NEC sues government over terminated biometrics project

NEC Australia has launched lawsuit aiming to recover the costs it incurred during a terminated biometrics project with the Australian Criminal Intelligence Commission (ACIC).

The ACIC in early June 2018 suspended the Biometric Identification Services (BIS) project before later that month cancelling it altogether. In a statement issued at the time ACIC chief executive Michael Phelan said that the decision “was taken in light of project delays”.

“The contract with NEC Australia to deliver the BIS project has today been terminated,” the statement said. “The project was suspended by mutual agreement on 4 June 2018 while commercial negotiations were ongoing.”

NEC in May 2016 had been awarded the $47 million contract to implement the BIS, which was intended to be a successor to the National Automated Fingerprint Identification System (NAFIS) employed by state, territory and federal police.

During the course of the project, the ACIC agreed to more than $12 million in additional work, according to the Australian National Audit Office. Some of that work may have been unnecessary or already covered under the contract, the ANAO found in a report released in January 2019.

Shortly after Phelan announced that the project had be dumped NEC Australia claimed that the project “was ready to be handed over to the ACIC for System Acceptance Testing” when the law enforcement agency suspended it.

The statement said that the ACIC had ended the contract under a “termination for convenience” clause and “not because NEC had been in breach of its obligations”.

“The termination for convenience clause allows government departments and agencies to terminate a contract, regardless of whether or not the contractor has committed a default or breach of that contract,” NEC Australia said.

The company today said that since the BIS project was terminated in mid-2018 it had been “attempting to recover its costs, however unsuccessfully”.

“As a result and after careful deliberation, NEC Australia has decided to take legal action to recoup its costs directly related to the project by commencing legal proceedings in the Supreme Court of Victoria,” the company said.

The statement noted that the ANAO report that found that the ACIC’s management of the BIS project had been “deficient in almost every significant respect”.

Similarly a parliamentary inquiry, whose findings were published earlier this year, found the project was “premature” and “poorly scoped”. Phelan told the inquiry that the termination of the contract “cast no aspersion whatsoever on NEC's product”.

“In neither report is NEC criticised for its handling of the BIS project,” NEC said. “NEC Australia maintains it met all terms of its contract and was disappointed and surprised that a decision was taken to terminate at what it deems was beyond the 11^th hour in the BIS project.”

Under the terms of the contract signed by NEC and ACIC’s predecessor CrimTrac the vendor was due to complete BIS implementation by November 2017. The company would then support and maintain the new system until 30 November 2022.

NEC Australia said it respected the right of the ACIC to terminate a contract. “Nevertheless a substantial investment in this project was made by NEC and the company is simply seeking to have the investment at the time the contract was terminated for convenience, returned,” the company’s statement said.

“NEC will not publicly disclose details of its financial claim.”

“ACIC are unable to provide comment on the on-going legal proceedings of the BIS contract as the matter is currently with the Victorian Supreme Court,” an ACIC spokesperson said.

The contract with the supplier of NAFIS, Morpho, is due to expire in May 2020. The ACIC is exploring options for a longer-term relationship with the vendor and the potential to enhance the capabilities of the system.