According to reports, after the Jindal administration cancelled a 10-year Medicaid claims processing contract with Client Network Services Inc. in March, the contractor has alleged that the State is losing millions of dollars and, by hiring another contractor, will likely pay $75 million more over the next three years. Further noting that, among other costs, the state will spend an additional $5 million on a rebid.

The administration did not confirm CNSI estimates on costs of the contract cancellation, but noted they are evaluating it, and are also looking into their legal options to recover money from CNSI. As a result of the contract cancellation, CNSI has sued the state for breach of contract and is seeking compensation for work performed, lost profits, reimbursement for its costs and other unspecified financial damages.

CNSI contract was cancelled amid an ongoing criminal investigation and shortly after a federal subpoena seeking details about the contract was issued. The administration alleges that former Health and Hospitals Secretary, Bruce Greenstein, who was also former VP of CNSI, had inappropriate contact with the contractor throughout the bidding process which gave them an unfair advantage. Greenstein resigned shortly after the contract cancellation, and acknowledged the decisions he made during the bid process, made CNSI eligible to bid on the project.

Even though most businesses want to honor the terms of their contract and deliver to their clients, delays, an unexpected event and financial issues may arise which may prevent a business from fulfilling the terms of the contract. The failure of a party to meet its end of the bargain results in breach of contract. Contract disputes can get complicated, and it may be helpful for a business involved in a contract dispute to contact an experienced lawyer to evaluate their options.

Source: The Times Picayune, “Louisiana losing millions by canceling contract: CNSI,” July 3, 2013