Pennsylvania won't renew IBM contract

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HARRISBURG -- A planned modernization of the state computer system designed to calculate and provide unemployment compensation benefit payments in Pennsylvania is plagued with problems, according to a study released Wednesday.

The study was conducted by Carnegie Mellon University's Software Engineering Institute.

As of July, the modernization program is 42 months behind schedule and more than $60 million over the original contract price of $106.9 million, according to the study.

"It is simply unacceptable for the computer system that serves the state's unemployed to be unreliable,'' said a statement from Julia Hearthway, Department of Labor & Industry secretary. "It has to work and it has to work efficiently."

The problems identified cannot be solved and the state will not renew its contract with IBM, Ms. Hearthway added.

Problems outlined in the study include: the department's and contractor's plans "were not well implemented," instability in the contractor's workforce, the contractor's project manager and executive both leaving in early 2009 during a critical time, and "no one in [the Department of Labor & Industry] was accountable and responsible for the administration of the program," leading to ineffective oversight.

The problems have snowballed over the past several years, the study stated.

"The current state of the program is the result of the accumulation of risks and issues that were continually identified over a critical four-year period (January 2007 to June 2011) of the program. However, these indicators were not acted upon decisively by [Department of Labor & Industry] senior executives at the time to mitigate the systemic risks in the program."

The study does praise the department's current leadership for attempting to tackle the problem.

An IBM spokesman said Wednesday that the company was surprised by the announcement.

"This decision is based on a third-party report that we have not seen, despite repeated requests to the Department of Labor & Industry to review it together in the normal course of a working relationship, that always has had the best interests of the citizens of Pennsylvania as its primary objective."

The contract was originally awarded in 2006, according to the department.

According to news accounts, the state of Indiana canceled a major contract with IBM in 2009; the company had been the lead contractor in an effort to automate applications for public benefits such as food stamps and Medicaid.

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Kate Giammarise:, 717-787-4254 or on Twitter @KateGiammarise.


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