Tech deal bytes taxpayers
5/13/2001COLUMBUS - The web site for Chicago-based Accenture calls OhioWorks.com “a glimpse of the 21st Century electronic government.”
The nation's largest technological consulting company, which earned more than $10 billion last year, describes how the Internet “portal for the state of Ohio” was supposed to work, matching jobs with potential workers and tracking employment trends.
But Accenture, formerly Andersen Consulting, doesn't mention that Ohio Works doesn't work - at least not to the state's satisfaction.
The price tag for Accenture's Ohio Works contract, awarded in 1997 and expanded and renewed since - without competitive bidding - has reached $51 million.
Ohio was dragged kicking and screaming by the federal government into replacing its 88 county-run child support collection and disbursement systems with one automated, statewide system.
After missing federal deadlines and paying $43 million in fines, the last county went online Oct. 1.
The largest of four technology consultants setting up the $300 million system is American Management Systems, Inc., based in Fairfax, Va., with 9,000 employees nationwide. Since 1996, the price tag for AMS involvement has surpassed $62 million.
Job and Family Services - a $10 billion-a-year agency overseeing welfare, Medicaid, job training, child care, adoption, unemployment compensation, and other federal and state programs - is by far the largest consumer of outside technology consultants.
Seven out of 10 workers in the department's 1,000-member Management Information Services staff are not state employees. Most work for American Management Systems, billing the state hourly rates ranging from $64 to more than $200. That compares with the highest hourly rate of about $36 for state employees on staff.
An internal department study figures it costs taxpayers $81,000 more a year to fill an information technology post with a consultant rather than with a state employee.
For every 2.4 technology employees on the state payroll, there is one contract consultant, according to the Ohio Department of Administrative Services.
“The excuse for bringing in consultants is that the current staff isn't up to it, that they don't have the internal skills. If that is true, then the question is why,” said Peter Wray, spokesman for the Ohio Civil Service Employees Union, which represents 35,000 state workers.
“During my last year, several legislators wanted to privatize the whole system. I told them we were pretty close to that anyway,” said Arnold R. Tompkins, who was director of the Department of Human Services under Governor Voinovich. Last year, Governor Taft merged Human Services with the Ohio Bureau of Employment Services to form the Department of Job and Family Services.
The second-largest consumer of outside consultants is the Bureau of Workers Compensation, where the ratio of consultants to state employees is exactly opposite that of Job and Family Services.
In addition to the state's 2,400 in-house technology employees, there are 500 vacancies the state has had trouble filling, increasing its dependency on outsiders for even daily operations.
“Either I'm getting contractors to augment some of that or the work isn't getting done,” said Greg Jackson, assistant director of Administrative Services and the state's chief technology officer.
Former House speaker Jo Ann Davidson, who headed the troubled Job and Family Services for two months at Mr. Taft's request, said the state has to do a better job of building talent in-house.
“The department will never be self-sufficient,” she said. “We will always have to have some vendor involvement, but there should be a great deal more internal involvement than external.”
She has told lawmakers that the state has to do a better job managing its consultants and tying their payments to achieving specific goals.
In the cases of AMS, Accenture, and other information technology consultants, open-ended contracts require a supply of expertise, manpower, and support - but not necessarily a quality, finished product that can be maintained by state employees left behind.
“It's about having management who understands the internal logic of the policies and programs you're working on,” said Greg Browning, state budget director for seven years under former Governor Voinovich and now a public policy consultant.
“Otherwise, you lose the thread and the consultants are in charge,” he said.
Job and Family Services is in the process of hiring project managers to oversee its contracts, reducing the consultants' ability to make decisions unilaterally that affect the projects and, ultimately, their price tags.
Ohio Inspector General Tom Charles is investigating the department's awarding of multimillion-dollar, computer-consulting contracts like Accenture's without competitive bids and whether the two prior directors of the department had conflicts of interest when it came to their selection.
Former director Jacqueline Romer-Sensky, a former aide to Governor Voinovich, has kept a low profile since resigning under fire March 2. She has declined requests for interviews.
Her predecessor, Mr. Tompkins, now runs his own consulting business that, for several months in late 1998 and early 1999, included Ms. Romer-Sensky as a partner. It counted Accenture and American Management Systems as clients.
Mr. Tompkins said he took Accenture on as a client a year after he left his state job in October, 1998, and that he has not used his influence with the department since to get the company business.
He declined to comment further on the investigation, but he defended his decision to award Accenture the Ohio Works contract without competitive bids.
“We didn't go through the [request-for-proposal] process, because it takes so long,” he said. “I wanted something that was existing. I did not want to develop a whole new program. Accenture had knowledge of other systems around the country.”
The contract was later renewed under Ms. Romer-Sensky without competitive bid. It will expire next month, but this time Accenture will have competition.
“OhioWorks.com is really not so much at Bob Taft's feet as George Voinovich's,” said state Sen. Linda Furney (D., Toledo). “He allowed his Human Services department to do that contract when the Bureau of Employment Services had [a system] that was up and running that was done with minimal money.”
After spending millions, state officials say the system still doesn't work as planned.
“It should be a customer-friendly system where any user can sit down at a library and actually use it for everything from resume services to job match to upgrading jobs, the whole works,” said Dan Wiloby of Logan County, president of the Ohio Job and Family Services Directors Association. “Unfortunately, it hasn't gotten to that point. It can kick you out. It takes perseverance.”
Job and Family Services had considered at least temporarily returning to a prior system developed by the now-defunct Bureau of Employment Services at a third of the price tag for Ohio Works. But so far, the state has decided to stick with Ohio Works, hoping eventually it will live up to its name.
Barb Hohbach, spokeswoman for Accenture, disagreed with the argument that Ohio Works has been a failure and said it was designed to match the state's requirements.
“Thousands of job seekers and employers use Ohio Works daily,” she said. “It is a shame that a pioneering program which has helped so many and has been honored with a Smithsonian Award and a vice-presidential commendation is being tarnished in this way.”
Although the original American Management Systems contract for the child-support system was bid competitively, it has since been extended without bidding. The company also has benefited from other nonbid contracts within the department or its predecessors for Y2K and welfare reform work.
AMS considers Ohio's child-support system to be a success story, despite what it deems to be moving targets of federal requirements and the fines.
“Bad publicity is one thing, but the [child-support] program is in place and has been successfully rolled out in 88 counties,” said AMS spokeswoman Anne Burt. “This was a multiphase endeavor, an immense complex system with hundreds of databases, millions of lines of codes, and a million [child-support] enforcement cases.”
Shortly after the system was up and running, counties began complaining that the system frequently was down. And it was revealed that the system, an amalgamation of 1,200 computer programs, was, in violation of federal law, withholding millions in overdue child support owed families who'd left the welfare rolls.
Most families never missed the money until Association for Children For Enforcement of Support - a support advocacy group founded in Toledo - began preparations to sue.
The federal government plans to visit the Lucas County child-support agency in June to decide whether the Support Enforcement Tracking System will be accredited and the leak of federal fines plugged.
Although Mr. Jackson of Administrative Services noted that Ohio has just a 5 percent turnover rate among state information technology employees, it continues to struggle to fill vacancies. The state plans to begin a radio advertising campaign in search of workers with these skills and is developing ways to retrain those it has.
“The state can't compete with price,” said former director Tompkins. “Once the folks in the department get the knowledge, then they get better jobs. We worked with several firms and we became a body shop. They'd hire our people at higher prices and then, when we'd go to these firms, we'd get those people back [at higher cost].”
Under a proposed revamp of the state's information technology pay scale, the salary for a “systems analyst 2” would go from the current range of $48,000 to $68,000 to a range of $53,000 to $75,000, Mr. Jackson said. The industry average for an equivalent job is $61,000.
Although the consultants are supposed to work as a team with state employees, the state workers complain the skills aren't being transferred to them to allow them to run, let alone create, these major data and Internet systems.
State Rep. Jim Trakas (R., Independence) once worked for M.A. Hanna Co., which, in turn, worked alongside Andersen Consultants, now Accenture, on a project.
“My experience with consultants in general and Andersen specifically is that, rather than train workers, Andersen creates parallel groups,” said Mr. Trakas. “State workers are not always cut into what's going on and the high-priced consultants end up doing their job. There should be a knowledge transfer to the actual state workers and then the consultants should hit the road.”
The state employees union is working with Job and Family Services and Administrative Services on a pilot apprenticeship project to try to develop in-house pools of network administrators and high-level programmers.
Mississippi is among a growing number of states operating their own information technology departments, lending skilled in-house programmers to various agencies. But spokeswoman Karen Newman said in-house employees will never entirely replace outside consultants.
“We definitely don't have enough to handle all the work in all the agencies,” she said. “When you're working on a major project, you don't want to have a staff of full-time positions for something that's only going to last one or two years.”
The state, however, writes into its contracts that the skills to develop a project must be passed from the consultant to the state employee working by his side.
Mississippi has had its share of dealings with American Management Systems, many of them positive, according to Ms. Newman. But the state successfully sued the consultant last year for fraud and breach of contract.
The lawsuit, ultimately settled for $185 million after a jury returned a $474.5 million verdict, alleged that AMS used its $11.2 million contract for development of a tax system for Mississippi instead to develop a system for another client, Kansas, that didn't meet Mississippi's needs.
Jim Conrad, who has a reputation as “Mr. Fix-It” in Ohio government, is heading Governor Taft's team to whip Job and Family Services into shape.
He has done similar work for the former Ohio Department of Human Services and Bureau of Employment Services. He is director of the Bureau of Workers Compensation.
When Workers Compensation set out to establish a well-received Internet web site through which employers and workers could gather information and make claims, Mr. Conrad opted to do the work primarily in-house.
“When a system is critical to your agency, you don't want the contractors essentially running things,” spokesman Jim Samuel said. “That puts you at the mercy of the contractors in some cases.”
Ms. Davidson points to workers compensation as a model for where Job and Family Services should be going.
“But it's not going to happen with a snap of the finger,” she said.