On March 13th, 2017, American brewery MillerCoors filed a breach of contract lawsuit against India based HCL Technologies, an IT and Engineering services firm. The complaint filed in the United States District Court for the Northern District of Illinois Eastern Division alleges that HCL knowingly or with reckless disregard for the impact on MillerCoors did not comply with the terms of its services agreement. MillerCoors claims that this alleged breach resulted in significant damages to MillerCoors in excess of $100M dollars.
UPDATE: On June 19th 2017, India-based IT and Engineering services firm HCL Technologies filed a countersuit against American brewery MillerCoors. Read about it here
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. As always, there are more questions than answers in the early stages of these proceedings. We will lay out in the remaining portion of this blog what we know, and conclude with what we would like to know and hope to find out through future litigation filings.
MillerCoors is a wholly owned subsidiary of the Molson Coors Brewing Company. We learned from the SAP website that Molson Coors is running 7 instances of SAP ECC. This number of instances is likely the result of the multiple acquisitions that have taken place as the brewing industry consolidated.
From the lawsuit filed, we learn more about the specific project:
- MillerCoors was going through a business process and system transformation project.
- The transformation effort was aimed at driving efficiencies, innovation and growth across the company by adopting a common set of best practice business processes and implementing them in a new enterprise SAP software solution.
- The implementation involved SAP’s Global Available to Promise, and Extended Warehouse management software.
The Time Line
The timeline laid out in the lawsuit picks up following the completion of blueprints created by MillerCoors. These blueprints documented the various business processes that would be implemented in SAP.
Sept 18, 2014 – 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.
Dec 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.
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 time frame 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 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 lawsuit, the final testing of the implementation indicated there were 8 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.
December 10, 2015 – Agreement is amended a 3rd time. The adjustments to milestone payments were made to accommodate requests from HCL to facilitate cash flow.
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 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.
March 14, 2017 – MillerCoors files lawsuit.
The Claims of Breach
Paraphrased from the suit, MillerCoors claims that HCL:
- Failed to provide and deliver to MillerCoors deliverables on or before due dates.
- Failed to provide and deliver deliverables in compliance with requirements.
- Failed to staff the project with an adequate number of skilled personnel to perform.
- Failed to provide the services at levels of accuracy, quality, completeness, timeliness, responsiveness, resource efficiency and productivity contracted.
- Failed to implement and adhere to appropriate project methodology.
- Failed to perform adequate program management and quality assurance services.
Our Initial Conclusions & Questions
From our initial review of the lawsuit we have formulated the following assumptions regarding the program.
- Based upon SAP’s website information we conclude that MillerCoors likely had a solid foundational knowledge of SAP and managing SAP environments.
- Based upon the time from RFP to award, we conclude that HCL was already an established vendor for MillerCoors likely performing support services.
- Based upon the language of the lawsuit, MillerCoors had some initial doubts regarding the potential quality of HCL work. Specific language was included in the contract regarding holding HCL accountable to Tier 1 vendor standards.
- The timing for project was reasonable. Based upon benchmarks of programs this size, MillerCoors’ program fit comfortably within the time frame of other successful implementations.
As with any lawsuit, there are at least two sides to every story. As I was reviewing this claim, I started to ask myself a few questions that will need to be answered to understand what really happened.
- Did MillerCoors have independent QA services from SAP or other firms?
- What sign-offs had HCL received from MillerCoors to move through various project gates?
- What specific responsibilities did MillerCoors have that perhaps could have contributed to delays?
- What was the decision-making process that allowed the implementation to take place with severe and high priority open testing errors?
What the future holds
The next sets of court updates are due toward the end of April. 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 [email protected].