[foliovision]

Exactly. Based on IBM's track record around the world (I know of IBM payroll projects for Canada, Australia, Pennsylvania which have failed while New Zealand and Slovenia have been mentioned in comments), I'd say failing on low ball government payroll projects and then taking the government to the cleaners is strategic at IBM.

IBM have made billions doing so. Bad publicity is just a good start.

The really interesting point is that if this business plan is shown to be strategic (if I were Canada, Australia or Pennsylvania I'd be looking at full discovery of all email records), IBM would then be vulnerable to civil suit for fraud.