Weak contracts, lack of expertise hurt tech projects, officials say

SACRAMENTO -- California officials didn’t include stricter rules in the contract for overhauling the state payroll system because they feared scaring companies away from the complex project, officials told a panel of lawmakers Thursday.

The project ended up skidding off the rails and the state fired the contractor, SAP Public Services, in February. By then the state had already spent $254 million out of the $373 million budgeted for the overhaul, and the new payroll program failed repeatedly during testing.

Lawmakers met Thursday to review the botched project, questioning legislative analysts, members of the controller’s office and the head of the Department of Technology about ways to avoid such failures in the future. California routinely struggles to improve its aging computer systems.

“The size of our projects is not likely to get smaller,” said Sen. Richard Roth (D-Riverside), who chaired the budget subcommittee. “So we need to get better.”

Sen. Norma Torres (D-Pomona) said she’s concerned the state was dumping money into a troubled technology initiative while cutting social services at the same time.

“It is very painful for me to sit here today and acknowledge a quarter billion dollars might have been wasted,” she said.

Only three companies bid to be the lead contractor on the state’s payroll project, and SAP was hired in 2010. Carlos Ramos, director of the Department of Technology, said other provisions could have been inserted in the contract to tie payments to the project’s progress.

Officials said they were beefing up their contracting procedures to provide stronger scrutiny to companies working for the state. A task force appointed by Controller John Chiang and Gov. Jerry Brown released its own report on Thursday, outlining recommendations for better management of technology initiatives.

The payroll overhaul was not the only project that stalled earlier this year. A $208-million upgrade at the DMV was cut short because little progress was being on half of the initiative.

“Many California state software-development projects exceed their cost and schedule estimates,” the report said.

Another issue raised in the hearing is the state’s reliance on contractors. Jim Lombard, the chief administrative officer at the controller’s office, said the state often doesn’t have the expertise to second-guess the companies hired to do the work.

“It’s a little bit bothersome we can’t do our own evaluation,” Roth said. “We rely on the vendor telling us whether they can do the job.”

The payroll initiative, known as the 21st Century Project, has continued to cost the state -- $20 million has been spent since SAP was fired, according to the controller’s office. Officials are still trying to clean up errors that occurred when the upgrade was tested last year.

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Twitter: @chrismegerian