Report 97116 Summary - March 1998

Health and Welfare Agency:

Lockheed Martin Information Management Systems Failed To Deliver and the State Poorly Managed the Statewide Automated Child Support System

Results in Brief

In its contract with the State of California, Lockheed Martin Information Management Systems (Lockheed) promised to design, implement, and maintain the Statewide Automated Child Support System (SACSS). However, our review revealed that Lockheed did not fulfill its many promises to the State and failed to deliver a functional child support system. Specifically, we found that Lockheed did not deliver the project team it had promised, developed a flawed computer system that failed testing, and did not supply many of the deliverables promised in its contract with the State. Lockheed's failure to comply with the terms of its agreement contributed to the termination of the contract and a dysfunctional computer system.

Although we believe that Lockheed is responsible for many of the problems with SACSS, the State also contributed to the failure of SACSS because it did not take adequate action on quality assurance (QA) contractor warnings and mismanaged the administration of the project, thereby wasting millions of taxpayer dollars. From the planning to the installation phases of the project, the State made poor management decisions despite paying QA contractors $3 million for independent, impartial assessments of the project's methods, techniques, deliverables, and progress throughout the life of SACSS. Even though the contractors repeatedly warned the State about significant deficiencies in the project staffing and the system developed by Lockheed, the Department of Social Services (Social Services) and the Health and Welfare Agency Data Center (data center) failed to correct the problems and continued their efforts to install SACSS. Further, Social Services and the data center inappropriately increased the prices paid to Lockheed under the contract by more than $14 million. They also made inappropriate payments on the SACSS project in excess of $27 million, including payments for incomplete and inadequate deliverables.

The failure of SACSS cost taxpayers more than $111 million, and the State will pay up to another $11 million for Lockheed to maintain SACSS for those counties currently using the system. Additionally, Social Services estimates that the State now faces as much as $144 million over the next four years in potential federal penalties. The State also faces the challenge of beginning the project all over again while many children wait for child support payments from absent parents whom counties are unable to locate without help from a statewide automated system. In addition, recent welfare reforms increase the importance of improving child support collections because aid to families is limited under new laws.

A "Cascade of Events" Contributed to the System's Failure

SACSS did not fail as the result of one defect; rather, it was an accumulation of problems that caused the project to fail. When the airline industry investigates an accident involving a commercial airliner, it refers to the series of events that led to the accident as the "cascade of events." The cascade of events helps explain how a series of unrelated events or decisions formed a unique set of circumstances that led to the accident or failure. Similarly, we have examined the cascade of events that ultimately contributed to the failure of SACSS. The following is a summary of some of the more significant events that we believe contributed to the project's failure:

  • The federal government required states to transfer existing child support systems from other states or counties rather than build entirely new systems. However, only a few available systems met the federal government's requirements and were suitable for transfer to other states. As a result, California, like many other states, attempted to transfer incomplete and incompatible systems, an effort that added costs and delays to the project. The federal government eventually recognized the obstacles associated with transfer systems and in July 1994, eliminated it as a requirement. Unfortunately, the federal government's realization of the problems with transfer systems came too late for SACSS.

  • The federal government took five years to provide states with final requirements for the system. Because the federal government did not provide states final system requirements until June 1993 (one year after the award of the contract to Lockheed), states were under tremendous pressure to develop and implement a very complex system within a compressed time frame; the original deadline being October 1, 1995. California's size, diversity, and organizational structure for child support enforcement made this challenge even greater than for other states.

  • The federal government's mandated deadline for completing the project negatively influenced the State's decisions. Automation projects normally are driven by a need or a desire to improve upon an existing system and to support improved processes. In the case of child support enforcement, the United States Congress mandated automation as a means to improve states' child support enforcement systems and to increase child support collections. As a part of that mandate, Congress set the deadline at October 1, 1995, later extended it to October 1, 1997, and established severe financial penalties for states failing to comply with the mandate. The focus on meeting the federal deadlines significantly influenced many of the State's decisions regarding SACSS. For example, although the system failed user acceptance testing, the State installed the defective system in counties in its efforts to meet the federal deadline.

  • Lockheed did not provide the project team it proposed. Throughout the life of the project, the State's QA contractors raised concerns about the quality and number of Lockheed's staff, which experienced a high turnover rate that adversely affected the project. For example, Lockheed's project manager and conversion manager each changed five times during the project. Moreover, according to the staff lists provided by Lockheed, only 10 of the 87 staff specifically named in the proposal actually worked on the project.

  • Lockheed developed a flawed system design. The general and detailed system design documents, the "blueprints" for SACSS, contained numerous identified flaws and deviations from system requirements. These problems were documented by Social Services and its QA contractor and acknowledged in writing by Lockheed early in the project. However, despite the fact that these issues were identified, documented, and discussed as far back as 1993, many of these problems remain unresolved today.

  • Lockheed failed to test SACSS adequately. In May 1995, the QA contractor criticized the system testing performed by Lockheed, and raised concerns about the ability of SACSS to perform within established parameters. Rather than requiring Lockheed to fix the problems, Social Services had Lockheed verify during the next phase of the project that the system met the State's requirements. However, this revised approach did not ensure that the system would function according to design.

  • Expanding scope of the project. With the approval and encouragement of the federal government, the State expanded the scope of the SACSS project beyond the minimum requirements established by Congress. As SACSS was being developed, the State further increased the scope of the project to accommodate the diversity of the counties. Moreover, changes in state laws added new requirements for the system. The expansion and changes in the scope adversely affected the project by increasing its complexity thereby adding to the risk of failure.

  • State did not adequately resolve problems. The State paid its QA contractors $3 million to help oversee Lockheed's work and to ensure the State was getting what it paid for. However, despite the contractors' repeated warnings of deficiencies with Lockheed's staffing, development practices, testing procedures, and with the system, Social Services and the data center failed to take adequate action and continued their efforts to install SACSS.

  • State mismanaged the SACSS project and wasted millions of taxpayer dollars. As administrators of the SACSS project, both Social Services and the data center made numerous management decisions that contributed to the failure of SACSS and cost the taxpayers millions of dollars. From the planning through the installation phases of the project, the State made poor management decisions. For example, the State paid Lockheed for incomplete contract deliverables, and inappropriately increased contract prices paid to Lockheed by over $14 million. Additionally, the State failed to monitor and control total costs of the SACSS project and did not establish adequate internal controls over accounting processes. Finally, the State did not establish satisfactory contract penalty and risk-sharing provisions and poorly negotiated contract amendments.

To avoid a repetition of the Statewide Automated Child Support System's (SACSS) failure, the Health and Welfare Agency should do the following:

  • Create a governance council led by county district attorneys and state representatives to oversee future child support enforcement automation efforts.

  • Ask California's congressional delegation to pursue changes in federal laws governing child support enforcement automation efforts.

  • Provide high-level support for the project and create incentives for the counties to develop solutions for the State's child support enforcement automation needs.

  • Improve the policies and procedures at the Health and Welfare Agency Data Center and the Department of Social Services that have allowed inappropriate, unjustified payments and contract amendments to go undetected.

  • Ensure that the entity selected by the governance council to manage any future child support enforcement automation efforts learns from the lessons of the first SACSS project and utilizes good project management techniques.
In addition, the Legislature should memorialize Congress to amend federal laws governing child support enforcement automation efforts.

Agency Comments

The Health and Welfare Agency (State) generally agrees with our recommendations and with many of the audit findings regarding warning signs and project management issues. However, the State disagrees that its management decisions contributed to the failure of the project and that it allowed the counties to purchase personal computers and printers for SACSS prematurely.