$80 Million HR Technology Project Gone Wrong - Very Wrong

It's being called an "$80 million information technology fraud scheme" against the New York City government. The technology, known as CityTime, is a custom made time and attendance system which includes online timesheets and biometric devices.

The story begins in 1996 when the city contracted with Science Applications International Corp (SAIC) to build a timekeeping system that would track schedules for 165,000 employees in 5000+ job titles. The city comptroller at the time estimated that the project would take 2-3 years to complete. The city budgeted $63 million. This alone sounds like a hefty price tag but we can give them the benefit of the doubt since newer technology was not available in 1996 that makes projects like this much less complicated and time consuming. (Though one wonders if they would ever realize $63 million dollars in savings from such a system.)

In 2003 SAIC put their hands in the air and said they would not be able to complete the project. But the city wanted to finish and offered to up the budget to $114 million. (Now one really wonders about the ROI. Throwing good money at bad?)

SAIC still balked but made an offer to scrap the project and start from scratch. The new project would be delivered to the city at cost -- based on hours worked by the contractors to complete the project. No cap was placed on the number of hours and no one could say how many hours would be likely.

Uh oh. The project designed to make sure everyone is on the up-and-up with their work hours just created a blank check for the contractors. Seven more years and $722 million later, the mayor abruptly stopped payments this year when the fraud came to light.

(Now we're REALLY beyond any possibility of ROI for this system.)

Six people have been indicted for $80 million fraud and $850,000 was seized from one of the consultant's bank deposit box.

The responsibility for overseeing the project fell to Joel Bondy, the current Executive Director of the Office of Payroll Administration. Bondy had been the lead on the project prior to being tapped by Bloomberg for the position in 2004. Bondy managed over another contractor Spherion, whose role it was to monitor SAIC for quality assurance. On performance reviews, Bondy rated Spherion (who happens to be his former employer) as excellent. “The contractor’s work has consistently exceeded expectations.”

Unfortunately, criminal charges suggest the opposite.

Investigators said that from 2005 through this December, Mark Mazer, Spherion’s lead quality assurance consultant on CityTime, awarded lucrative contracts to people he knew who then kicked back about $25 million to him. Prosecutors said these individuals also billed for work that was never performed and hid the money in shell companies that were in the names of Mazer’s mother and wife."

Bondy is reported to have links to Mazer as well. According to news reports he worked with Mazer in the past in another city office. Bondy was placed on unpaid suspension. He has since resigned effective December 31, 2010.

With the complexity of HR technology contracts it's hard to imagine such a thing happening. Perhaps it's a good reminder to everyone who purchases HR technology that your contracts are only as good as the people involved in carrying out the work behind the contract. That means good, trustworthy managers internally and impeccable vendors who are committed to exceeding your expectations, not your budget.