The state has not yet conducted an internal review of its ill-fated universal payroll system project over fears the findings could impact a pending lawsuit against the contractor, according to a nonpartisan report released this week.
The report by the Legislative Analyst’s Office also concluded that the state controller needs double the money Gov. Jerry Brown has proposed in his budget to pursue a lawsuit against SAP Public Services Inc.
Brown’s budget proposes $6.5 million, of which $2.5 million is for outside counsel, to support the controller’s lawsuit. His budget would allow the Department of Finance to add funds for any additional litigation costs. However, the LAO recommended the Legislature budget at least $4.75 million for outside counsel.
The LAO also recommended State Controller John Chiang seek an independent assessment of lessons learned from the project, despite the governor’s concern a review may hurt the state’s legal case.
Chiang sued SAP in November in a bid to recover its costs implementing the system known as MyCalPAYS, which was intended to replace the multiple legacy payroll systems among the different state departments. But, Chiang terminated the contract in February 2013 after tests led to several problems paying employees.
The lawsuit could have a financial result anywhere from a $150 million recovery if the state wins the lawsuit to a loss of $50 million if the state loses, according to the report. However, the benefit of learning and applying lessons from MyCalPAYS could be much larger to other large-scale IT projects than money recovered from the lawsuit, the LAO found.
It could also help the state move ahead with an updated payroll system.
"A timely assessment would move the state towards a modernized payroll system more quickly, reduce the length of time that the state must depend on the aged legacy system, and thereby reduce the risk of a significant legacy system disruption in future years," the analyst wrote.
