Thrift board accepts findings of Senate probe

The Thrift Savings Plan's governing board last week strongly endorsed the findings of a Senate investigation into a failed $36 million project intended to modernize the TSP's computer records.

The Senate inquiry determined that communications breakdowns and staffing shortages led to the failure of the TSP contract with American Management Systems. The 401(k)-style federal retirement organization abandoned the contract in 2000 and hired a new firm to bring its accounts online. The failed project cost TSP participants $36 million, which was paid for by raising the annual cost of each account to 11 basis points, or 11 cents per $100 invested. Thrift board officials expect the cost to drop back to six or seven basis points next year.

The new contract, now successfully completed, cost TSP participants another $33 million.

Sens. Susan Collins, R-Maine, and Joseph Lieberman, D-Conn., the chairwoman and ranking member of the Senate Governmental Affairs Committee, told the investment board that future technology projects should be based on guidance from independent experts, and that officials should avoid relying on a single contractor. The senators also said the board must ensure that participants do not bear the financial responsibility for failures.

"Your committee and its staff are to be commended for both the extensive effort and thoughtful insight which was required to perform the review," said investment board Chairman Andrew Saul in a letter to Collins and Lieberman. "Your comprehensive review of this ill-fated project has helped us to better understand what occurred and how to avoid similar problems in the future."

Saul's letter, however, made a conspicuous effort to deflect any lingering blame from the Thrift board. He noted that all but one of the current board members took their positions after the computer modernization unfolded, and he listed a string of recent-and successful-hiring and procurement measures.