sentiment was echoed by Attorney General Clare E. Connors, who stated, “It is a priority of my office to ensure that vendors hired for State projects comply with their contractual and professional obligations – and that their insurers likewise live up to their commitments.”

HDOT once again sends a sincere mahalo to the attorneys at the Department of the Attorney General and at Kasowitz Benson Torres LLP for their help in obtaining this significant recovery for Hawaii’s citizens. HDOT appreciates that this win was secured through outstanding teamwork by HDOT personnel, the Office of the Governor, and the attorneys who aggressively litigated the case.