SAP returned to the government $59 million for the failure project of development of the system of charge of salaries

Project History

The system developed by the government carries^[1].

The first project phase covers salary accrual only of 1300 employees from 240 thousand government employees of the state, and conditions of settlings with them are one of the least difficult. So far the government of the state uses an old HRM system which provided payroll of all 240 thousand government employees till the last moment.

2016: The court obliged to return SAP to California $59 million for a project failure

In June, 2016 prolonged judicial proceedings concerning the failure SAP project within which it was going to update the system of salary accrual in the Californian state agencies ended. By a court decision, the division of SAP Public Services will have to return to the government $59 million and also to take back the claim for $29 million in which the German producer of corporate providing accused the opponent of a breach of contract.

Betty Yee, the employee of the body exercising control over finance  of the State of California said that the administration is glad "to settlement important judicial process on profitable terms". After that the state will be able to pass to development "the exact, stable and reliable new system of charge of salaries and management and the labor capital", she noted. The agreement was signed less than in two weeks prior to the next listening, transfers the The Sacramento Bee edition.

The company is satisfied with result of this case and is glad that left this dispute behind — the representative of SAP Andy Kendzie said.

According to him, some parts of the contract between the state and SAP remained in force. The company also hoped that California will update the processing systems of pay-sheets using the software of SAP.

Follows from promulgated court documents that since the end of the 1990th years California spent for creation of a new system of charge of salaries of 240 thousand government employees about $250 million by the time of contract cancelation. Before other amounts — were called mainly not so big. The cost of all project was estimated at $371 million.

SAP did not cope with creation of a system of charge of salaries of 240 thousand government employees in California

In the claim it is said that among other defects of SAP could not impart knowledge the public servant, could not test adequately a system, hid problems, and at submission of applications for participation in the tender "revaluated the record of service, the capabilities and experience of a command — they were not enough for creation of an operable system".

In the settlement agreement which was signed by SAP and the authorities of California, it is said that any of the parties does not recognize itself responsible for a project failure. The producer submitted a claim to the government, pointing that it terminated the contract with violation of its conditions, without having allowed SAP to complete the construction of a system.^[2]

As a result the MyCalPAYS project was completely closed, and the Californian authorities began "study modern information technologies" to create a new personnel management system and payroll. 

The treasurer of California John Chiang in a conversation with the Techwire edition said that he expects establishing strong partnership with the IT companies as the state has no sufficient financial and labor resources for creation and support of each IT project.

Gavin Newsom before the appointment to the post of the governor of California called  the companies which are engaged in IT consulting, "cartels" which fleece the government.

The president of the University of California  Johnette Napolitano, giving an example with MyCalPAYS, says that it is very difficult to update big complex salary systems. The university began to implement a similar system in 2012, but could not finish begun for several years

2014: Search of the contractor for search of the reasons of a failure of the project

In August, 2014 California started the tender which winner for $1.275 million had to carry out the independent assessment of failures of the MyCalPays project. Then the authorities did not begin to look for the new contractor for creation of a system, and focused on proofs of fault of SAP in unsuccessful implementation

2013: Court with SAP

In February, 2013 the controller of the state John Chiang repealed the contract with SAP because of an incorrect program runtime in the pilot mode which at that time covered several hundred government employees. Officials learned about failures from employees, but not from integrator. In a system there were many errors: from incorrectly withheld payments of child maintenances to rough miscalculations in compensation.

John Chiang as the main thing on finance in California terminated the contract with SAP

In eight months of test system operation it could not complete any cycle of payroll without material mistakes. Instead it abounded with a large number of massive faults. The representative of the controller of the state Jacob Roper said that the technology was tested on "the simplest requirements" in the state.

Experts and market participants interceded for SAP, saying that, considering experience with state customers, SAP could hardly not cope with salary sheets for 1300 people — most likely, the wrong data got to a system.

According to Roper, by the time of the termination of cooperation with SAP the state paid $50 million and froze about $7 million in the form of additional payments.  The rest of expenses was connected with purchase of software licenses, payments of trudochas of employees, etc.

In August, 2013 it became known that authorities of the state California, the USA which discharged SAP of an implementation project of one of financial information systems in February, 2013 and continuing to work on it independently intends to resolve a dispute judicially.

Officials say that despite $200 million spent for the project, a system continues to work with errors and its implementation did not correspond to the stated diagram.

According to the official report of local supervising department (Senate Office of Oversight and Outcomes), a system "suffered because of not resolution of the main questions, chronic miscalculations of project managers and their insufficient foresight".

SAP denies the fault in failure development of the system of charge of salaries by the government employee in California and filed a lawsuit against the government of the state

The office of the controller of the State of California John Chiang^[3]who sponsored the project not always frankly declared the difficulties which arose during the project, it is also told in the report. As a result Chiang office and SAP "accused each other of failure of the project, and the dispute will probably continue in court". On a game - more than $190 million the paid means, $135 million which are necessary for officials on project completion, and also $55 million which SAP expects to receive in addition.

The official position of SAP consists that the vendor fulfills all obligations under this project for which the company selected the best resources. Representatives of SAP also said that for a project success responsibility is born the company and representatives of the state equally.

2012: End of the first stage

According to auditors, the first of five key project phases came to the end in June, 2012, but on its termination "the disturbing volume of defects" was revealed.

2010: Beginning of cooperation with SAP

SAP joined this project in 2010 after departure of the first contractor, BearingPoint.

1999: California begins creation of a system

In 1999 legislature of the State of California approved the budget in $1 million for development of a modern system of charge of salaries to the staff of public institutions. Initially this project was called The 21st Century Project, and then it was renamed into MyCalPAYS. It had to become the updating of a system of salary accrual, largest in the USA.

The state was in great need in new technology as old was created in the 1960-1970th years. Development of a new system was complicated by the fact that in it it was necessary to consider a set of the laws and provisions regulating salary accrual in California.

Notes