California fires contractor on troubled computer project

Controller John Chiang
(Rich Pedroncelli / Associated Press)
<i>This post has been updated. See the note below for details.</i>

SACRAMENTO -- The company in charge of one of California’s biggest and most troubled technology projects is being fired after testing revealed deep problems with the system, state officials said Friday.

The move is another setback for the 21st Century Project, a $371-million overhaul of the state government payroll system that has fallen years behind schedule while tripling in cost.


Controller John Chiang’s office, which oversees the project, will now try to recoup more than $50 million already paid to the contractor, SAP Public Services.

Jacob Roper, a spokesman for the controller, said the state will perform an autopsy on the project and determine what can be salvaged. Right now there’s no timeline for finishing the upgrade.

“Moving ahead with this at all would be completely imprudent,” Roper said. “This absolutely had to stop.”

SAP is the second contractor to be fired from the project, which was authorized by lawmakers in 2005 and has cost $254 million so far.

[Updated, 12:20 p.m. Feb. 8: A spokesman for SAP said the company was “extremely disappointed” that the controller terminated the contract.

“SAP stands behind our software and actions,” Andy Kendzie said in a statement. “SAP also believes we have satisfied all contractual obligations in this project.”

Kendzie did not directly address the controller’s concerns about errors during testing, nor did he say whether the company would fight the state’s efforts to recoup payments.]

The 21st Century Project is intended to improve and integrate the state’s divergent and outdated payroll systems. Problems were highlighted by the Los Angeles Times in December, soon after state officials sent a letter to SAP saying the project was “in danger of collapsing.”

The system was tested on 1,300 employees, with disastrous results, Roper said.

Not only were paychecks occasionally sent to the wrong person for the wrong amount, he said, the system canceled some medical coverage and sent child-support payments to the wrong beneficiaries.

Roper said the state also had to pay $50,000 in penalties because money was sent incorrectly to retirement accounts.

“State employees and their families were in harm’s way,” he said. “Taxpayers were in harm’s way.”

Overall, one out of every three tasks performed by the system was handled inaccurately, according to the controller’s office. The error rate for the state’s current, aging system is .29%, Roper said.

SAP was hired in February 2010. The previous contractor, BearingPoint, was fired in January 2009 after it had been paid $26 million. The state was able to collect $2.8 million in insurance payments and keep completed work.


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