- John Belden
- Reading Time: 6 minutes
On June 19th 2017, India-based IT and Engineering services firm HCL Technologies filed a countersuit against American brewery MillerCoors and parent Molson Coors Brewing Company. The complaint was filed in response to MillerCoors $100M breach of contract lawsuit against HCL. The countersuit accuses the MillerCoors management team of not understanding the operations of their own business and using bullying techniques to make HCL a scapegoat to save their own jobs.
UpperEdge’s Project Execution Advisory Service follows and reports on these types of suits as a service to our clients. There are always lessons to be learned and risk mitigation tactics that can be developed from these types of implementation failures. This counter claim provides some insight into the other side of the story and answers some of the questions that we put forward in our previous blog.
In the remaining portion of this blog we will lay out what we learned from this counter claim, and conclude with what we would like to know and hope to find out through future litigation filings.
Project Background
MillerCoors is a wholly owned subsidiary of the Molson Coors Brewing Company. A program called Business Process & Systems Transformation (BP&S) was launched in 2013. The program was intended to put a single IT platform and business processes in place across its breweries, which were running on seven different instances of SAP ECC.
The BP&S went live with the first implementation in November of 2015. The implementation went poorly, resulting in business disruptions for MillerCoors. As a result of the poor go-live and disputes with HCL over payment, MillerCoors filed suit against HCL claiming that HCL:
- Failed to provide deliverables on time and in compliance with requirements
- Failed to provide skilled personnel
- Failed to adhere to appropriate project methodology
- Failed to perform adequate program management and quality assurance services
HCL’s Lawsuit
As expected, HCL’s countersuit provides a much different version of the situation. HCL claims that the MillerCoors senior management team did not fully understand their own business and were unable to accurately communicate the requirements of the project. HCL also claims that with new ownership, the MillerCoors management team faced significant risks to their longevity if they admitted to responsibility for a project that was substantially over budget and behind schedule. HCL’s lawsuit claims, “MillerCoors’ senior management lacks even the basic understanding of the company’s operational requirements and is incapable of leading such a complex business transformation.”
The counter complaint provides for three causes of action:
- Breach of Contract for failing to approve and pay invoices, wrongful termination, and failure to supply timely, complete and accurate information about MillerCoors project requirements
- Quantum Meruit – HCL claims that the work they performed went well beyond the scope of the contract as evidenced by the change orders that were proposed and they are due compensation for this work.
- Tortious Interference with a Contract – In this case, HCL is accusing Molson Coors of interfering with the contractual relationship that MillerCoors had with HCL, thereby causing a breach of contract and damage to HCL’s business reputation
Answers and Questions
HCL’s countersuit answered a number of questions that we previously posed with the initial lawsuit and raised others.
Questions answered:
- The blueprinting activity was led by a Tier One system integrator, Deloitte. MillerCoors intended to hold HCL to the same standards they expected from Deloitte.
- A governance process was in place to approve payment to HCL for achieving milestones.
New Questions:
- What audit procedures were in place to confirm that all requirements were met to pass through program gates?
- How did the decision to RFP the build, test and deploy work to another vendor affect the quality of the deliverables provided by Deloitte in the blueprint? If HCL were to prevail in their claims, will MillerCoors file suit against Deloitte?
- Why would HCL continue to execute on work that it believed to be contractually out of scope? Were assurances given to HCL to proceed with the work?
- Were there program risk assessments conducted that provided insight to MillerCoors’ management team that indicated potential problems with the budget, schedule, and operational continuity?
At the end of this blog, I have added some additional dates to our timeline of events based upon material provided in each of the lawsuits.
Lawsuits such as these can take years to litigate. The Bridgestone lawsuit against IBM with similar charges has entered its fourth year.
UpperEdge will keep our eyes on this case to develop a deeper understanding of what went wrong. If you would like to learn more about UpperEdge’s Project Execution Advisory Services and how we develop specific techniques to identify risks well in advance of them turning into issues, or if you have any questions or comments, please do not hesitate to contact us.
The Time Line
In our previous blog, we provided a timeline that was laid out in the MillerCoors lawsuit. We have updated this timeline to include information that was supplied in HCL’s countersuit. New information is identified in italics.
Early 2013 – MillerCoors launches BP&S and contracts with Deloitte Consulting to provide Blueprinting Services.
September 18, 2013 – RFP issued to bidders. Firms were provided specific peak brewing period constraints and asked to propose an optimal approach to implement SAP and provide a realistic project timeline, staffing, and costs to implement the program.
October 2013 – MillerCoors accepted HCL’s fixed-price bid that HCL claims was predicated on the functional specification for the first phase being completed.
December 3, 2014 – HCL was awarded the business and an interim knowledge transfer work order was signed under the terms of a previous Master Services Agreement. The scope of work was intended to allow HCL to come up to speed on the blueprint process designs.
January 17, 2014 – HCL and MillerCoors agreed to a new work order for the remainder of the program. The SAP Realization Services work order is a fixed price agreement of roughly $53M inclusive of expenses.
February 2014 – HCL claims to have started raising the issue of incomplete specifications provided by MillerCoors. In its countersuit, HCL claims that the specifications provided were 75% incomplete.
Early 2014 – Proposal was made to split the implementation of Phase I into two releases, instead of having a simultaneous release at both breweries.
October 31, 2014 – A dispute arose between the parties with regard to the overall quality of the blueprint materials and the level of effort that was required to complete the implementation. The resolution of this resulted in an amended agreement that extended the implementation timeframe and increased the fixed cost by $9.6M. The revised agreement targeted the first deployment for Oct 5th 2015, and the second deployment to be executed 6 months later on April 4th 2016.
May 2015 – The agreement was amended to de-scope some of the services to be provided by HCL and to delay implementation of some of the scope until the 2nd deployment. The lawsuit contends that these changes were made in an effort to secure the timing of the 1st deployment.
November 2, 2015 – The program goes live with its first implementation, one month later than planned. Per the MillerCoors lawsuit, the final testing of the implementation indicated there were eight critical severity defects and 47 defects of high severity (It is not clear if MillerCoors was aware of the defects prior to the go-live). Following the go-live, MillerCoors went into an extended period of post go-live hyper-care where thousands of additional defects were recorded.
November 2015 – HCL claims that several issues with the functionality of the Extended Warehouse Management solution were identified after go-live. Requirements were identified that HCL claimed were not previously disclosed. HCL asserts that the designs for the implemented solution had been previously signed off during testing.
November 11, 2015 – SABMiller and Anheuser-Busch InBev announced that they would merge, and that SABMiller would sell its majority stake in MillerCoors to Molson Coors in order to eliminate antitrust regulatory hurdles.
December 10, 2015 – The agreement is amended a 3rd time. The adjustments to milestone payments were made to accommodate requests from HCL to facilitate cash flow.
December 18, 2015 – Most components of the ERP implementation were transferred, as planned, out of post-go-live support.
January 15, 2016 – MillerCoors project governance committees approved the Financial Book of Record Stage Gate.
January 28, 2016 – MillerCoors requested approval to invoice the Go-Live milestone.
March 8, 2016 – MillerCoors sends a letter to HCL demanding HCL remediate the problems with the first implementation, deliver an approved detailed program plan, and fill all project roles with qualified personnel.
June 2016 – HCL submitted a change request for $5.8M to amend the contract work to account for expanded scope and extended timeline caused by the warehouse management re-design.
June 20, 2016 – MillerCoors sends HCL notice of termination of work, exercising the terms of the agreement to secure a new supplier to remediate HCL’s work and complete the project going forward.
October 2016 – The sale of SABMiller’s interest in MillerCoors to Molson Coors was finalized and closed.
March 14, 2017 – MillerCoors files lawsuit.
June 19, 2017 – HCL files counter complaint.
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