A modernization of the CalPERS computer system is scheduled to “go live” in September, nearly two years later than the original startup date, and the main contract is $276.6 million, up from $199 million announced five years ago.
CalPERS has 250 full-time staff working on the project and will increase the total to 300 in two months. The main contractor, Accenture, has 325 people working on the project, an increase of 120 during the past year.
Last month the CalPERS board approved a one-year extension of its agreement with Accenture to Sept. 13, 2013. The board also was told that operation of the system will be phased in, beginning with 85 to 90 percent of the functions this September.
John Nichols, the Accenture project manager, told the board members they may have noticed a “lot of automobiles” in the CalPERS parking lot in the evening and on Saturdays.
“That is because of the hard work of dedicated men and women up on the fifth floor of this building and other places,” Nichols said. “They are proud of what they are doing and do appreciate your continued support as we work through the heavy lifting.”
The modernization is called the Pension System Resumption (PSR) project because an initial attempt begun in 1995 failed. After delays in the current attempt, CalPERS board members gave Accenture officials a tongue lashing in December 2009.
A “recovery plan” was launched under the new Accenture team leadership of Nichols, who had helped complete a long-delayed state child-support collection system. The CalPERS project director retired and was replaced by Karen Ruiz.
A troubled state computer system is not unusual. It’s more like the norm. As early as 1973, three years before Apple sold its first computer kit, the nonpartisan Legislative Analyst’s Office issued a report on failed state computer systems.
“Many of these efforts have been characterized by cost and schedule overruns, user dissatisfaction and operational problems which have resulted in either major modification or abandonment,” the analyst said nearly four decades ago.
Earlier this month the state auditor warned that FI$CAL, an attempt to create a single financial management system for state government, could be in even more trouble because the top executive and two of his top assistants were leaving.
The plan by the finance department and three other agencies to put budgeting, accounting and procurement on one modern system is already expected to cost $1.6 billion and take 12 years, up from the original estimate of $1.3 billion and eight years.
A computer system linking state courts, once expected to cost $260 million, has been hit with delays and estimates that costs could reach $2 billion. Sacramento County judges called for a halt in spending on the project two years ago.
An attempt to replace the antiquated system that issues state paychecks, begun in 2004 with an estimated cost of $130 million, stalled after $70 million was spent. The contractor for the 21st Century Project was terminated in 2009.
State Controller John Chiang’s office expects a new system, MyCalPAYS, to begin issuing checks in October for a few departments. Others would be added in five waves during the following year.
Nichols led an Accenture team, working with prime contractor IBM, that finally completed a state child support collection system in 2008, two decades after it was authorized. The state paid $1 billion in federal penalties because of the long delay.
Is the CalPERS attempt to consolidate 49 outdated systems into one state-of-the-art system serving 2,700 local government agencies another chapter in the long history of botched state computer projects?
“Yes, we are not within the original timeframe or the original budget, but the difference is we are going to deliver,” said Stephen Kessler, CalPERS deputy executive officer.
The CalPERS board chairman, Rob Feckner, gave Accenture a public tongue lashing in December 2009 after Accenture, given a second extension of the startup date just a month earlier, said it might not be able to meet the new target, September 2010.
“What we have now is totally unacceptable,” a visibly angry Feckner told an Accenture official. As the grilling continued, board member Priya Mathur said: “I’m very angry right now. I’m not satisfied with your answer today.”
Feckner called the Accenture chief executive and board chairman, said Kessler. At the time Accenture was in the news for dropping its sponsorship of golfer Tiger Woods, hit by a serial marital infidelity scandal.
Accenture, with headquarters in Ireland, has about 211,000 employees in 53 countries. Once known as Andersen Consulting, the firm separated from Arthur Andersen a decade before the accounting firm was charged in the Enron scandal.
The Accenture office for state and local government projects in California moved into a building near the CalPERS complex in 2008. The “recovery plan” launched after the December 2009 blowup was jointly developed by CalPERS and Accenture.
When Sacramento staff leaves at the end of the day, the big global firm sends the computer code base to India, where work continues during the night and then is sent back the following day.
It’s a way to “double the productivity” on the project and probably saves Accenture some money, said Dale Jablonsky, who became the CalPERS information technology assistant executive six months ago after 26 years at another state agency.
In addition to the incentive of having to meet several “milestones” in the development of the project to receive payments, Accenture could face “daily fines of hundreds of thousands of dollars” for certain failures, said Jablonsky.
The first CalPERS project launched in 1995 was called COMET or Corporate Online Member Employer Transactions. It handled contracting and enrollment, but was unable to properly manage contributions, payroll and benefits.
CalPERS looked at standard “off-the-shelf” systems around 2000, but concluded that the complex operations required a customized system. The five-year Accenture contract announced in 2006 was for $199 million with a November 1999 startup date.
Now the total cost is said to be $276.6 million, the “go live” startup date is Sept. 19, and the contract has been extended to Sept. 13, 2013, lengthening the warranty period and the payment “holdback” until performance targets are met.
The new plan approved by the CalPERS board last month calls for a startup with 85 to 90 percent of the functions (mainly excluding the legislative and judges systems), followed by a second phase in six months, and a final phase a year after startup.
A CalPERS staff report said the original rate for Accenture system support after the startup date, $135 an hour, was dropped to $98 an hour because the “world economy” and “market conditions” have changed since 2006.
Among other things, the new system is intended to give the 1.6 million CalPERS members better online access to their accounts, streamline the retirement process and reduce the workload for employers.
“I remain hopeful but skeptical,” CalPERS board member J.J. Jelincic told the staff as the changes in the Pension System Resumption project were approved last month. “I hope you prove me wrong.”
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 18 Jan 11