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Botched Programming Contract Wasted $36M

The Federal Retirement Thrift Investment Board (FRTIB) wasted $36 million on a computer programming contract with American Management Systems (AMS), according to a U.S. Senate investigative report released Wednesday.

The investigation examined the problems surrounding the four-year contract between the FRTIB and AMS to develop a record keeping system for participants and beneficiaries of the Thrift Savings Plan (TSP). According to the report, the software developed by AMS was over-budget, behind schedule and "proved to be almost useless."

As a result, the Board was forced to hire a new contractor, Materials, Communications and Computers (MATCOM), which completed the project in 18 months for a total cost of $33 million. TSP plan participants and beneficiaries had their retirement accounts to pay the costs of the failed contract.

"[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," Senators Susan Collins (R-Maine) and Joe Lieberman (D-Conn.) said in a letter to FRTIB Chairman Andrew Saul.

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.

The Senate Governmental Affairs 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.

"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 Collins-Lieberman letter states. "The TSP Board failed to recognize these major changes, and thus did not prevent them."

To prevent future failures of similar projects, 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.