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Vendor Management: Why Litigation Costs You

By Scott Berinato

February 01, 2004 — CIO —

The Moral of This Story: Stay Out of Court

In March 2000, a $10 million software company called Triple Point Technology signed three contracts with Transammonia, then a $1.5 billion petrochemical company, promising to link all 27 Transammonia offices with a state-of-the-art commodities trading platform called Tempest 2000. Triple Point also agreed to design and develop six interfaces between Tempest and Transammonia’s existing PeopleSoft accounting system.

For Transammonia, it was the quintessential Internet-era "business transformation project" that would launch the old economy company into the 21st century of Internet-based, real-time, 24/7, free-flowing information. And the six interfaces between Tempest and Transammonia’s existing accounting software were the crux of the deal. No point in having a free flow of information if it didn’t freely flow into the general ledger.

Triple Point assured Transammonia the interfaces wouldn’t be a problem. In its business proposal to Transammonia from September 1999,

Triple Point said no fewer than three times that it had "experience" building "fully integrated solutions." Triple Point could "custom-build any interfaces required," the proposal also said. The sides talked about the interfaces shortly after the proposal, and a month later, too, when Triple Point again assured Transammonia that it was "very familiar with the nature of these interfaces, having built them for some of our existing clients." Triple Point said it had built a similar Tempest-to-PeopleSoft bridge for Mieco, another chemical company.

Transammonia was convinced. The company supplied a quote for Triple Point’s press release?something about working efficiently in fast-changing markets. It was a happy nuptial, but then, nuptials are never unhappy. Marriages sometimes are.

Failure Hits. Send in the Lawyers.

But Triple Point, it turned out, was rather liberal in representing its experience. In fact, it had never developed the interfaces. The company had only managed subcontractors that developed the interfaces, and it had done that just twice.

No one at Triple Point had mentioned subcontractors to anyone at Transammonia prior to the contract signing in March, but that was the plan. Triple Point hired PeopleSoft to develop the interfaces.

But by August, Triple Point still hadn’t provided PeopleSoft with a project plan and failed to monitor progress on the interfaces, other than through informal conversations. By the Dec. 31, 2000, deadline, zero of six interfaces was completed. In February 2001, Triple Point stopped paying PeopleSoft. A few days after that, Transammonia stopped paying Triple Point. Finally, Triple Point turned the screws on its subcontractor, setting a firm March 9, 2001, deadline for the interfaces to be completed.

 

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