Re: Feep, Feep!
It's not unheard of for a bespoke project to run over time, but they were probably looking for a way out of spending all that cash as soon as they signed the contracts. The upgrade to the existing platform seems to signal exactly what you're saying.
I wish them good luck getting the milestone payments back. If you've already reached the milestone and completed that work, how could you possibly ask the contractor for the money back? More fool them if they only had time gates for the payments rather than actual project milestones.