Fort Collins sues utility software contractor, wants to start over

FORT COLLINS — After spending three years and $8.6 million on a $7.3 million contract, the city of Fort Collins has filed suit against Open International LLC and Open Investments LLC, Florida-based companies, alleging failure to implement new software to handle utility billing for the city’s broadband and other utilities.

The suit seeks rescission of all agreements, return of all money paid and “a return of the parties to the position they were each in before the city entered into the agreements.”

“Unfortunately, we have lost confidence in Open International’s ability to provide the product they originally promised would be ready and functional by end of 2019,” said Darin Atteberry, Fort Collins city manager. “Their most recent proposal asks for more time and money but does not offer the city any security if Open again misses its deadlines. We believe it is time to move forward.”

Open International said in a response to a question from BizWest that it expected to be able to work out a solution until served with the lawsuit. It will be responding today, said Hernando Parrott, North American president for the company.

Gretchen Stanford with Fort Collins Utilities said that the city is operating on the Open software but hasn’t received what it contracted to receive.

The city contracted with Open Aug. 9, 2018, to install and replace software used for utility billing and customer interaction. The driver for the decision to replace the city’s decades-old software was the launch of Connexion, the city’s new broadband utility. First out of the gate was to be the Connexion billing system, followed shortly thereafter by replacement of the software for the city’s four other utilities.

Open International claimed to have a 30-year track record of implementing utility billing systems in the Americas, according to the suit, and the company’s website does indicate that the company has been in operation since 1987 with most of its work in Central and South America. It’s timeline says that it secured its first North American customer in 2018. Stanford acknowledged that Fort Collins was the first North American customer.

In any case, the company pledged an “Irrevocable Guarantee,” the suit says, that it would “unconditionally guarantee the performance of Open International in all obligations set forth” in the agreements. 

The city claims fraudulent inducement, breach of contract, breach of implied covenant of good faith and fair dealing, saying that despite claims that the software was “off the shelf” and ready for installation with minor tweaks, the city learned that much of the software required extensive work. Some had not yet been written. Open disclosed to the city that it had spent 30,000 hours of development on a self-service portal, and the city contracted for 15,000 more hours to complete work that still has not been delivered.

The job was supposed to be done in January 2020, but deadlines were missed, extended and missed again, according to the lawsuit.

In May 2021, the city during contract-dispute negotiations suggested entering “Executive Negotiation,” an escalation of the dispute-resolution process. Open said that “would be interpreted by Open as a serious escalation and that it would not be conducive to finding a mutually beneficial resolution.” So the city backed off.

Then on May 19, 2021, Open filed a “Notice of Default,” claiming the city was in breach of the contract. The parties met in-person in June, after which Open suggested that the city spend 16 more months, an additional $3.3 million and pay ongoing costs of $120,000 a month to manage the system.

The city’s lawsuit followed on July 2.

Open said it thought there were agreements reached at the June in-person meeting. “We mutually agreed that this would take firm commitments from both parties to deliver on their respective responsibilities. At the same time, in recognition that the city has limitations on staffing (both in skill sets and quantity), Open agreed to define within the proposal a plan to take ownership of activities for which the city was originally responsible,” Parrott said in an email to BizWest.

“Open and the city agreed to refrain from involving legal counsel during the negotiations, on the principle of working in good faith toward a solution. Furthermore, Open conditioned the proposal submission to Fort Collins not working on any alternative plan, while negotiations were taking place. As a matter of fact, Open also agreed … that starting on July 5th the city and Open would jointly revise and negotiate the proposal and plan to move toward a successful project conclusion. We were in fact waiting for the city to schedule the meetings this week to jointly revise and agree on plans and costs to move forward for a successful project,” he wrote. 

“Open also wants to assure the mayor, the City Council, and the citizens of Fort Collins that the allegations contained in the complaint are frivolous and untrue. Allegations that Open made fraudulent statements or misled the city are absolutely and completely false. Contrary to what is stated in the complaint, the city is far from complying with the contract for several reasons that our lawyers will address in their answer,” he said. 

Court dates have not been set.

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