City Agency Audit Reports
Audit Report on the Office of Payroll Administration’s Monitoring of the Oversight of the CityTime Project By Spherion Atlantic Enterprises LLC
Audit Number: FM10-135A
Release Date: September 28, 2010
AUDIT REPORT IN BRIEF
In 1998, the City, through the Office of Payroll Administration (OPA), awarded a contract for the development of CityTime, an automated timekeeping system that would interface with the City’s Payroll Management System (PMS). The contract was awarded to MCI Systemhouse Corporation and subsequently assigned to Science Applications International Corporation, the developer since 2000.
In 2001, OPA contracted with Spherion Atlantic Enterprises, LLC (Spherion), to provide quality assurance services for the CityTime project. Spherion was to validate the developer’s recommended infrastructure, methods, and procedures; to certify the deliverables and project phases; to assess risks and recommend mitigation strategies; to track the project; and to review past and future work products and change orders. Spherion’s contract was initially for three years, worth approximately $3.4 million, and subject to five, one-year renewals by the City. Since 2001 there have been 11 amendments to the contract, and payments to Spherion have exceeded $48.2 million (total contract authorization is for $51.2 million).
The initial CityTime contract totaled approximately $63 million, and as of September 30, 2010, will cost the City approximately $628 million. The project was intended to be fully completed by June 2010, and to serve approximately 180,000 users at 81 agencies. This number was later adjusted to 165,000 users at 81 agencies. As of June 2010, CityTime has been implemented at 58 of 81 agencies, with approximately 58,000 employees using the system.
This audit determined whether OPA, through Spherion effectively monitored its agreement with the CityTime developer and whether Spherion provided the oversight necessary to complete the CityTime project.
OPA mismanaged its quality assurance agreement with Spherion, which severely limited Spherion’s ability to oversee the development of CityTime and may have resulted in significant increases to the cost and duration of the project. In July 2001, six months after the agreement was signed, it was amended to eliminate Spherion’s requirement to independently review and certify project deliverables in a systematic manner, even though evidence indicated that deliverables may have been substandard. Approximately a year later, OPA may have violated Procurement Policy Board (PPB) rules by materially altering the agreement to include Subject Matter Experts (SMEs) for project management services. As a result, Spherion was then responsible for quality assurance and project management, thereby eroding the line between the two conflicting responsibilities and eliminating the independence of the quality assurance function. The primary purpose of an independent quality assurance function is to identify and correct problems early in a project. Correcting these problems reduces costly reprogramming.
In 2005, OPA also relied on Spherion and its subcontractors to validate and estimate information used to justify a major escalation of the project at a juncture when CityTime could have been terminated or possibly rebid. To guarantee the objectivity of the information, OPA should have used a completely independent party that had no interest in the development of the project. Finally, OPA could not provide several years’ worth of quality assurance reports therefore making it difficult to determine to what extent the project was being monitored by Spherion.
Since its inception, CityTime has been plagued by poor management decisions. The decisions and associated issues presented in this report deal only with OPA’s management of its agreement with Spherion, which is relatively small in cost but significant to the success of the project ($51 million compared to $628 million authorized to the developer). There is no way to quantify the effects of these decisions in dollars or to determine whether the project would even have been allowed to continue to the point it did. Every large and complicated project encounters hurdles in its development. However, hindsight is not required to recognize the negative consequences of these decisions for the CityTime project. As a result, the City has been left with an overpriced system, which as of September 30, 2010, will cost approximately $628 million and as of June 2010 had been implemented at 58 of 81 agencies but serving only 58,000 of the intended 165,000 employees (35 percent).
Due to the severity and magnitude of the issues encountered with the project, we are making the following recommendation to the OPA Board of Directors (Board). Specifically, the Board should:
Create an independent crisis management team to advise the Board on whether it is feasible to continue the CityTime project.
In determining whether or not to continue the project, the crisis management team should:
- Validate the established budget and timeframe needed to complete the project.
- Estimate future maintenance costs and consider whether these costs outweigh system benefits.
Should the Board decide to continue the project after the aforementioned tasks have been fulfilled, the Board should:
- Empower the crisis management team to oversee and evaluate project decisions as well as developer performance in achieving project milestones.