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

“[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

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.

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