Legacy Life Extension

Zimmer Biomet sues Deloitte for $172M over 'disaster' of a project

Zimmer Biomet (NYSE: ZBH) has sued Deloitte in the Supreme Court of the State of New York in Manhattan, claiming in a lawsuit that the British accounting and consulting firm falsely sold the ortho device giant on an enterprise resource planning (ERP) software system that ended up costing tens of millions of dollars to fix.

The mounting challenges from what ZB describes as a botched ERP system caused it to reduce its full-year 2024 guidance when Q3 earnings came out in October last year.

ZB said in its complaint that the company was barely operational through the third quarter of 2024, unable to ship or receive product, issue invoices, or generate basic sales reporting.

"While litigation is never our first choice, Deloitte strung us along with repeated false assurances, both before the contract and before the system go-live," Zimmer Biomet General Counsel Chad Phipps told MassDevice in an emailed statement. "This is not the conduct we expect nor tolerate from our business partners, and we intend to hold Deloitte accountable for its actions, which not only seriously disrupted our business, but also put patient care at risk."

Deloitte, in its own statement, said: "We are deeply committed to our clients, regret that Zimmer Biomet has chosen to embark on this path, and will defend ourselves vigorously against this meritless claim."

Filed on Sept. 4, ZB's lawsuit accuses Deloitte of falsely assuring the Warsaw, Indiana–based company that it had the skills, experience, implementation methodology, tools, and accelerators necessary to successfully deliver cloud-based SAP S/4HANA ERP software from the company SAP SE.

According to Zimmer Biomet, Deloitte drew on trust from over 25 years of successful collaboration to convince company officials that replacing the company's legacy system with SAP SE's software would save it $197–316 million over 10 years.

The lawsuit complaint claims that the Deloitte team was incompetent and unqualified, with the $94 million in fees running 36% over what Deloitte had represented. The new ERP was supposed to save hundreds of millions of dollars for Zimmer Biomet's operations in North America and Latin America, but ZB says it was instead a severely flawed system limited to North America.

The complaint goes on:

"That botched system finally went live in North America on July 4, 2024, after numerous postponements and delays. Thereafter, when issues began to surface, Deloitte discounted their significance, assuring Zimmer Biomet they were the typical hiccups commonly experienced following an S/4 launch. But as the months passed, the problems worsened, eventually causing massive disruption to Zimmer Biomet's operations and global supply chain, halting the shipment of critical medical devices to doctors and patients, and inflicting more than $172 million in damages on Zimmer Biomet. Only through an extraordinary internal effort was Zimmer Biomet able to prevent even more extensive damage to its business and customer relationships. … Deloitte's implementation of S/4 for Zimmer Biomet was a disaster."

By July 1, 2025, Zimmer Biomet notified Deloitte by letter that it had breached the work order and agreement, according to ZB's complaint, which claimed Deloitte waited for over six weeks before abruptly canceling all of its contracts with the company.

Zimmer Biomet demanded ongoing termination assistance services until the end of the year. To avoid further operational disruptions, the company had to pay outstanding invoices and prepay to receive the extra assistance.

ZB said Deloitte "relied heavily on an offshore team in India over which the onshore team on site at Zimmer Biomet maintained little oversight or control," and that the India team had "constant" turnover "such that the project was never supported by a consistent, qualified, or stable Deloitte team.""

ZB's lawyers said Deloitte "change-ordered Zimmer Biomet to death" with 51 change orders for an additional $23 million in fees above the $69 million contract price. Those change orders would not have been needed had Deloitte sized and scoped the project appropriately, ZB said in its lawsuit.

Zimmer Biomet is claiming at least $173 million in damages, including the $94 million in fees paid to Deloitte, an additional $15 million invoiced as Deloitte unsuccessfully sought to fix its own mistakes, and ZB's own $72 million in additional post-go-live costs.

According to the lawsuit complaint, "Zimmer Biomet struggled (and still struggles) to plan or meet production schedules, fill orders, and ship and deliver products to customers on time. Deloitte's S/4 system still suffers from significant defects, functionality gaps and other issues to this day."

City council faces £216.5M loss over Oracle system debacle

Europe's largest local authority canceled expected savings baked into financial plans

Lindsay Clark
Tue 20 Aug 2024 // 08:30 UTC

The total cost of Birmingham City Council's Oracle implementation disaster is set to reach £216.5 million ($280.4 million) by April 2026, according to a new audit report.

Europe's largest local authority went live with the Oracle Fusion single platform for finance, payroll, HR, procurement, supply chain management, and customer relationship management – replacing an SAP system first introduced in 1997 – in April 2022.

Since its introduction, the council has been unable to file auditable accounts. It is set to re-implement an "out of the box" version of the solution after customizations in the first effort disrupted its bank reconciliation system. The system also left the council unable to provide an audit trail or detect fraud for 18 months.

The cost of the Oracle project increased from an initial estimate of £19 million to a projected cost of £131 million, including the re-implementation.

However, a fresh report from the Audit Reform Lab, a collective of academics, consultants, and activists based at the University of Sheffield, estimate the true cost of the Oracle implementation disaster is set to be £216.5 million until April 2026 as the council's spending plans had relied on expected costs savings from the ERP system, which it had later canceled.

"None of the anticipated direct savings were delivered, and, furthermore, due to the inability to monitor budgets, a significant amount of wider savings had to be written off. In total, £69m of savings in 2023/24 were written-off, along with unspecified further savings in future years," the report said. "Many of the internal processes and tacit knowledges that had previously been used to produce financial outputs broke down, providing no simple workarounds that would enable problems of this kind to be resolved."

The report – commissioned by the GMB, Unison, and Unite unions – also claims that problems with the implementation were not disclosed to elected members and the wider public for more than a year.

The report calls for a public inquiry into the financial disaster, which saw the council become effectively bankrupt after news of a £760 million equal pay claim was disclosed. The report claims that figure was "prematurely disclosed and potentially overstated" while the role of Oracle was downplayed.

"Any subsequent inquiry should ask serious questions about why the failure of Oracle was downplayed by senior management at that time; and whether this was the result of intransigence and mismanagement, or was part of a deliberate strategy to deflect blame, or some other reason," it said.

In response, John Cotton, leader of Birmingham City Council, said: "We must take responsibility for the failings that have contributed to our current difficulties, but the mistakes made in Birmingham have not occurred in a vacuum. Report after report shows that there's a national crisis in local government caused by 14 years of neglect from the previous Tory government, combined with major rises in demand and cost-led pressures." ®