Computer system presents challenge
CHARLESTON, W.Va. - West Virginia is in the first months of an eight-year, $98 million effort to change the nuts and bolts of state bureaucracy.
While it will mostly escape public notice beyond the halls of government, the state is working to eliminate scores of far-flung software programs. Instead, West Virginia government is working on one computer system to manage state's accounts, personnel and assets. The goal is to keep better track of taxpayers' money and provide unprecedented levels of government oversight.
The contract, one of the largest in state government, was awarded late last year to CGI, a Montreal-based technology company that's doing similar projects in other states.
Just signing the contract was a multi-year undertaking and it's not nearly finished. The system will come online in four main stages starting in fall 2013.
As that happens, the state is going to have to train an untold number of state employees how to use it.
State officials hired consultants to make sure the computer system was a good idea. The Legislature hired a consultant of its own to do a review before agreeing to foot the bill.
The bidding process started in February and didn't end until December after two rounds of analysis. More than 30 people advised the state on how to proceed. The state asked companies to meet 12,310 specific requirements.
Five companies submitted more than 10,000 pages of technical proposals for review. Company representatives and purchasing division staffers traded hundreds of pages of emails, including some emails from other bidders that sharply questioned the ability of CGI to do what it says it will.
The computer system is known as the Enterprise Resource Planning system. It has two nicknames: ERP and "WV OASIS," which stands for "Our Advanced Solution with Integrated Systems."
The ERP even has its own governing structure that was established by law. The governor, auditor and state treasurer are on a three-member board that oversees the project. A sixteen-member steering committee reports to them.
All that because the state hopes it can save money by combining numerous far-flung computer programs into one.
The state currently has one computer system that agencies use for some billing, but several years ago the state began to think that system wasn't good enough. The current program, called Financial Information Management System, or FIMS, is nearly a quarter century old. Before that, the state used IBM Selectric typewriters to help keep its books.
An analysis by Unisys, a technology consulting firm, said in order to do best practices, the state needed "transform their financial systems, processes and organization."
One sign the software may be sorely needed was an audit last year that found the state Department of Environmental Protection had an accounting system that wasn't able to accurately track more than $19 million flowing through the agency.
So, there were three choices: keep doing business as usual, upgrade FIMS or get a whole new system. Upgrading would require extensive time and money and be "very high risk," Unisys told the state.
Already, the ERP is going to cost more than first thought.
In 2008, the state's top technology official thought it would cost on the "high end of the $40 to $60 (million) estimated range," according to a report Boston-based consultants Wolf & Company gave to the Legislature.
When the first round of bids were opened last summer, two companies were disqualified and three remaining bids ranged from $80 million to $173 million.
Global computer giant IBM and Morris Plains, N.J.-based Cherry Roads both submitted proposals that failed to meet the state's rigorous technical demands.
Then the state put the three remaining companies through another round of bidding to clarify some questions and to get a best and final offer.
Finally, the state settled on CGI's $98 million bid during the second round of bidding. About $13 million of that is just licensing fees for software.
But there questions about the initial vast disparities during the first round of bidding.
In a July 2011 letter before the second round of bidding, one of the other bidders, Accenture, worried that CGI could not possibly do its work for the rate it bid.
At first, CGI said it could do the job in 359,00 hours, while Deloitte said it would need 820,000 hours and Accenture said it needed 740,000 hours, according to an analysis by Accenture of the bids.
"Staffing the WV ERP project with people compensated at entry level labor rates, combined with the seriously insufficient staffing noted above, leads to errors, delays and on the job learning at the expense of the state," Accenture said before the final round of bidding.
In the second round, CGI said it would need 514,000 hours to complete the project at an average rate of $118 an hour.
By contrast, Accenture needed 20,000 more hours -- 533,000 hours -- at $164 per hour. At the high end, Deloitte committed to 622,000 hours at $144 per hour.
After CGI won the contract in mid-December, Accenture again complained, this time about the way the bid was judged by the state.
"In particular, we are confused and troubled by the inconsistent and arbitrary nature of the scoring," a company executive wrote to the state purchasing division. "As a result, we strongly request that the State redo its scoring.
But that letter wasn't considered a formal protest by the purchasing division.
State acting Secretary of Administration Ross Taylor said the state came away satisfied with CGI's bid and ability to do the project. He said the low rate was a sign of CGI's commitment.
"To me all that really indicates is that CGI really wanted the job," he said. "We weren't necessarily going to question why they were offering such a low rate.
"As a result, it's up to us to manage the project to make certain that, No. 1, they do give us the staffing that they won and then No. 2, that they don't come back with a lot of change orders and things, trying to increase their cost, trying to increase their monies they receive from us."
Likewise, the state's ERP project manager, Todd Childers, said the state thoroughly investigated all of the different companies' accusations and the state was comfortable with its review before the contract was awarded.
Childers said the state is very comfortable with CGI's staff.
"We did not feel that had any merit in terms of less senior staff," he said. "Quite the contrary, we think we got a more senior, more experienced bid by CGI than the others."
Asked about outsourcing or hiring less experience to hold down rates, Childers said, "I don't see any evidence of any negative things they are doing to keep their rates down."
The state's bid allowed 3 of 18 types of technology work to be done outside the United States, but Childers said the vast majority of people from CGI are working in Charleston at the state-owned Lottery headquarters building. He said the board was "very sensitive" to having work done outside the U.S.
Like many consultants, some CGI staffers travel in on Monday and leave on Thursday, Childers said, although he added that some people have moved to Charleston.
The state has also taken measures to protect itself should something go wrong.
The contract allows the state to withhold up to 15 percent of the money it owes CGI at different stages of the contract until state officials are satisfied the company has met different benchmarks.
That method, known as a "retainage," differs from another method states use to guarantee they will get good work. At times, states ask companies to put up bonds.
Earlier this month, legislative auditors took a look at a state Medicaid computer contract. The auditors surveyed other states who have similar Medicaid computer contracts and found about half the other states required some kind of bond from technology companies who did Medicaid work.
Childers said consultants told the state that 5 to 10 percent retainage was normal in the industry. As a result, he thinks the 15 percent withholding is good insurance.
"Even our consultants told us that was extremely high retainage in the industry," Childers said during a joint interview along with Taylor.
Software and staffing
CGI, unlike other companies, makes most of its own software. That might have pluses and minuses for the state.
Some companies take complex off-the-shelf software from companies like Oracle and modify it and install it for states. CGI uses some of that software, but also creates much of its product from scratch.
That has several long-term implications.
First, Taylor said it makes CGI more accountable for its work because CGI can't blame other people's software for causing problems.
"CGI, they are going to be pointing at themselves, basically," Taylor said. "Whereas Oracle could blame Accenture, Accenture could blame Oracle and not actually take the full responsibility. CGI, it's their software; they implement their software."
Childers also said it's an advantage to be able to point the finger at CGI and CGI alone.
"We like the concept - our consultants called it the 'one-throat to choke,'" Childers said. "Our vendor doesn't like that, they prefer the 'one back to pat.'"
But using CGI's proprietary software does limit the number of outside people who can look under the hood and know what they see. In other words, the state is partially locked in to dealing with CGI for years to come.
"There is a flipside to that, yes," Childers said. "You're going to be dealing primarily with CGI."
But officials hope that has its own upside: state employees who are trained on CGI's software are less likely to get poached by the private sector, where CGI software is less common, though CGI has a good foothold in the public sector.
The state has had to deal with private companies coming in and taking away people the state has trained. When that happens, the state has essentially helped train somebody so they can leave government with their state-funded technical knowledge. Using less widely-used software could hamper that.
"Our apprenticeship is more limited than what it would be if we went with one of the others," Taylor said.
Training state workers to use the new software will also be its own ordeal.
In the end, Taylor said the ERP would make things smoother because employees who transfer from one agency to another will be using the same software. Now, a person going from DEP to the Department of Natural Resources may have to learn a totally new computer system to do the exact same job they had before. That will end once everybody is using the same system.
Right now, the state is using more than 100 different accounting and management programs. The ERP will replace most of them, although some agencies will keep highly specialized programs, like the transportation department's bridge and pavement management system.
But, to get there, the state will need to train everyone to use the new system. That will start at the top and work its way through to agencies. That will have its own cost.
"There is an element of state cost that has not been quantified," Childers said.
CGI's contract runs for eight years. Most of the system will be up and running by fall 2014, but there's a whole period afterward when CGI will remain on the job to make sure the system is running and running smoothly.
The financial portion of the system is expected to be online by October 2013. The system will start managing human resources and payroll by January 2014. The Department of Transportation should be fully online in summer 2014 and the portion of the software to manage real estate will be up and running by fall 2014.