Thrift board sues AMS over systems revamp

Thrift board sues AMS over systems revamp


Alleging 'reckless and willful misconduct,' the agency that handles $100 billion in assets for federal retirement accounts has fired its record-keeping system contractor.

The Federal Retirement Thrift Investment Board this month also sued American Management Systems Inc. of Fairfax, Va., following a series of schedule delays and cost overruns on the project. The board seeks $50 million in compensatory damages and $300 million in punitive damages.

The suit, filed in the U.S. District Court for the District of Columbia, claimed that AMS failed to deliver a record-keeping system for the Thrift Savings Plan, a retirement fund for 2.5 million federal workers.

In its suit, the board said AMS intentionally misled it to win the contract, then 'made a series of misrepresentations about its progress on the project, concealed defects in its execution of the contract and failed to disclose the extent of likely cost overruns.'

In a statement, AMS said it was disappointed by the action and that the suit was intended to 'shift the focus from the board's own deficiencies and contract breaches.'

The board in 1997 awarded AMS the upgrade contract, which called for completion of the project by May of last year at an estimated $30 million. But by the time the board fired AMS, the price tag had reached $87 million, the suit said, and completion had been pushed to January of next year.

After it fired AMS, the board awarded a contract to Materials, Communications and Computers Inc.

The Alexandria, Va., company will finish the project within a year for no more than $20 million, the board said.

'Matcom will look at everything AMS has done and will use what, if anything, can be used,' a board spokesman said. 'But at this point, that doesn't look like much.'

What lies behind

The original plan called for AMS to customize OmniPlus software from SunGard Employee Benefit Systems of Birmingham, Ala. The upgrade was to let the system process transactions daily, not monthly as it does now. It also was supposed to improve customer service, offer participants access to two additional funds, reduce the need for manual processing of transactions and make maintenance and upgrades easier.

But the board said AMS withheld key personnel'including company vice president Robert Silverman and 15 other staff members'after promising that they would work closely on the project. The company also failed to implement a rigorous quality assurance program or set a configuration management plan and did not efficiently customize the OmniPlus software, the suit alleged.

The board said AMS created 1.3 million lines of code'200,000 more than the original software'making the system difficult to maintain. AMS said it wrote the code to accommodate the board's changing requirements.

The suit is not the first multimillion-dollar litigation AMS has faced in the last year. The company agreed to pay $185 million to Mississippi last August to settle a lawsuit the state filed after hiring AMS to build an integrated tax collection system [see].

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