OPM suspends portion of contract for electronic retirement system

The Office of Personnel Management has suspended a portion of a 10-year, $290 million contract awarded to Hewitt Associates to create a new electronic retirement system.

OPM decided late Wednesday to suspend part of a contract with Hewitt, a human resources consulting company based in Lincolnshire, Ill., to develop the system. The suspended portion, valued at $27 million, involved creating a retirement calculation system.

A federal source who requested anonymity said the prime vendor for the contract and OPM have had concerns regarding aspects of the program that the vendor says are out of the scope of the contract. A former OPM employee also said there has been problems with data cleansing for the system, noting that annuity calculations have not consistently been correct as a result.

It's unclear whether problems with data cleansing were the reason for suspending the contract. Hewitt said on Thursday that it was working closely with OPM to understand the rationale behind the suspension. "We successfully delivered on our first live date with OPM on Feb. 25, 2008," the company said, "and as of the date of the stop work order, we were on track to deliver on successive dates as required by our contract."

OPM said it would not comment until after it issued a press release, which was not available at the time this story originally was published.

The move came just days before OPM was scheduled to launch wave two of the retirement project for employees at the U. S. Postal Service. Currently, 26,000 employees at the General Services Administration have converted to the system, with OPM expecting to transfer all federal employees to RetireEZ by February 2009.

At a briefing in April, OPM touted the benefits of the system Hewitt created, which originally was available for employees to use only in accordance with their benefits officers. OPM expected to roll out the tool for use by individual employees from their homes or work computers this summer.

"I know that testing of RetireEZ has been going badly," a former OPM employee said. "What Hewitt was trying to do was take an off-the-shelf program and squeeze the government computations out of that."

RetireEZ was designed to expedite and improve the quality of services to more than 3 million active employees covered under the Civil Service Retirement System and the Federal Employees Retirement System. Under the current paper-based system, it often takes months for federal employees to receive an accurate annuity payment when they retire, because OPM stores its paper-based retirement benefits documents in file cabinets in Boyers, Pa.

The Government Accountability Office criticized the implementation of RetireEZ in a January report, saying OPM failed to set and meet consistent baselines for performance and relied on faulty budget estimates for the retirement program. In response to the GAO report, OPM said the project was progressing, with the majority of retirees receiving their first annuity payment within 30 days of the date the employee retired.

OPM requested $15.2 million from Congress to continue the project in fiscal 2009.