CalPERS rolling out new computer system late and at higher cost
At nearly twice the estimated cost and a year late, a new computer system for the state’s giant public pension fund is scheduled to go live Monday, tracking the contributions, healthcare coverage and retirement benefits for 1.6 million members.
Officials at the California Public Employees’ Retirement System hope the complex $507-million project, dubbed My CalPERS, will work as planned, though they expect start-up problems with software.
“It won’t be perfect on Day 1, but we do have a solid plan for continued improvement,” Karen Ruiz, the fund’s project manager, told the CalPERS board last week.
The effort turned more complicated than anticipated as computer engineers had to find a seamless way to combine the information and the functions of 49 unrelated older computer systems into a single network that could accommodate CalPERS staff, government agencies and CalPERS members, using a self-help feature. That led to the delay and cost overruns of $228 million, CalPERS said.
Such problems have been typical in California’s three-decade history of trying to replace or upgrade computer systems that often depend on antiquated mainframes and ancient programming, such as COBOL from the 1960s.
One venture, dubbed the 21st Century Project, was authorized by the Legislature in 2004 to handle payroll and human resource data. The main contractor was fired in 2007, and the state controller had to start over again. The cost so far has been $185 million, and completion is not expected until 2013 at the earliest. The project was supposed to be completed last year at a cost of $305 million.
CalPERS seemed to be heading in the same direction 17 months ago when the board became alarmed at the growing cost and slow progress. The board excoriated executives of the contractor, Accenture, but extended its contract to October 2012.
At first, CalPERS made some of the same mistakes as other agencies overseeing ambitious computer projects, said Erika Li, a senior information technology analyst with the California Legislative Analyst’s Office.
“They didn’t understand how long it would take,” she said. “Obviously, there were communication issues and misunderstandings between the vendor staff and the state — a mismatch of what we wanted and what we got.”
Since May 2010, hundreds of CalPERS, Accenture and outside consultant technicians have been testing programming and completing readiness checklists.
“We hope it works and expect it mostly will,” said Steve Coony, the state treasurer’s representative on the board. “All the evidence that we’re getting now compared to what we were getting two years ago and even one year ago, before we negotiated the deal with Accenture, looks a lot healthier.”
Indeed, consulting firm KPMG, hired by CalPERS to provide independent oversight and verification, said Wednesday that it had upgraded its evaluation of the project’s readiness from a red flag to a yellow, or caution, flag in four crucial areas.
“In the last month, the project team took steps to address concerns that we identified,” KPMG’s Chris Jasper said.
One of those positive moves, he said, was the creation of a “war room” at CalPERS headquarters to respond quickly to problems as they arise. The system, Jasper warned, “may degrade rapidly after launch” as CalPERS clerks input real data about members’ changing status, retirement and benefits.
Accenture project manager John Nichols predicted that the initial transition and training phase “is going to be a difficult time for CalPERS business users,” including 2,400 employees, other agencies statewide and 3,033 local government groups that participate in the CalPERS retirement system.
“We’ve crafted a system that should take all involved to a better place over time,” Nichols told the board last month. “But it will be several months before it feels that way.”
In an effort to avoid some possible start-up problems, CalPERS and Accenture will roll out My CalPERS in three phases. As much as 90% of all needed functions go live Monday, with a small set scheduled to roll out in six months and the rest in a year.
The difficulties have proved expensive for Accenture, the New York global management consulting and technology services company known for sponsoring golfer Tiger Woods before the athlete was embroiled in a sex scandal in late 2009.
Accenture was forced to absorb costs associated with project delays, said Stephen W. Kessler, CalPERS deputy executive officer for operations. Accenture spokesman Jens Egerland confirmed that the costs exceeded the contract price.