In May 1989, the State of Florida signed an agreement for EDS to
supply a system to manage welfare benefit payments for the disadvantaged.
The system was based on IBM 3090 mainframe and was intended to integrate
six software modules, covering social security payments made for
food stamps, child support payment enforcement, and Medicaid, which
offers federal care to the poor.
In its original specifications, Florida said it would prefer a
distributed system that would not depend on a single processor.
However, in its requests for proposals, it gave the prospective
suppliers the freedom to propose any equipment configuration, provided
it guaranteed that the system performance could cope with at least
a 120% increase to the projected 1993 departmental caseload level
of more than 2.3 million cases.
In outlining its complaints against EDS to the Florida courts,
the state's Department of Health and Rehabilitative Services (HRS)
insisted that, because of the expected growth in social service
programs, the system should have been designed to cope with any
further loads without adversely affecting the overall configuration.
The state said that EDS had insisted that its proposed CRIS-E system
design offered "tomorrow's solution today".
EDS found that a fear culture within HRS inhibited decision-making.
To support this claim, EDS quoted from a report by the Florida Governor's
Chief Inspector General: "The corporate culture at HRS seemed
to promote and reward those who didi not raise problems; and thus
the Secretary [head of HRS] was often the last, not the first, to
Things deteriorated as Florida's caseload continued its exorable
growth. Because of the additional cases, HRS's required CPU capacity
now reached over four million transactions a day.
In March 1992, the two sides clashed again, this time over a benchmark
test intended to show that the chosen hardware was up to the job.
HRS claimed that, from March 1992 until June of that year, the
Florida system experienced stability and reliability problems with
frequent crashes. During the crashes, the system could not be used
for any business purpose, and the state was forced to turn away
its customers. Poor response times meant that claimants had to queue
for hours to receive benefits, leading to unfavourable publicity.
By the contract termination date of June 1 1992, HRS claimed EDS
had delivered a system based on a configuration that was "unproved,
inflexible and insufficient to meet the capacity requirements, either
present or future". The state insists that because of the stability
of the welfare system, some old systems had to remain in use to
provide backup or to supplement existing operations, leading to
Three months after the termination of the contract, the two sides
resorted to legal action. In September 1992, EDS sued HRS, seeking
damages of more than $40 million because the State of Florida had
stopped making payments. HRS immediately counter-sued for $65 million
in damages, alleging breach of contract and warranty.
Two years into the legal battle both sides agreed to alternative
dispute resolution (ADR) which avoided a full blown court case.
A "Special Master" in this case the former CIA head William
Webster was appointed to adjudicate between them.
His judgement was that the state owed EDS $50 million and, late
in December 1995, a circuit judge backed EDS and said the state
should be held to Webster's ruling. The state siad it would appeal
to the district court and, if necessary, to the state's Supreme
EDS was awarded much of the money it had sought from the state.
Eventually a court ruled that the state of Florida should pay EDS
$42.8 million (approx. £30m) to settle all disputes relating
to the system developed and implemented by EDS. This compares with
the $55 million originally sought by EDS. The case is now over.