Court says TSP board can be sued by contractor

American Management Systems has won another round in its ongoing legal battle with the board that runs the federal Thrift Savings Plan.

The U.S. Court of Federal Claims ruled on Aug. 30 that AMS can challenge the board's decision to fire the Fairfax, Va.-based contractor in July 2001.

"We are very pleased with the ruling," said Anne Burt, AMS spokesperson. "We believe the court to be the appropriate forum to solve a federal contract dispute." TSP Board officials did not return phone calls seeking comment.

The board fought to get AMS' suit dismissed on the grounds that the court lacked jurisdiction. The board claimed that it is a "non-appropriated" agency, suggesting that it does not rely on public funds to do its job. Rather, the board said its expenses are covered by agencies making contributions to retirement plans on behalf of their employees. Once applied to a retirement fund, those monies are part of private accounts, the board argued. Thus, the board said, its expenses are paid from private funds.

The court rejected that argument.

"Defendant is incorrect in claiming that the expenses identified … are payable out of private funds," the court ruled. "Because the government-sourced monies in the fund originate in an appropriation that specifically earmarks their use for Thrift Board expenses, it cannot be successfully argued that the Thrift Board is drawing on private funds." The court also noted that the board's annual budget is subject to congressional review.

AMS was hired in 1997 to modernize the TSP computer system, giving federal employees more tools to manage their 401k-style retirement accounts. The $30 million project was slated for completion by May 2000. After four years and four schedule delays, the TSP board fired AMS and sued for $350 million in damages. Last November, a federal court ruled that the board could not file that suit independent of the Justice Department. The board is appealing the ruling.

After firing AMS, the board hired Alexandria, Va.-based Materials, Communication & Computers, Inc. to complete the modernization. That effort was supposed to be completed in September, but on Aug. 20, the board announced the new system would not be up and running until November.