OPM suspension of electronic retirement calculator blamed on contractor shortcomings

Office of Personnel Management officials said on Friday that they told a contractor to stop working on a portion of a new electronic retirement system for federal employees because of a "lack of satisfactory performance" in creating, developing and maintaining an electronic retirement calculator.

Ronald Flom, OPM's senior procurement executive, made the decision on Wednesday to issue a stop work order to Hewitt Associates, a human resources consulting firm based in Lincolnshire, Ill. The calculator was one of three components of the modernization program known as RetireEZ.

In addition to the suspension, OPM issued a show cause notice to Hewitt, giving the company 10 calendar days to respond to the performance issues the agency raised.

Reginald Brown, director of modernization for OPM, said Hewitt failed to deliver on a new set of functions to calculate employees' retirement annuities. In a recent round of testing, he said, only five of 61 functions passed.

Brown said Hewitt also failed to deliver a modeling tool that would enable a group of employees who were within range of retirement to model different retirement scenarios. The delays stalled OPM's plans Friday to introduce a wave of employees at the U.S. Postal Service to the retirement system.

"We had assurances up until just the past couple of weeks that those functions would pass the test," Brown said, "and we were moving based on that to our May 30 target."

Flom said it became apparent on Tuesday that Hewitt would not deliver the new functions or the modeling tool. "We waited until the very last moment until it became clear," he said. "We had no choice but to stop work."

While sources with knowledge of the RetireEZ program told Government Executive on Thursday that OPM had expressed concerns about issues that Hewitt said were outside the scope of the contract and that there had been problems with data cleansing in the system, OPM said on Friday that the decision to stop work was not related to changes in the scope of the contract and that data cleansing was not a factor in the decision, either.

On Thursday, Hewitt issued a response to OPM's order, saying it was working closely with the agency 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 disagreed with Hewitt's statement, but noted that the company had an opportunity under the show cause notice to demonstrate that it was "indeed in a position to deliver as required."

OPM Director Linda M. Springer said on Friday that the agency holds a 10-year, $290 million contract with Hewitt to create, develop and maintain RetireEZ. She stressed that the cost of the calculation engine accounted for $27 million of the contract, of which OPM has paid $21 million thus far. "We thought it was prudent to take this step now before any more money was spent," she said.

Flom said the stop work order made clear to Hewitt that OPM could terminate the contract and find another vendor if Hewitt did not improve. "We hope it doesn't get to that," Flom said. "We want them to be successful."

Springer said the other two components of RetireEZ -- data conversion and change management -- will continue unabated. Even apart from the calculation engine, she said, having employees' data current, complete and accurate is a major portion of the overhaul. "It's full steam ahead on that and on the business processes," she said. "We'll come out of the pause and work on the calculation piece."

As of Friday, the RetireEZ Web site said it was "currently offline for maintenance." OPM said the decision to take the system offline was made on May 23 and bore no relationship to the decision on Hewitt's contract.