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IT company files suit against city, SD Data Processing Corp. (the same day SDDPC’s chief resigns)

November 13, 2009 - 2:07 pm


Axon Solutions Inc has filed a $5.6 million suit against the City of San Diego and its not-for-profit IT provider, the San Diego Data Processing Corp., alleging breach of contract, misappropriation of trade secrets and copyright infringement.

The suit was filed the same day the head of SDDPC, Tom Fleming, announced his resignation (which the U-T reported, completely missing the suit). The U-T attributed the resignation to the mayor’s decision to “split up the agency’s duties and allow outside companies to bid on them.”

The New Jersey-based company, Axon, is asking for the money it says the city and SDDPC owes for abruptly canceling its contract, the return of all its proprietary software and supporting documentation and an injunction that would keep the city from continuing to use Axon’s systems on its website.

According to the complaint filed in US District Court yesterday, the contract emerged from the city’s decision in 2007 to upgrade its “outdated” computer systems, specifically the software that powers the city’s finances and business support services.  Through SDDPC, the city signed a $17 million contract with Axon to make it happen.

Then, in November 2008, the city decided to back out. According to a Nov 20 memo, Axon was “not meeting deadlines and deliverables have been incomplete based on the contract.”

Axon provided them with a bill for $4.86 million. After a few meetings in 2008, Axon says the city agreed to pony up the cash–and then completely welshed on the agreement. Even though the city had severed its ties with Axon, San Diego took the software system  “live” in July 2009.

In Aug. 2009, the city and Axon initiated mediation, which also tanked.

Because the city reneged on its promise, Axon says the city has no right to continue using Axon’s intellectual property, including its project management and document database programs and source code. Axon is asking for the $5.6 million, which represents what the city owes plus interest, any money the city made or saved by using the unlicensed software, legal fees, and restitution.

Here’s the complaint as a pdf.

A few related 2008 stories from Voice of San Diego:

3 Comments leave one →
  1. November 14, 2009 - 11:28 pm 11:28 pm

    Dave, I read the Lawsuit and SOW.

    Axon clearly states there must be a minimum of customizations for the project to be successful.

    In the letter to the council (sent to the lame ducks after the election, before the new members and city attorney were sworn in) I can read between the lines that the city staff were pushing for the very customizations Axon had said would be out of scope and expensive additions.

    Therefore the “blueprint stage”, where requirements are specified, dragged on and on. Staff called in SAP, probably in a dispute over whether something staff wanted would be “easy or hard” to implement.

    What’s interesting is Axon’s stipulation that because the city cancelled for “convenience” when they reached impass over the requirements specification (tellingly stuck at “90%”) it has to pay as if the entire project phase were actually developed and delivered.

    Since the city didn’t seem to follow the contractually specified process for rejecting these deliverables, they’re on the hook. In addition, in the letter to the lame duck council the city says they’re paying the money to Axon.

    Then the city continued using the Axon provided online document management system. That’s not really a big deal, and in friendly circumstances any company would be happy to give over the “90%” specification…but then the city never paid for these deliverables as promised and required by the contract.

    It does suck. We, the taxpayers, paid for city staff incompetence and inexperience in managing software contracts. They’re blaming it on the contractor, Axon, saying they couldn’t create the correct specifications. But reading between the lines, the staffers were going against the spirit of the contract which was to minimize customizations.

    Axon balked, and rightly so. The city decided to go directly with SAP, and pay off Axon for their efforts.

    But then the city didn’t pay.

    What a farce. We’re paying twice for the project specification phase. Mr. Fleming may have attempted to stop the staffers from insisting on customization and failed. Or maybe he wasn’t paying attention.

    Either way, the project was doomed to failure…sadly predictable failure.

  2. November 15, 2009 - 2:38 pm 2:38 pm

    Hey Fred, thanks for the super thoughtful and insightful response. I’m doing my best to understand all the history and technology, but it’s got a long history (and I’ve been here a month) and the technical language is extremely dense. That’s why I find it extremely helpful when readers with that kind of expertise chime in. Thanks again.

  3. sdbudz permalink
    November 24, 2009 - 9:38 pm 9:38 pm

    check out the history of SDDPC not for proft my ass,it was city corruption and nephitism at its finest, Dick Murphy’s office remodel came from dpc funds because he “hated that bitch’s taste”, what does that have to do with your new phone system?”just take care of it”

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