OPM terminates contract for electronic retirement calculator

The Office of Personnel Management on Thursday ended a contract with Hewitt Associates because it was not satisfied with the company's performance in creating, developing and maintaining an electronic retirement calculator.

Ronald Flom, OPM's senior procurement executive, said during a press conference that the agency would continue its RetireEZ modernization project without Hewitt, a human resources consulting firm in Lincolnshire, Ill. The 10-year, $290 million contract was canceled because Hewitt could not demonstrate that the retirement calculator and modeling portal worked.

"Unfortunately, they have failed to meet the requirements of their contract," Flom said. "Since Hewitt has proven unable to deliver a working engine which will help us meet our goal of enabling retirees to plan for retirement and calculate their payments, we have no choice but to find an alternative means of doing so."

In May, OPM officials told Hewitt to stop working on the system after the company failed to deliver a tool that would allow a group of employees near retirement to model different retirement scenarios. In a round of testing of the retirement calculator, only five of 61 functions passed.

Another round of testing performed by Hewitt last week was "disappointing," with only a 33 percent pass rate, Flom said on Thursday. The contract required an overall 95 percent pass rate, he said.

Flom said that while Hewitt had originally created a retirement calculator that worked well in a commercial environment, customizing the system to fit the complexities of federal retirement proved difficult.

"During the stop work period, we worked with them and communicated and tried to work through some issues with test results, but we just fell short," he said. "They may have underestimated the difficulty of delivering what we needed."

Delivery of the calculation engine would have cost $27 million, of which OPM has paid $21 million thus far, Flom said. Hewitt could be liable for any increased cost of awarding a new contract, he said. For example, if the cost of a new contract is $30 million, Hewitt could be liable for the $3 million difference. Flom added that OPM cannot recover its full payment to Hewitt, since the agency derived some value out of the contractor's work.

"We have to break out what work was performed that has provided value and what we could possibly recover," Flom said. "But I can't tell you that we're going to go after them for a certain sum of money."

Hewitt has the right to challenge OPM's decision before the Civilian Board of Contract Appeals within 90 days or the U.S. Court of Federal Claims within one year. Hewitt spokeswoman Amy Wulfestieg said on Thursday that the company will "vigorously challenge OPM's attempt to terminate this contract for default." She noted that the company had delivered on its contractual obligations and had taken extra steps to try to ensure the success of the project despite serious deficiencies on OPM's part.

"OPM's decision today … was very disappointing," Wulfestieg said. "Ultimately, OPM's decision is not in the best interest of the more than 5 million federal employees and retirees the system would have served, or the taxpayers who ultimately fund this initiative."

Meanwhile, OPM Acting Director Michael Hager said on Thursday that other components of RetireEZ will continue. Even apart from the calculation engine, he said, maintaining current, complete and accurate employee data is a major portion of the overhaul.

Hager noted that a data conversion project has integrated information from multiple sources for more than 1.5 million active federal employees and that about 2 million paper records for active federal employees have been converted to electronic data. OPM also has captured more than 8 million images of records for more than 1 million active employees, he said.

OPM Deputy Director Howard Weizmann said that OPM also would work to convert remaining paper records and data into an electronic format, eliminate interim retirement payments and overhaul its call center to improve customer service.

"The goal is to allow an employee to view their personal records and model potential retirement scenarios and even apply for retirement electronically," Weizmann said. "That's down the road, because we have to crawl before we walk."