Report 99028.1 Summary - December 2002

Child Support Enforcement Program:

The Procurement of a Single, Statewide Automated Child Support System is Taking Longer Than Initially Estimated, With Several Challenges Remaining

HIGHLIGHTS

Our review of the Department of Child Support Services and Franchise Tax Board's (project team) procurement of a single, statewide automated child support system (child support system) revealed the following:

  • Regardless of its use of a competitive performance-based contracting model, the project team only received a single final proposal.

  • The single proposal received was evaluated and found to be responsive and viable, with an estimated total system cost of $1.3 billion over 10 years.

  • Nothing came to our attention during our review of the evaluation process to indicate bias or favoritism toward any bidder.

  • The project team still needs to complete contract negotiations and a feasibility study as well as obtain approvals. It also needs to procure a state disbursement unit function for the child support system.

RESULTS IN BRIEF

The federal Family Support Act of 1988 requires each state to establish a statewide automated system to track and collect court-ordered child support payments and to locate nonpaying parents. Such a system would replace California's current county consortia systems, which do not meet federal requirements for a single, statewide automated child support system. Previous attempts by the State to comply with federal requirements have been unsuccessful, resulting in sanctions in the form of penalties and reduced funding imposed by the federal government.

In 1999, the California Legislature outlined a process for establishing a single, statewide automated child support enforcement system (child support system). Chapter 479, Statutes of 1999, assigns the responsibility for procuring, developing, implementing, and maintaining such a system to California's Department of Child Support Services (department), with the Franchise Tax Board (board) as its agent. Although the department is the single state agency responsible for the child support enforcement program, the board has a major role in procuring the child support system, in part because of its previous successful tax automation projects. The legislation also requires the Bureau of State Audits (bureau) to monitor the evaluation and selection process for any signs of bias or favoritism toward any bidder. This report describes the progress made toward procuring a child support system and our review of the process.

The statute requires, among other things, that the board develop a plan, subject to federal approval, for procuring a child support system. In developing the plan and procuring the system, the board is to use techniques that have proven successful in its previous technology efforts.

Because of the State's previous failure to meet federal deadlines for a child support system, the federal government is imposing sanctions on the State in the form of penalties that may cumulatively total approximately $1.3 billion by 2006. In addition, the federal government has reduced its funding support for the State's child support system from the 90 percent it allowed in 1990 for the planning, development, and installation of transfer systems to its current support level of 66 percent. The federal government is also weighing in on major milestones in connection with the development of the child support system and is monitoring the current procurement process. For example, it has reviewed or authorized the release of certain documents, such as the solicitation document and the criteria used to evaluate the proposal, that are critical to the process.

A project team made up of staff from both the department and the board separated the procurement into two parts: a statewide system (the main system) and a state disbursement unit, a centralized system for collecting and disbursing child support payments. According to the project team, the state disbursement unit procurement, which is in the beginning stages, is anticipated to be more straightforward than the main system because it will be a service contract. Therefore, the team believes the time necessary to procure that system should be shorter.

The procurement of the main system has been underway for more than two years. The early estimates by the project team called for the contract for developing the main system to be awarded in July 2002. Due to unforeseen schedule changes, the project team now estimates that it will award the contract in February 2003. However, because the project team has identified further uncertainties, the contract award date may be extended to July 2003.

The project team has overcome several obstacles. For example, shortly before the final proposal deadline of February 28, 2002, the project team decided to significantly change the scope of the quality assurance services. As a result, the project team determined that it was necessary to replace its quality assurance contractor. According to industry standards, the role of quality assurance is to provide adequate assurance that processes in the project life cycle conform to their established plans. Another obstacle was the withdrawal of all but one team of qualified vendors from the competition. As a result, the project received only a single proposal from a group of companies that includes International Business Machines, Accenture, and American Management Systems (IBM group). Regardless of these obstacles, the project team continued following the process it developed before soliciting proposals.

The main system that the IBM group proposed had an estimated total system cost of more than $1.3 billion over 10 years. The project team evaluated and scored the proposal and found that it met the requirements set forth in the document that solicited proposals, known as the solicitation document, for the child support system. However, because it received only a single proposal, the project team engaged a consulting firm to examine the reasonableness of the costs. The resulting report is still confidential due to the ongoing nature of the procurement. The project team has moved forward with the IBM group and issued a letter of intent to enter into contract negotiations in June 2002. The cost reasonableness assessment is scheduled for completion at the end of contract negotiations, but before the contract is awarded.

During our evaluation of the process used to score the proposal, nothing came to our attention that would cause us to conclude that the project team deviated from the evaluation criteria, nor has anything come to our attention to indicate that the project team materially deviated from the predefined evaluation process in a way that would have resulted in unfair treatment of the potential vendors.

The project team still faces a number of challenges before it completes the procurement of the main part of the child support system. It must finalize contract negotiations, complete the feasibility study of viable options, and obtain approvals before awarding the contract. In addition, the majority of the steps necessary to procure the state disbursement unit remain.

AGENCY COMMENTS

The department and the board agreed with the information contained in this report and felt that it accurately described the progress made and the processes used for this procurement.


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