Insurers for a Colorado company that years ago botched a software project for the state Department of Transportation have agreed to pay more than $20.7 million to settle a lawsuit over the failed system.

The Hawaii DOT and the Attorney General’s Office announced Tuesday that the state has recovered a total of more than $31.7 million during years of litigation over the project by Ciber Inc., which was supposed to provide a high-tech upgrade to a financial management system for DOT’s Highways Division.

State transportation officials hired Ciber in 2008 after a competitive procurement process to design and implement the accounting system, but the system failed repeated tests during development, and never worked properly.

H1 Freeway Westbound Traffic.
The state Highways Division still does not have the financial management system that Ciber Inc. was hired in 2008 to provide. Cory Lum/Civil Beat/2019

“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,” according to a written statement by transportation officials on Tuesday.

When the state demanded that Ciber complete the project, Ciber refused and filed a lawsuit against the state demanding $17 million in damages. The state, meanwhile, filed its own claims accusing Ciber of fraud, violations of the False Claims Act, breach of contract and unfair business practices.

During the litigation, lawyers for the state obtained internal Ciber documents from the company in which Ciber managers admitted Ciber’s team lacked the necessary skills to complete the project, made critical mistakes, and misled transportation officials about the quality of Ciber’s work.

Ciber filed for bankruptcy in 2017, but the state pursued its claims in state and federal courts. Ciber and its primary insurer agreed in December 2017 to pay the state $11 million, and the company also agreed to assign to the state Department of Transportation the rights to Ciber’s excess insurance policies.

The state then sued Ciber’s excess insurers in Hawaii court in 2018, and the insurers fought the claims for two years. An arbitration trial was set to begin on Monday, but the insurers agreed to settle the case for a total of $20,775,000, according to the statement from DOT.

“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, director of the Department of Transportation.

The New York law firm Kasowitz Benson Torres assisted the AG’s office in the case.

Ed Sniffen, DOT’s deputy director for highways, said the division still does not have the financial management system that Ciber was supposed to provide. He said a vendor has been selected to provide a comparable system, and the new system is scheduled to be operational within two years.

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