WASHINGTON, DC — Senate Governmental Affairs Committee Chairman Susan Collins (R-ME) and Ranking Member Joe Lieberman (D-CT) today released the findings of a months-long Committee investigation into a failed computer-programming project that wasted $36 million in federal retirement assets. The investigation examined the problems surrounding the four-year contract between the Federal Retirement Thrift Investment Board (FRTIB) and American Management Systems (AMS) to develop a record-keeping system for participants and beneficiaries of the Thrift Savings Plan (TSP). The software developed by AMS — over-budget and behind schedule — proved to be almost useless, forcing the FRTIB to enter into a new contract with another company in 2001 and spend an additional $33 million to develop a new system.
In a letter of the findings sent to FRTIB Chairman Andrew Saul, Senators Collins and Lieberman outlined where major mistakes were made in the project and offered recommendations to guard against repetition of such costly errors in the future. The Senators wrote, “[w]hile it is clear that AMS failed to produce a workable system and repeatedly missed its own deadlines and cost estimates, the Board should have taken more steps early on to prevent this failure and to protect plan participants and beneficiaries from paying the tab.”
In 1997, the TSP Board of Directors contracted with AMS to implement a new record keeping system that would help TSP employees better record and track retirement contributions of federal employees and to provide federal employees and retirees with online access to their retirement accounts. The work was scheduled for completion by May 2000 at a total estimated cost of $29.7 million. However, after four years of work, repeated delays and $65 million worth of AMS and internal charges, AMS was unable to implement a working system.
As a result, the Board was forced to hire a new contractor — Materials, Communications and Computers, Inc. (MATCOM), which completed the project in 18 months for a total cost of $33 million. MATCOM essentially had to start from scratch.
In their letter of findings to Chairman Saul, Senators Collins and Lieberman pointed out that both AMS and the TSP Board have largely avoided accountability for their share of the project’s failure. After Committee staff interviewed witnesses from both the FRTIB and AMS, reviewed thousands of documents produced by both parties, and studied reports prepared by outside observers, the Senators reached the following conclusions:
— Much of the time and money the Board spent on the project from 1998 to 2001 was wasted. TSP participants and beneficiaries should have received the benefits of a new record keeping system beginning in May 2000, but the new system was not implemented until the summer of 2003. TSP plan participants and beneficiaries had their retirement accounts debited $36 million dollars to pay the costs of the failed contract.
— Responsibility for wasted time and money rests with both AMS and the TSP Board. While it is clear that AMS failed to produce a workable system and repeatedly missed its own deadlines and cost estimates, the Board should have taken more steps early on to prevent this failure and to protect plan participants and beneficiaries from paying the tab.
— AMS deviated significantly from the original design, causing repeated delays and cost overruns. AMS deviated from its original project plan, drafting source code that was unnecessary and unworkable, which ultimately derailed the project altogether. The TSP Board failed to recognize these major changes, and thus did not prevent them.
— The TSP Board and AMS failed to sufficiently staff the project. Staffing problems contributed to the Board’s failure to better manage the contract and AMS’ failure to complete the project.
To prevent future failures of similar projects, Senators Collins and Lieberman recommended that qualified staff be assigned to oversee such projects; that independent experts should be consulted to prevent the TSP Board from becoming too dependent on one contractor; and that the Board use better risk management practices and contract structures.
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