Small Contract, Big Settlement

Small Contract, Big Settlement<@VM>Techtoons

Steve LeSueur

by Steve LeSueur, Editor

The figures, everyone agrees, are huge.

American Management Systems Inc. Aug. 28 agreed to pay Mississippi $185 million over 13 years because the company allegedly botched the installation of an automated tax system.

That's a lot of money, but the settlement was a lot easier for AMS to swallow than the $474.5 million that a jury less than a week earlier had ordered the company to pay following a civil trial examining the state's accusations against AMS.

And the jury award was less than half the $984 million initially sought by the state when it filed a lawsuit against AMS in April 1999.

Further, AMS' piece of the $185 million will be only $23.5 million, according to company officials. The rest, they said, will be paid by AMS' insurance carriers, who, by the way, had resisted early settlement of the case and instead took their chances with a Mississippi jury. After all, the state had only paid $6 million on the $11.2 million contract with AMS. How much damage could the state have suffered?

Mississippi government officials apparently made a persuasive case, arguing, among other things, that over the years the state has lost $184 million in potential efficiencies and savings because AMS failed to install the promised system.

Staff Writer William Welsh talked to many of the main players and analysts who followed the controversy, and in this week's top story, takes a detailed look at what the State of Mississippi vs. AMS Inc. means for AMS and the information technology industry.

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