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California’s Payroll Project Debacle: Another $50 Million Up in Smoke

Also: IT projects ablaze at the UN and U.S. Army; USAF and Marin County play with matches again

8 min read

California’s Payroll Project Debacle: Another $50 Million Up in Smoke

Ah, I love the smell of napalmed IT projects in the morning!

Not, though, when they are government IT projects and the wafting odor is from taxpayer monies going up in smoke.  And unfortunately, for past few weeks, the stench of burning government IT projects has been especially pungent.

We start off in California, where after burning through some $50 million, California State Controller John Chiang announced last Friday he had decided to terminate the state’s US $89.7 million contract “with SAP as the system integrator for the MyCalPAYS system, the largest payroll modernization effort in the nation.” The planned 5-phase effort mercifully never made it past the first pilot phase.

Furthermore, Chiang said that the Secretary of the California Technology Agency (CTA)  has “suspended further work until the CTA and SCO [State Controller's Office] together conduct an independent assessment of SAP’s system to determine whether any of SAP’s work can be used in the SCO’s go-forward plan to address the State’s business needs.”

You may remember that Chiang sent SAP a letter last October warning that the project was “foundering and is in danger of collapsing,” and gave SAP one last chance in the form of a demand for urgent get-well efforts from the company. Chiang claimed that there were errors in one out of every three tasks performed by SAP's system, and that there hadn’t been a single pay cycle without material payroll errors occurring.

In Friday’s announcement, Chiang threw in the towel. He said that while he had hoped “for a successful cure to SAP’s failure to deliver an accurate, stable, reliable payroll system, SAP has not demonstrated an ability to do so.” This was especially disheartening, Chiang implied, given that the SAP effort covered only 1300 SCO employees who had “fairly simple payroll requirements.”  There was no way the SAP system could be trusted to support the payroll requirements of the state's "240 000 employees, operating out of 160 different departments, under 21 different bargaining units."

SAP said in response to the news of its contract termination that it was “extremely disappointed in the actions. SAP stands behind our software and actions.... SAP also believes we have satisfied all contractual obligations in this project.”

All of this, of course, suggests that when the napalm smoke clears, a date in court will be in the offing. Chiang as much as said so in the announcement: “The SCO will pursue every contractual and legal option available to hold SAP accountable for its failed performance and to protect the interests of the State and its taxpayers. This includes contractually required mediation and, if necessary, litigation.”

An SCO spokesperson called the project’s performance “frightening,” but what must be really frightening to California taxpayers is the continued inability of the state to manage the acquisition of its IT projects. So far, nearly $254 million has been spent so far in two unsuccessful attempts to get a state government payroll system in place, the LA Times reports. If SAP fights instead of settles, it would at least be a public service, exposing the depth of California’s IT project risk mismanagement.

The upshot is that California will continue to use its decades-old Cobol-based payroll system until it figures out what to do next. And to help it figure that out, the SCO has—in the best tradition of government—set up an IT Procurement Task Force. Whenever in doubt, form a committee.

I hope the Task Force members have strong stomachs; the stench of IT project failure coming out of California is of the mephitis variety.

UN’s Umoja Project Failure of Management

If you see another cloud of smoke on the horizon, it's not Vatican, announcing the new pope. It's too early for that, and the cloud is way too large. It's the UN’s troubled enterprise resource project dubbed Umoja (or “unity” in Swahili) that is supposed “to equip the organization with twenty-first century techniques, tools, training and technology.” Fox News reported on Monday that it's going to burn though a lot more money before it is completed, assuming it ever is.

The project’s cost has climbed from an original US $286 million in 2008 to $316 million in 2009 and now looks like it will reach at least $348 million by 2015, “with three years still to go after that,” Fox reports. The completion dates have climbed with the dollars: The project was supposed to be delivered in 2012, but the current forecast go live date has slipped from 2015 to now December 2018. The likelihood of achieving that date is probably close to zero.

According to the Fox News story, even after promises in 2009 to follow accepted IT project management practices in the light of project problems that had already surfaced back then, UN auditors have found the project does not have “systems in place that could link the budget to milestones and deliverables.” In fact, the project management team told what had to be startled auditors that “linking the budget milestones and deliverables was not a requirement under the United Nations system accounting standards.”

The auditors must have felt that they had to go back and reread what their job description was after that revelation.

Next, the auditors found that the Umoja project team has not yet planned on how it will move legacy system data into the new system; auditors estimate this effort alone could tack at least another $110 million onto the project. Nor has the project team started to fulfill another promise made back in 2009 of ensuring “effective and ongoing education and training in both the new system but also all the new processes and standards that are going to be required.” The approach that the project team appears to have decided on, the auditors discovered, is to roll out the new system and hope its every feature and function is self-evident to the user.

I wonder what the Swahili word is for unmitigated IT project conflagration.

US Army Business Systems Implementations Worry DoD OIG

There's an IT disaster cloud forming over the Pentagon as well, and it may eventually dwarf the others. The Department of Defense Office of the Inspector General published a report last week that shows grave problems in the Army Office of Business Transformation (OBT).

In a review of the OBT business systems information technology strategy that is supposed to guide the implementation of Army IT systems worth some $10.1 billion over their life-cycle, the OIG found that the OBT’s overall strategy “did not include specific ERP [enterprise resource management] implementation milestones and performance measures for accomplishing the Strategy’s goals, [for example] including a plan for using ERP capabilities, or clearly define the Army Enterprise Systems Integration Program’s ERP integration role or milestones.” Sound familiar? It's as if OBT had decided to follow the UN's IT project management best practices.

The reason for the lack of specific ERP implementation milestones and performance measures, the OIG report stated, was that “OBT officials [were too] focused on near-term milestones.” OBT officials must not have been focusing too hard, however, given the OIG also found that “although OBT officials included 25 implementation tasks in the Strategy, with due dates of May 2011 and August 2011, the Army did not complete 16 of these tasks as of March 2012. This occurred because OBT officials did not adequately monitor the development and completion of the implementation tasks.”

Army leadership promised the OIG that it is its “intention” to start practicing IT project management 101, but things might change because “Army business system strategies and processes are changing rapidly and frequently due to both internal and external influences.”

In other words, the OBT’s intentions might soon be OBE (overtaken by events).

USAF ECSS Billion Dollar Debacle: We Don’t Believe in Accountability

Last Saturday, NBC Nightly News ran another one of its “Fleecing of America” segments on US governmental waste. This episode (video) involved the burnt-out wreck of the USAF Expeditionary Combat Support System, one of my favorite IT project debacles—it has managed to scorch through $1 billion with absolutely nothing to show for it. While the NBC News segment didn’t have much new to say, it did highlight the facts that: (a) the primary contractor CSC is still insisting that “it provided the Air Force with capabilities and assets to deliver the system of the future and that taxpayers got their money's worth” for the billion dollars spent, and that (b) no one will be fired or even punished over the debacle.

When Sen. John McCain was asked by NBC reporter Lisa Myers, “Should people be fired over this?”  McCain answered, “Sure. Sure they should be. Will they be? No.”

In fact, Brig. Gen. Kathryn J. Johnson (who took over the project in May 2012) made it very clear that firing or even demoting anyone for blowing a billion dollars of taxpayers’ money was out of the question. In an interview with the Federal Times last November, when she was “asked if anyone has been fired or demoted for the program’s failure, Johnson said no. ‘We didn’t feel it was necessary to do that,’ she added.”

Maybe NBC Nightly News might want to interview Gen. Johnson and ask why the $%#$ not? And, at what point should some heads roll? Two billion? Ten billion? Or is managerial incompetence just part of the job description?

The Wall Street Journal ran a story last week on the USAF’s replacement for ECSS, which is supposed to be implemented by 2017. Not surprisingly, the Gen. Johnson refuses to state how much this replacement system will cost, but she does claim that it will cost less than ECSS.

My question: Is that cost in comparison to the original $668 million cost of ECSS or the nearly $8 billion  that it would have taken to complete ECSS to its original specifications?

Marin County Settles Lawsuit and Ensures It Can’t Talk About Its Own Incompetence

Did you think we were done talking about failed California government IT projects? California and SAP—yes, SAP again!—have an apparently inexhaustible supply of them. You may recall one from 2009, involving Marin County’s MERIT (Marin Enterprise Resource Integrated Technology) system. The county had originally thought in 2005 that the MERIT system would cost it US $12 million, but  the county ended up spending nearly $30 million over four years in a vain attempt to get the system to meet the county's original specifications before finally giving up.

In 2010, the county sued consulting company Deloitte Consulting LLP for $30 million along with unspecified punitive damages over what it claims was a botched SAP ERP implementation. It also named SAP and former county auditor Ernest Culver in another $90 million lawsuit. In that suit, Marin County claimed (pdf) that the project vendors had improperly influenced Culver to act favorably towards them by "approving Deloitte’s deficient work on the project, approving payments, and causing Marin County to enter into new contracts with Deloitte and SAP Public Services, Inc."

Well, after spending $5 million on its lawsuit in which the judge threw out many of the Marin County’s claims, the county and Deloitte reached a settlement last month in which the county will receive $3.9 million from Deloitte, and nothing from SAP and or Culver.  

According to the Marin Independent Journal, which has been following the lawsuits since the beginning, the terms of the settlement are “strictly confidential" and can't be discussed in any way, shape or form. The only thing the county would say in relation to the settlement was that it "reduced the total fees paid to Deloitte Consulting and spares the taxpayers the continued expense of litigation. It does not constitute an admission of wrongdoing by either party.”

When the Journal asked the Marin County Counsel about whether the “taxpayers got a raw deal [by] spending $5 million to get a $3.9 million settlement,” the Counsel would only say, “I can't say anything about what you just said.”

How very convenient. The confidentiality agreement allows Marin County managers to keep quiet on how they also colossally mismanaged the project.

As far as I can tell, no one has been fired or demoted over in this IT project debacle either. In fact, according to another Journal story, many of the same folks are working on the plans for the next attempt. But not to worry, County Administrator Mathew Hymel told the Journal, “When we fall short, our goal is to learn from it and do better next time.”

Of course, what those lessons might be can't be discussed—they're confidential, you know.

UK Government CIOs: ERP Systems Don’t Deliver

If you're starting to think that along with the specific incompetencies of all these IT organizations, there might be a fundamental problem with enterprise resource projects in general, you'll be happy to find some confirmation of that coming out of the U.K. An article in Information Week in late January that reported that a survey of 100 U. K. public CIOs and other senior IT and financial managers indicated that, “63 percent of [the] respondents said their ERP system hasn't met their expectations in at least one area. It also suggests that more than 33 percent of respondents have spent more than they had expected on their ERP implementation, 20 percent are disappointed by how their platform met their needs out of the box, and only 20 percent would be prepared to go through a similar ERP project a second time.”

The survey, Information Week stated, was carried out by an independent market researcher but paid for by a local U.K. ERP supplier Advanced Business Solutions.

Those 20 percent who indicated that they would be prepared to go through a similar ERP project a second time are either very good IT project managers, or masochists. Our advice in either event: Try to stay upwind of the stench and smoke from the failed projects started by those project arsonists playing with matches all around you.


Photo: iStockphoto

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