A massive computer upgrade at CalPERS has run millions of dollars over its original budget and missed its completion deadline – and is in danger of falling further behind schedule.
CalPERS officials’ frustration over the delays exploded publicly Wednesday.
Furious board members scolded a representative from New York-based consulting firm Accenture, the lead contractor on the project, after hearing warnings of possible new setbacks to the project’s timetable.
“You’ve put this board and this system’s reputation at stake,” CalPERS President Rob Feckner told Accenture’s Tom Hartman during the pension fund’s regular board meeting. “If our reputation is at risk, so is yours. … What we have now is totally unacceptable.”
The computer overhaul, announced in late 2006, was supposed to cost the California Public Employees’ Retirement System about $278 million. The budget has been increased to $361 million. Most of the cost increases are due to additional features sought by CalPERS after the contract was signed, said pension fund spokesman Brad Pacheco.
On Wednesday, fund officials were focused on project delays. Just last month, CalPERS agreed to push the completion date to next September, a five-month delay. Now that could be in peril.
Hartman, an Accenture managing director, told the board that Accenture has “experienced serious problems with system tests” in the past few weeks.
He said Accenture won’t know until April, after some additional testing, if the September deadline is realistic. “It’s very embarrassing,” he said.
Pension fund officials seized on his statement. Priya Mathur, a CalPERS board member, told him, “I have no faith that you’ll be able to deliver this in September.”
Hartman told the board that 25 additional Accenture staffers have been put on the job in order to catch up. And, in an interview, he said Accenture’s chief executive, William Green, has been alerted to the problems with the CalPERS job. “We are putting every effort in,” he said.
Hartman referred additional questions to a corporate spokesman, Peter Soh. Soh issued a statement pledging Accenture’s commitment to the project.
“This is a large, complex consolidation project and it is critical to complete extensive system testing before rolling it out to California public employees,” Soh said. “CalPERS and Accenture are working together to make that happen.”
The computer issue is the latest problem to hit CalPERS, which is wrestling with huge investment losses from last year and a possible influence-peddling scandal involving placement agents – middlemen hired by private-equity firms to secure investment dollars from public pension funds. One such agent, former CalPERS board member Alfred Villalobos, has earned more than $60 million from CalPERS deals in the past decade.
Other computer snafus have popped up elsewhere in state government recently. The Bee has reported that spending on an overhaul of the state’s court system has grown from $260 million to $394 million – and could go much higher.
The tardiness of the CalPERS computer project has already created organizational problems for the fund, and a further delay would be even more harmful, said Teri Bennett, CalPERS’ chief information officer. For instance, the project is causing some delays in open enrollment for health insurance, she said.
Bennett said she’s “shocked” at the prospect of further delays in finishing the computer overhaul.
“We negotiated in good faith … to come to a new schedule, a new plan,” she said.
She said CalPERS is insisting that Accenture get the job done by September.
“I think they have the wherewithal to fix it,” she said.
The project is designed to enhance the pension fund’s “My CalPERS” system, which lets members access their accounts via the Internet. It would consolidate dozens of outdated computer systems into one.
Accenture, as lead contractor, was originally to be paid $199 million. Its fee has now grown to $250.9 million, mainly to cover enhancements that weren’t in the original contract but were subsequently requested by CalPERS, said pension fund spokesman Pacheco.
He said “they’re not getting any more money” because of the delays.