Reference no: EM131230101

NYCAPS and CityTime: A Tale of Two New York City IS Projects

New York City Mayor Michael Bloomberg made his fortune in information technology, as the owner of Bloomberg L.P., a giant financial news and information services media company. Bloomberg thought he could translate his success in modernizing information technology on Wall Street to modernizing New York City's government, and he launched a series of projects to do just that. Two of those projects proved him dead wrong. Both the New York City Automated Personnel System (NYCAPS) and the CityTime system for payroll-related employee timekeeping have been fraught with cost overruns, mismanagement, and an overall failure to deliver an information system that has the capabilities sought by New York City government. How could this happen? Soon after becoming mayor, Bloomberg announced the development of NYCAPS. The NYCAPS project had a budget of $66 million at its outset. The goal of the project was to create a modern, automated system for managing and updating personnel information for New York City's workforce, including employee benefit information. Personnel management was a prime target for a sweeping technological overhaul, since the city was using eight individual citywide systems, 200 systems within individual agencies, and a maze of paperwork for handling employee benefits and job changes. A timely and successful implementation of the NYCAPS project stood to save the city millions of dollars per year in labor and IT costs. To date, the implementation has been anything but timely, and the total expenditures of the project have grown to over $363 million, nearly six times the original budget. Project monitors from within the administration filed reports that described the chronic mismanagement, cost overruns, and general waste plaguing the project, but the city continued ahead with the project without making any significant changes. One report from as far back as 2003 detailed that "no sense of economy, efficiency, or value is evident in any area of the project." These reports indicated that the primary reason for the project's ballooning costs and myriad delays was lack of strong leadership. The NYCAPS project was controlled by government officials who did not have the authority or expertise to make important project decisions, and therefore missed many opportunities to lower development costs. Early on, in 2002, NYCAPS's lone functionality was as a Web site where people could apply to take civil service exams. But less than two weeks after the launch of the site, a user found that he could obtain other users' personal information by exploiting a security flaw, and the site was immediately shut down. Officials in charge of the project then vowed to fix the flaw and get the project right. However, instead of taking charge of more facets of the project, the Bloomberg administration delegated more of the project to Accenture, a prominent consulting firm. Bloomberg has tended to favor outside expertise for improving the workings of government, especially for information technology projects. The city tasked Accenture with both defining the specifications of the system as well as putting it together themselves. Companies and government agencies building a new system rarely do this, since splitting those roles keeps the costs from any one contractor from exploding unchecked. This is just what happened with Accenture. Accenture consultants charged the city up to $400 an hour, and the company earned $8 million from the city in 2004, then $26 million in 2005, $29 million in 2006, and a whopping $53 million in 2007. Raj Agarwal, the city's appointed project manager, was outspoken in his criticisms of Accenture's billing techniques, claiming that they were billing at rates that reflected many more consultants than were actually on the job, and that the company was using recent college graduates and interns to perform the work, all while billing the city at much higher rates typically used for experienced workers. Agarwal has long since quit his post, and the city has struggled to attract experienced and capable managers from the private sector. The city was eventually able to switch Accenture to fixed-price billing. Accenture has put the blame on the city for increasing the scope and functionality of the project beyond the original specifications while it was being developed. As time passed and the city grew desperate for a functioning version of the system, the city abandoned development on many of the capabilities that the system was intended to have. Nearly 10 years after the project was launched, the city has a live version of NYCAPS, but thousands of retirees still cannot access the site and thousands more current workers are not included in the system. Even worse, NYCAPS was built to run on the same old legacy systems that used the previous patchwork system, despite the fact that upgrading legacy technology was a major reason for the project's development in the first place. As bad as the NYCAPS project has become, an earlier, even more ambitious New York City project makes it look tame by comparison. The CityTime payroll system project, first conceived in 1998, has seen its budget grow from approximately $65 million to well over $700 million as of 2012. CityTime was created to automate payroll timekeeping once dependent on pen and paper, and in the process to curb undeserved overtime payments to city workers and improve accountability throughout the government. In an ironic twist, the project has instead been permeated with fraud at every level, and engineers from the main consulting organization, Science Applications International Corporation (SAIC) were charged with fraud. A June 2011 press release from Manhattan U.S. Attorney Preet Bharara states that "the alleged criminal scheme extended across virtually every level of (CityTime); contractors and subcontractors systematically inflated costs, overbilled for consultants' time, and artificially extended the completion date." Again, the biggest reason for the project's unheard-of budget increases is lack of qualified oversight. The few government employees constantly monitoring the project turned a seemingly blind eye on the ballooning costs incurred by SAIC and the lack of progress in the project. Belief that the software developed for the system could be sold to other governments was perhaps another reason why the city let costs balloon. Bloomberg's budget director, Mark Page, was reportedly the strongest voice in favor of CityTime. He had hoped to stop the trend of police officers, firefighters, and other aging city workers receiving unnecessary overtime at the end of their careers, presumably to increase their pensions. Page also wanted to limit lawsuits against the city from workers claiming their pay was too low for the hours they had worked. But Page's background was in law, not information systems, making him a poor choice to oversee CityTime. Other government branches, like the city comptroller, left the project mostly to Page. William C. Thompson, the city comptroller from 2002 to 2009, never audited CityTime despite numerous warnings about the project from staffers. Still, an aide for the mayor did suggest that the comptroller's office had raised concerns about the project to the mayor, but those concerns too were ignored or dismissed by Page. The lack of adequate government oversight of the CityTime project may have been the biggest reason for the hundreds of millions of dollars in cost overruns incurred since the project's conception in 1998, but the main beneficiary of those overruns has been SAIC. In 2000, work on the project was transferred to SAIC from the first contractor, a subsidiary of MCI. Instead of the usual competitive bidding process for contracts, the city opted simply to pass it off to SAIC, a transfer which is still being reviewed by city investigators. Shortly after SAIC took control of the contract, work on CityTime was switched from fixedprice to hourly billing. This, in turn, inflated costs from $224 million in 2006 to a total of $628 million by 2009. Thanks to the hourly contracts, the city was on the hook for all of the waste incurred by SAIC. The terms of contracts were also constantly changing: another consulting company hired to provide quality assurance for CityTime had its contract amended 11 times, increasing its value to almost $50 million from its original $3.4 million figure. SAIC delegated most of the work on CityTime to subcontractors, further complicating the chain of command involved in the project. The most prominent of these, Technodyne, received $450 million in funds from the city. When the U.S. Attorney's office released its indictments, Technodyne's owners, Reedy and Padma Allen, fled the country and are believed to be at large in India. Today, over 150,000 city workers use CityTime to keep track of attendance and leave of absence requests, but the cost per user for the project is estimated to be approximately $4,000. The industry standard for projects of this size is between $200 and $1,000 dollars. New York State has developed a much more complicated system to perform similar tasks for only $217 million, which makes CityTime's $720 million price tag look even worse by comparison. In March 2012, the city received some good news: SAIC agreed to repay $500 million in restitution and penalties back to the city to avoid federal prosecution for various instances of fraud involving the CityTime project. Although the result will lessen the burden of the project on taxpayers, the scandal nevertheless is a black mark for Bloomberg and his goals to modernize city information systems, and there is some doubt about how much of the sum that SAIC will actually be able to pay. The New York City Council also called a hearing to respond to the budget-crippling cost overruns of both projects. The Bloomberg administration vowed once again to review the way it handles complex, multi-million dollar technology projects. Proposed changes included first looking for commercial software before developing customized software without a real need for it. The city also stated that it would bill contractors as functional benchmarks for projects are achieved instead of hourly, to avoid future partnerships like Accenture and SAIC, and would ensure that multi-million dollar technology projects are overseen by qualified experts, instead of government administrators from other areas with no project management experience.

CASE STUDY QUESTIONS

1. How important were the NYCAPS and City Time projects for New York City? What were their objectives? What would have been their business benefits?

2. Evaluate the key risk factors in both projects.

3. Classify and describe the problems each project encountered as the NYCAPS and City Time systems were being implemented. What management, organization, and technology factors were responsible for these problems?

4. What were the similarities and differences in the management of both projects?

5. What was the business impact of these botched implementations? Explain your answer.

6. Describe the steps that should have been taken to prevent negative outcomes in these projects.