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Light shed on background to companies’ dispute with Government

Legal action launched by BPMS, InnoFund and i3 against the Government is not yet resolved (Photograph from Instagram)

Tech companies claiming damages from the Government over alleged breach of contract said access to systems required to perform work agreed by the parties was “effectively denied”.

BPMS and InnoFund — two of three entities that were part of a network designed to support technology-based start-ups — said no reason was provided as to why requests to get the data were fruitless.

The organisations, along with the InnoFund Innovation Incubator, or i3, launched legal action against the Government in 2022, when i3’s operations were suspended until “some resolution” could be found in the dispute.

A recent statement from BPMS said: “BPMS and InnoFund remain ready to provide Bermuda with its digital solutions and associated programmes specifically designed to provide the sort of economic impact and revenue streams that our jurisdiction desperately needs, while eager to ensure that all parties fulfil their contractual obligations.”

Last week, a government spokeswoman said that no agreement signed by the Premier committed the Government to paying funds.

However, she said that a separate arrangement was set up “without proper authority”, and was later stopped.

InnoFund launched i3 in partnership with acclaimed tech accelerator DMZ, based in Toronto, and had a meeting with the Premier and others in January 2020 as plans developed.

In 2021, the Government guaranteed a $2.5 million loan on behalf of InnoFund.

The House of Assembly was informed then that the money was for the establishment of a venture capital programme for technology start-ups and “for the creation of a mobile portal for the Government”.

However, a writ filed in the Supreme Court’s civil jurisdiction in December 2022 against the Government showed that the three entities claimed for loss and damage, and alleged that the Government failed to pay for services and products provided after certain agreements were made.

It is understood that the dispute relates to a number of invoices resulting from work done by BPMS — a mobile software company that would fund the not-for-profit i3 incubator — that were allegedly unpaid.

At a sitting of the Senate in March last year, it was confirmed by junior finance minister Arianna Hodgson that the guarantee was repaid.

A spokesman for InnoFund said then that it appeared from the company’s banking records that the Government had “paid the guarantee in full” as well as legal costs associated with the process.

Several questions from The Royal Gazette were put to representatives of the companies earlier this year, and responses from BPMS and InnoFund were provided by e-mail.

They said that while BPMS invoices that covered April 2021 to October 2021 were paid in February 2022, those submitted by the company for work carried out from November 2021 to June 2022 were not paid.

The companies added that “in fact, invoices that were submitted up until December 2022 remain unpaid”.

BPMS and InnoFund were asked if unpaid invoices were the reason for the civil litigation against the Government.

They replied: “Partly. Once invoices weren’t paid for one year, the provision within our services agreement forced us to seek legal remedy.

“We had been working to try and remedy the situation for several months before that, to no avail.

“In the BPMS services agreement, it was explicitly stated that BPMS was granted access to the Bermuda Government’s technology systems in order to complete its scope of work.

“While BPMS requested access on numerous occasions from EDD [the Economic Development Department] and IDT [Information and Digital Technologies], and others, for the purpose of completing its work as defined within the services agreement, all requests were either ignored or effectively denied throughout the duration of the contract while BPMS was never given a reason as to why.”

Stating that the invoices remained unpaid, the entities added: “Consequently, this led to the suspension of business of the aforementioned companies; created a host of issues with creditors, start-ups and business partners; and led to the default of the government-guaranteed loan … ”

The ecosystem

Launched by InnoFund Ltd, the InnoFund Innovation Incubator — i3 — was designed to act as a one-stop shop to help island founders and others from overseas to build and develop cutting-edge technology while scaling their start-up growth.

It supported 12 members over 18 months and delivered a programme from Toronto Metropolitan University’s DMZ accelerator, providing access to coaching, capital, an investor network, expert-led workshops and customers.

A venture capital fund was also planned.

The Royal Gazette was earlier told that a third element was BPMS, which was to create digital, mobile applications for government services in a single portal.

It was said to be the mechanism for the generation of revenue, which would then go on to sustain the incubator, venture capital fund and other elements of the network.

By supporting i3, it was hoped that the facility would be well placed to draw more companies to the island, delivering knock-on benefits to Bermuda’s economy.

A public relations manager for DMZ said last month: “DMZ is still in contact with i3 and is hopeful the incubator will be able to open its doors again to provide tech start-ups with the tools and support needed to thrive within Bermuda’s business ecosystem.”

In a letter from BPMS dated June 2022, and addressed to David Burt, the Premier and Minister of Finance, and Jason Hayward, the Minister of Economy and Labour, with others copied in, the company outlined work it said was carried out as well as the challenges it faced at that time

The letter, seen by the Gazette, said three applications were delivered to the Government and that, in the first year of operations, 12 technology or non-fungible token start-ups were incubated.

It added: “In exchange for the custom development of free software for the Government of Bermuda, that it is entitled to export globally, the parties committed to a $10 fee that would ensure the programme was sufficiently capitalised.

“At the height of the Covid-19 pandemic, there was a requested pivot in the project to include a travel component to ease the pressure and streamline traveller processes.

“This was executed swiftly and broadcasted to relevant government stakeholders from the Cabinet boardroom in August 2021 with beta testing downloaded on at least seven government phones.”

The letter said: “The Government has failed to provide any data to integrate/interface with our software and despite the best efforts of BPMS to offer a push data system where we would require to send data to the Government, a destination and the form in which the Government would like to receive the data has yet to be provided.”

It outlined fears that investments, equities and debt-servicing responsibilities on the part of both parties were “in imminent danger" and BPMS said the matters were raised “with the gravest concern”.

BPMS asked for a meeting, “if possible” with Mr Burt and Mr Hayward.

The Gazette was told by the companies that BPMS “never received a response to the letter and there was never a meeting arranged with the Premier and Minister of Finance and the Minister of Economy and Labour”.

In a statement, BPMS added: “BPMS and InnoFund created and delivered multiple digital solutions for the Bermuda Government and offered its expertise within steering and implementation committees that included ministers, civil servants and technology professionals.

“As prescribed in our agreements, the finance ministry and Bermuda’s Economic Development Department sat on the InnoFund board in their capacity as appointed ex officio board members and were privy to all InnoFund and BPMS activities regarding the development of all technological solutions and InnoFund programming and investments with several local companies.”

A government spokeswoman said on Friday that owing to continuing legal proceedings, extensive commentary could not be provided.

She added that “it should be noted that no agreement signed by the Premier obligated the Government to pay any funds”.

The spokeswoman said: “A separate arrangement, entered into without proper authority, and under which payments were sought to be made, was identified by internal controls and payments were immediately stopped.

“The individual responsible for this is no longer in the public service.

“It should be further noted that the Government attempted to find a solution to issues between the parties, but those efforts were halted on the commencement of legal proceedings.”

A hearing on the civil court case has been scheduled for next month.

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