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Comptroller Wyman Calls on Governor to Scrap Privatization Deal

Calls Early Results of EDS/DSS Study a "Wake-Up Call."

Contact: Steve Jensen
860-702-3306/3301

As the negotiations between the State and Electronic Data Systems (EDS) near the self-imposed deadline of June 15, 1999, State Comptroller Nancy Wyman today called on Governor John G. Rowland to abandon his plan to privatize the State's information technology systems.

"There are too many questions still unanswered, and a growing body of evidence suggests that privatizing our information technology through EDS could be the worst fiscal and policy decision of the decade for the state of Connecticut," Wyman said.

Wyman pointed to early results of an audit begun in February by her office of the contractual relationship between EDS and the state Department of Social Services.

While the final report is not yet complete, Wyman said documents obtained so far paint a bleak picture of DSS' contractual relationship with EDS. The Comptroller said the documents should cast serious doubts on the company's ability to take over the state's entire information-technology system at an estimated cost of $1.5 billion.

"These documents should be a wake-up call to this administration to abandon this billion-dollar-plus boondoggle," she said. "If EDS couldn't handle this single project, how can the administration consider them the frontrunner for the biggest contract in state history? The taxpayers of this state deserve an answer."

The documents cited by Wyman are associated with EDS' failure to complete implementation of an Advanced Information Management system (AIM) that DSS was to use to process Medicaid claims. The system was originally slated to begin operating in 1994. EDS, however, never completed the design and implementation of the AIM system despite numerous extensions and modifications in the scope of the project.

A Feb. 13, 1996 letter from DSS Commissioner Joyce A. Thomas to Dr. Ronald D. Preston, the Associate Regional Administrator of the Federal Health Care Financing Administration (HCFA), best sums up the story.

In the letter, Commissioner Thomas raised concerns about EDS' inability to even complete an appropriate work plan for the AIM project.

"Concerns regarding EDS' performance and workplan slippage were compounded by the fact that EDS appeared to be altering the agreed-upon work pattern without DSS input or consent," Thomas wrote.

Commissioner Thomas continued,

"Such behavior by EDS was typical as well as symptomatic of their reactive and sporadic attention to work plan management. Clearly this lack of attention to work plan management precluded the project from being successfully completed by December 29, 1995."

One might ask why, after so many months, the Commissioner did not fire EDS. The answer lies in paragraph 10 of the letter:

"Serious consideration was given to termination of the project and the contract as well as the imposition of liquidated damages and penalties." [However], "Steering Committee members from both within the Department and outside the agencies felt the risk of litigation and a protracted dispute resolution processes (sic) posed a great liability for the Department. Additionally, the Department does not have the in-house capacity to rapidly absorb the critical and complex processing of Medicaid claims, …"

And finally, the Commissioner acknowledges that the State of Connecticut was at the mercy of EDS:

"Without continuation of the AIM development effort it was felt that the current contractor would not continue in its fiscal agent capacity for the state of Connecticut thereby placing the clients, medical providers, the newly established managed care initiative as well as the traditional fee-for-service program administration at risk."

Other documents obtained during the Comptroller's audit showed that DSS officials involved in the AIM project concluded that:

"EDS appears to believe that it is automatically entitled to however many extensions and however long it takes to make this project a reality, with no consequences…"

There was "…serious slippage in AIM development activities that had been either ignored or camouflaged by EDS."

"…categorically (EDS has) a very dissatisfied customer in the State of Connecticut."

Instead of turning the state's entire information-technology system over to a private vendor, Wyman suggested that an outside consultant might be hired at a much lower cost to assess the capabilities and weaknesses of the state's existing computer system and suggest improvements.

"I would compare the state's computer system to an older house that needs a fresh coat of paint," Wyman said. "But instead of hiring a painter, this administration wants taxpayers to foot the bill for demolishing the entire house and building a mansion in its place."

The State Comptroller appreciates input on this and other issues from residents of the state. Please feel free to contact her office by phone - (860) 702-3300; mail - OSC, 55 Elm Street, Hartford, CT 06106; or, via E-mail - osc.opinions@po.state.ct.us

Learn more about the Connecticut Comptroller's Office by calling up our Internet Home Page, at the link below.

For Immediate Release
June 15, 1999

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