EDS penalties tied to Terralink's demise

State-owned mapmaker Terralink may have been taking a hit from penalty payments levied on EDS for delays in the Landonline data conversion project, helping push it into receivership. But no one will officially comment on who was paying the penalty.

State-owned mapmaker Terralink may have been taking a hit from penalty payments levied on EDS for delays in the Landonline data conversion project, helping push it into receivership. But no one will officially comment on who was paying the penalty.

Terralink was working under prime contractor EDS on the conversion project. When delays built up, the government charged EDS penalty payments. Sources in the geopgraphical information system (GIS) industry say EDS passed responsibility for the payments to Terralink.

EDS isn't saying, and nor is receiver Gary Traveller.

"Negotiations with EDS are going really well," says Traveller, of PricewaterhouseCoopers, "and we've agreed that [while those negotiations are in progress] we're not going to make any [public] comment on the EDS contract."

One GIS source questions whether the conversion project was ever feasible within the time and cost constraints imposed. There were around two million land parcels to be converted, including introduction of accurately surveyed measures, and it takes on average “about an hour to convert one parcel,” he says. Within the time allocated that adds up to about 1000 person-hours a day, he says – and Terralink had only 80 contractors working on the task.

The fact that Terralink was the only company that bid for the contract ought to have raised a cautionary flag for government, he says. “Terralink walked in where angels fear to tread.”

Government has made previous loans to Terralink (now in receivership) to help tide it over delays and blow-outs on data converison for the Landonline project.

In the wake of the receivership, National party finance spokesman Bill English and others asked why that drastic move was necessary, and whether a bridging loan would have sufficed to take the SOE out of its financial troubles.

But government has already explored the loan route. In 1997 the Crown lent Terralink $2.75 million by way of a debenture, says a spokeswoman at finance minister Michael Cullen’s office. The term of the loan was subsequently extended and half of it converted to equity.

In November 2000, Terralink requested another $2.5m loan, she says. The Government granted $1.5m on the condition that Traveller of PricewaterhouseCoopers was appointed as a “special manager” to monitor the company’s affairs. Traveller is now one of the receivers.

Late last year, Terralink asked for the other $1m, and Traveller advised against the loan. If the company is made insolvent, Government, as a preferential creditor will get at least a proportion of its loan money back.

Meanwhile a question-mark hangs over Terralink’s mainstream services, in map-making by techniques such as aerial photography and orthophotography (correction of aerial views adjusted to remove the effects of the Earth’s curvature). These services are used notably by local authorities.

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