Off the rails

GCN Management Photo by Steve Barrett

'I wanted to go straight ahead, but within proper business principles. You define the core issues and the real problem,' New Jersey's former CIO Wendy Rayner says.

When a $7.9 million project to redesign part of New Jersey's tax systems suddenly looked like it would cost $21.8 million, Wendy Rayner knew she had a crisis on her hands.

Rayner, then the state's CIO, needed to save the Tax Redesign Project at the state's Labor and Treasury departments, which aimed to put quarterly unemployment and disability tax collections online.

The case illustrates one way to deal with a program that has gone off the rails because of budget or schedule overruns or nonperformance by contractors.

The project, begun in 1997, fell into crisis two years later because it was behind schedule and over budget, officials said.

Contractor Deloitte & Touche LLP of New York had submitted a claim for a $13.9 million increase to the original $7.9 million contract, according to Treasury spokesman Tom Vince.

The company argued that the state owed more money because Deloitte had done work outside the scope of the original project, Rayner said. 'They were going for relief on the time commitment and for additional funds,' Rayner said.

Rayner's first response was to gather information. She sought separate meetings with state officials and the contractor to get both sides of the story.

Safe to speak here

The meetings were held in a neutral environment to encourage the parties to be open and honest, Rayner said. She also involved the state's Purchase and Property Division, which is responsible for procurement policy.

'I wanted to go straight ahead, but within proper business principles,' she said. 'You define the core issues and the real problem.' She emphasized the importance of gathering facts before approaching high-level executives of the other party.

Among the issues in dispute between New Jersey and Deloitte were the state's view that the vendor had not responded to its needs and the question of whether implementing the original contract through Labor instead of Treasury had led to confusion.

Eventually, state attorneys participated to ensure that Deloitte fulfilled its contract.
'It took quite a while, and we were going to go to court,' Rayner said. 'But eventually we settled out of court.'

She said the contract was clear on the state's expectations of the contractor. Clear contract language is essential to prevent such problems. Nevertheless, 'we were at loggerheads,' she said.

After the attorneys intervened and the prospect of legal action arose, Rayner said, 'we negotiated certain parts of it, and they came to terms.'

Under the agreement, New Jersey added $6 million to the original contract, Vince said.
The governor also issued an executive order that centralized the state's business contact functions for taxation in Treasury.

After Rayner had mapped out her plans, she went over them with the vendor and staff, and tracked progress in weekly meetings, she said.

As an exit strategy, Rayner and other New Jersey officials continued to monitor the state and contractor agreements. 'You make sure it is wrapped up in an agreed package because you will meet these people [again],' Rayner said.

Among the lessons learned was that coping with a crisis 'is really about good management principles,' Rayner said. 'You have to make sure you have the right resources for the project.'
She noted that the work needed for the Tax Redesign Project did get done'the tax collection system is operational at www.state.nj.us/njbgs/services.html#online. 'It took all hands on deck to do it, but that happens,' Rayner said.

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