THE COST OF POOR PLANNING
Philadelphia's city controller, Jonathan Saidel, didn't mince words in his audit of one troubled school system technology project. Taxpayers underwrote a new computer system for financial management, human resources and payroll that was "inefficiently procured, wastefully way over budget and still doesn't do many of the things it was intended to do," Saidel wrote.Under the 1998 contract with American Management Systems, the system was supposed to cost the school district $15.6 million. As of this past October, the cost had bloated up to $36 million. And school district officials had not figured out what future enhancements or additional services the system might still need.
In Saidel's view, the reasons for the cost overruns were clear. They didn't lie with the contract but with the schools. The school district's poor planning resulted in some 300 changes to the system after the contract was signed. "There were so many change orders," Saidel says. "The personnel involved in the RFP never talked at great length to those who use the system."
Saidel is on an auditing tear in Philadelphia, setting his sights on information technology because he fears the city is wasting millions of dollars. But Philadelphia is by no means the only place where auditors and outside consultants looking to unearth problems with government technology projects are hitting paydirt.
`NICE ROUND NUMBERS'
Back in 1997, the King County, Washington, council asked for a quick audit of the Department of Information and Telecommunications Services. The auditor's office got that first examination done quickly enough but found a number of issues that warranted two more in-depth investigations.A look at a financial computer system found that planners had done an inadequate job of determining costs, says auditor Harriet Richardson. For example, project planners put down dollar amounts for hardware but never spelled out what the money would buy. When pressed on what was behind their "nice round numbers," they had vague answers. In several cases they estimated a different cost for the same employee position. And on contingency costs for unforeseen problems, estimates ranged from zero to 70 percent of the total project cost, Richardson says. "I don't know how they came up with what they did."
On a wide-area-network project in April 1994, a design team report estimated the project would cost $3.85 million, but the county ended up spending more than $10 million. The bulk of the extra costs went for an e-mail system that had not been in the original estimates. "Some things that clearly were expected to be part of the system were omitted from the costs," Richardson says. The WAN project, the audit report states, "was a functional success but a financial failure by industry standards."
Richardson recommends more review upfront, and she believes that auditors could come in earlier to see if costs make sense before approval is granted for projects.
NOT EQUIPPED FOR COMPLEXITY
The Colorado Department of Revenue might have benefited from an early look by an auditor at the plans for a new tax-processing system. The department started designing and developing the $12 million project in-house in 1994. Originally scheduled to be completed in September 1998, it was pushed back a year and finally was stopped in its tracks.In January 1999, an outside consultant decided that every aspect of the project needed to be changed if it were to be viable. And an auditor's report from March 2000 said the halted proj-ect "raises serious concerns about the state's management of complex, costly information systems projects." For instance, the department spent $6.4 million on contract resources without requiring any products or deliverables, the audit found. Nor were there any written agreements on deadlines, deliverables or quality of work, even as the department contracted with 15 firms.
The state managed to salvage only about $1 million of its investment in the project. Moreover, the audit found that the department was just not equipped to take on such a complex project and recommended that the department limit its IT work to smaller projects and systems maintenance.
Republican state senators who had requested the audit were plenty peeved with the outcome. "We spent $12 million, and we could account for $1 million of it," says Senator Jim Cosgrove. "We have absolutely nothing to show for our money."
Peeved wouldn't be the word to describe the reaction of some Philadelphia school district employees to one of the troubled payroll system's glitches. A few months ago, there was a rash of phone calls from district workers frantic about problems with direct deposits. Not only were they not getting their paychecks but money in the amount of their checks was being taken out of their accounts. "The thing with technology," Saidel points out, is if it goes haywire, "it can destroy you."
