An immediate assessment of what went wrong with the MyCalPAYS project would be more beneficial in the long-term than delaying the assessment in favor of legal proceedings, according to a recommendation this week from the Legislative Analyst’s Office (LAO).
After a budget hearing today in the State Capitol, the Legislature appears to be in agreement on next steps after the State Controller’s Office in February cancelled the $90 million contract with SAP Public Services, Inc, the vendor in charge of the project.
Governor Jerry Brown’s 2013-14 May Revision budget proposes $14.6 million for correcting payroll and medical insurance errors and pursuing legal proceedings against SAP.
The Brown Administration supports doing an assessment, but only once legal issues have been resolved. “The only concern that we have is the timing of the assessment…we should go step by step, once we are done with the reconciliation and taking care of some of the legal issues, then we should go into the assessment,” said Department of Finance representative Oscar Chavez, testifying today in the Assembly Budget Subcommittee on State Administration.
The LAO estimates legal action could take several years and moving forward with an assessment now would be more timely and meaningful, and could benefit other state projects from what is learned. According to Monday’s LAO report, the State Controller’s Office legacy payroll system, which resumed operation after a number of payroll and insurance errors caused the SCO to terminate the contract, is still in need of replacement due to the instability of the old system. Their recommendation says that the risk of further errors and costs to employees and the state as a result of using the old system could outweigh the benefits of immediate legal action.
The LAO recommended that the Legislature allocate more resources to the SCO so that an assessment can be carried out more quickly. The subcommittee today approved language to shift funding first proposed to support legal efforts toward the cost of starting an assessment.
If the state wins a legal case against SAP, the state could recover 150 percent of the entire contract value, which would be about $135 million. However, if the state loses, SAP could seek compensation for termination of the contract, which could lose the state as much as $55 million, according to the report.
