State feeling hijacked over computer update

Firm seeks another $20 million to finish job; deal in jeopardy

April M. Washington, Rocky Mountain News

Published December 7, 2005 at midnight

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The Colorado Department of Labor accused technology giant Accenture on Tuesday of trying to hijack the state for nearly $20 million more to complete an update of one of its computer systems.

Rick Grice, the agency's executive director, threatened to pull the plug on the deal, worth $40.8 million, if the New York-based company and the state cannot come to terms by end of the month to salvage the project.

"Obviously, this is unacceptable," Grice said. "Accenture is in breach of contract. We're involved in intense negotiations over the next two weeks. My sense is if we don't get anything acceptable, than we are done."

The state may have little choice but to work overtime to salvage the deal. Accenture has already been paid $35.7 million to update the system the Labor Department uses to track unemployment benefits, officials said during a briefing to the Joint Budget Committee.

According to a labor department report, Accenture said in June that it needed another $19.9 million to finish the project. In August, the company backed off that price and presented a revised proposal, seeking $9.8 million to complete the contract by November 2006, according to the report.

"We have made no additional payments to Accenture," Grice said. "They've presented bills to us, but we have refused to pay. That was our first serious shot across the bow to Accenture that we're not going to take this anymore."

Accenture dismissed claims it's attempted to charge the state more money to finish the system.

Jim McAvoy, Accenture spokesman, said the two previous proposals were based on additional upgrades the Labor Department wanted to the system that were not included in the original deal.

The company presented six options to the department, including a proposal to finish the project at no cost to the state, he said.

"About 30 days ago, we put options on the table to address different solutions, including an offer to complete the work at no additional cost," McAvoy said. "We are anxious and hopeful that the state will accept our zero-cost option."

Labor is not the only Colorado department to complain about Accenture.

Last week, the secretary of state announced she was pulling out of a $10 million contract with Accenture to build a new computer system to track voter registration.

The secretary of state dumped the contract despite already having spent $1.5 million.

Dana Williams, a spokeswoman for the secretary of state, said the office is in discussions with Accenture to try to recoup the $1.5 million.

"The contract allowed a way for us to exit if the product wasn't up to snuff," she said. "If they didn't meet deadlines, it allows us an opportunity to get our money back."

It wasn't immediately clear Tuesday if the Department of Labor's deal with Accenture provided for a similar exit plan and way to recoup the tens of millions already spent on the project, which is not expected to go online until 2007.

Efforts to convert both computer systems and bring them online have been beset with problems, including missed deadlines and serious programming flaws, state officials said.

The latest problems with state computer conversions come just a year after the bumpy rollout of the Colorado Benefits Management System, a system developed by another major technology firm, EDS, linking a vast number of welfare and medical benefit databases.

The labor department deal with Accenture, initially reached in April 2002, calls for the creation of a system that would unite two distinct systems that track unemployment taxes and benefits in the state, and the system was supposed to be online in 2004.

Some state lawmakers criticized the Department of Labor for not taking steps sooner to address problems, many of which began to delay the project more than a year ago.

"The problems were apparent in the last year," said Rep. Bernie Buescher, D-Mesa County. "I'm bothered by that. I want you to know I'm bothered by that."

During the two-hour JBC briefing, department officials acknowledged that the multimillion-dollar project hit its first major snag in 2004 when Accenture fired a subcontractor responsible for updating a key component of the computer system, causing delays and missed deadlines, among other problems.

Grice said he inherited the contract headaches when he was named executive director earlier this year.

Nevertheless, he said the department made payments to Accenture as it completed various stages and phases of the project.

But the critical components of the system are not functioning, he said, leaving the state in a position of deciding whether to stick with Accenture or strike a deal with another company.

washingtonam@RockyMountainNews.com or 303-892-5086

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