The State Controller’s Office estimates it will incur $28.8 million in costs through 2017 to pay for outside legal help as the state prepares to go to court this spring over the failed 21st Century Project, according to state records.
The spending is going toward outside legal counsel, experts and consultants, depositions, legal discovery, trial preparation, document management, and infrastructure support.
The expenditures began in 2012. In November 2013 the controller’s office filed suit against the system integrator, SAP, claiming breach of contract. The vendor countersued in April 2014. The state says the case is scheduled for trial on May 23, 2016.
“Costs associated with outside legal counsel, experts and consultants have increased due to a larger than expected volume of documents for discovery, and the additional time spent in preparing for depositions based upon this much larger document set, as well as repeated delays and cancellations of previously planned depositions,” the State Controller’s Office wrote in budget documents.
The 21st Century Project, also known as MyCalPays, was intended to modernize the state’s legacy human resources management (HRMS) system and replace multiple legacy payroll systems used by state departments. The project was halted in February 2013, ending with the termination of the vendor’s $90 million contract.
MyCalPays goes back more than a decade, when in 2004 the California Department of Finance concluded that the state’s existing HR/payroll system was outdated. The State Controller’s Office determined that the best course of action was to procure an off-the-shelf software solution and hire a system integrator. The state eventually awarded a contract to the vendor in 2010.
Although California is spending tens of millions of dollars on the legal suit, it could conceivably recover 1.5 times the contract amount, about $156 million, if the state prevails. Conversely, the state could be liable for tens of millions of dollars if the trial goes in the vendor’s favor.
