Jury: AMS Breached Mississippi Contract

A Mississippi jury handed down a US$475 million judgment this week against American Management Systems Inc., saying the company breached its contract to build the state an integrated tax collection system.

It's reportedly the largest verdict ever against the industry.

The state sued AMS in April 1999, saying the company continually failed to deliver on its $11.9 million contract to build a system that would integrate Mississippi's 36 tax collection and reporting entities. The state said that more than five years after the AMS deal was signed in 1993, not a single tax collection software program was working. The state asked for $235 million in actual damages plus another $750 million in punitive damages.

"They were to build 36 systems in 36 months," said Ed Buelow, chairman of the Mississippi State Tax Commission. "After 64 months, they hadn't built one.

Well, I take that back - they built one but it didn't work.'' Jim Craig, an attorney representing the tax commission, said AMS' own records repeatedly included concerns that the staff assigned to the project was "inexperienced."

"No less than three project management people complained the staff did not have the technological savvy to work on as big a project as this," Craig said.

Officials at the Fairfax, Va.,-based AMS said Thursday they would appeal the verdict awarded Wednesday by the Hinds County Circuit Court.

Mark Andrews, executive vice president at AMS and director of the government and educational management systems division, called the judgment both disappointing and surprising.

"It's disappointing, quite frankly, that this is how we ended a project we were very committed, right to the end, to deliver," Andrews said. He pointed out that a similar AMS tax system in Kansas won an award this week from the National Association of State Information Resource Executives.

Buelow said that AMS used Mississippi to win the $55 million Kansas deal, underbidding the next closest bidder by $20 million to get the Mississippi contract.

"As soon as Kansas signed up, they walked off and left me holding the bag,'' Buelow said. "I watched my 85 programming people drop to 10.'' Buelow said his technology staff would complete the yet-unfinished State Tax Automated Revenue System.

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