Is a New IT System Worth $487M?

In the spring of 2015, NYCERS initiated a five year project (LRP) to modernize its IT systems. It was supposed to cost $132M and take five years.

It is now 2023, and the first phase of the replacement project is still in test. NYCERS has already budgeted $329M as of FY-2024 for the project and is projecting another $158M as of FY-2027, the new end date for the project. That adds up to a total of $487M. NYCERS unfortunately has a track record of underestimating future costs. So we should expect a higher total cost assumimg completion of the project.

The NYCERS budget was $55.2M in FY-2015. If you project a 3% increase every year, the FY-2024 budget would be $72.0M. The actual budget for FY-2024 is $165.9M.

In 2014, the City experienced a runaway IT project, CityTime. You can read the DOI report on the NYC.gov website. Just search for "CityTime" on the website. The LRP project is starting to look a lot like the CityTime project. There is no evidence of corruption but there is a lot to support a conclusion of gross incompetence.

Mayor Adams Budget Knife and the FY-2024 NYCERS Budget Update

In a June 17, 2022 posting, I outined the history of NYCERS administrative budget.

On June 21, 2023, the NYCERS trustess adopted the FY-2024 admin budget.

It was a 13.3% increase over the FY-2023 budget. See the updated table below. The numbers speak for themselves. I wonder if the trustees are aware of this spending history.

At the same time NYC adopted a FY-2024 budget that was a reduction from $111.2B to $107.7B, a 3.5% cut. To be fair, the FY-2023 budget was originally adopted at $101.1B. What made the Mayor allow NYCERS to increase its budget by 13.3%, while the City's budget was cut by 3.5%?

History of NYCERS Admin Budget 1996-2024

Fiscal Year	F/T Count	P/T Count	College Aides / Hourly	PS Budget	OTPS Budget	Fringe	Total	% Increase
2024	501	30	16	$54,290,508	$98,040,138	$13,633,903	$165,964,549	13.37%
2023	485	30	16	$43,016,089	$90,436,500	$12,942,144	$146,394,733	7.92%
2022	474	27	16	$38,397,943	$85,531,063	$11,719,465	$135,648,471	37.94%
2021	438	27	16	$36,842,549	$50,210,145	$11,283,945	$98,336,639	7.10%
2020	438	27	16	$35,262,139	$45,862,557	$10,689,350	$91,814,046	4.97%
2019	428	35	0	$33,592,612	$43,532,302	$10,344,565	$87,469,479	39.44%
2018	411	35	0	$31,704,410	$21,832,718	$9,194,015	$62,731,143	3.55%
2017	401	35	0	$31,056,080	$20,916,796	$8,605,288	$60,578,164	4.81%
2016	392	35	0	$30,233,989	$19,407,619	$8,155,517	$57,797,125	4.70%
2015	392	5	30	$29,131,972	$18,154,572	$7,915,476	$55,202,020	3.68%
2014	383	5	30	$26,813,635	$18,761,240	$7,669,819	$53,244,694	2.18%
2013	380	5	20	$26,623,635	$17,951,822	$7,532,499	$52,107,956	1.93%
2012	372	12	0	$25,756,827	$18,781,428	$6,603,649	$51,122,139	1.14%
2011	372	12	0	$26,046,827	$18,492,228	$6,006,573	$50,545,628	2.76%
2010	372	12	0	$26,046,827	$17,777,228	$5,362,640	$49,186,695	1.88%
2009	371	13	0	$25,189,842	$18,208,861	$4,879,903	$48,278,606	6.22%
2008	371	13	0	$23,597,857	$17,259,313	$4,799,066	$45,656,236	10.80%
2007	364	13	0	$22,616,783	$14,258,471	4,375,788	$41,251,042	5.73%
2006	342	13	30	$20,255,911	$14,683,855	$ 4,076,823	$39,016,589	1.01%
2005	342	13	30	$19,737,687	$14,851,355	$3,887,624	$38,476,666	1.2%
****
1996	154	0	30	$6,199,709	$2,573,715	na	$8,773,424	5.93%

The Bleeding Has Started - Legacy Replacement Project - $85.0M - Accenture

Legacy Replacement Project - $85,076,693 – Accenture

On February 26, 2021 NYCERS finally awarded the Legacy Replacement Project (LRP) contract to Accenture. The cost of the contract is $85,076,693. The LRP is supposed to be a five-year project. It was first proposed in the spring of 2015.

I have been writing about the LRP for the last six years. My first post was in 2015. My most recent post was in 2020. This boondoggle started in the spring of 2015 and has been dragging along ever since. Thank god the legacy systems built by civil servants have lasted over 40 years.

On of April 8, 2021, in support of the LRP project , the trustees adopted a massive increase in the NYCERS FY-2022 admin budget. The amount approved was $136.0M. As contrast, the budget in FY-2015 was $55.0M. This is at the same time as the mayor is cutting the medicare benefits of NYC retirees.

I have no hope that this lunacy will stop. After a six year delay in the start of this project, the trustees at the board meeting were thanking Liz Reyes for her great work on the project. What can you expect from people who are brain dead.

Accenture LRP Contract

The initial work, Phase 0, is a ten-week effort by Accenture to analyze its contract plans and possibly propose changes but with no cost increases. This phase may be longer than ten weeks. At the end of this phase either side can opt out of the contract without penalty or cost.

The second part of the contract, Phase 1, is scheduled to start July 1, 2021 and end December 31, 2021. The five-year term of the contract gives us an end date of June 30, 2026. I wonder who will be in the White House then.

Other Contracts Linked to the LRP Project

1. NYCERS has paid Gartner, the consulting firm, $7.1M since FY-2015.
2. Risk advisor to the Board of Trustees. The contract was awarded to Linea Solutions, Inc. on 7/21/2020 at a cost = $4,598,496 with a period of five years.
   • Will need to be place until 6/30/2026.
3. Quality Assurance advisor (projected award date - April 30, 2021) to NYCERS staff for the project. Contract being negotiated. Cost unknown. Period five years.
   • Will need to be in place until 6/30/2026.
4. Mainframe maintenance for five years while the LRP is being implemented. Contract awarded on 2/11/2019 to Blue Hill Data Services. Cost = $3,894,000. Period of five years.
   • Will need to be place until 6/30/2026.
5. FileNet maintenance for five years while LRP is being implemented. Open RFP issued on 11/7/2019. Cost unknown.
   • Will need to be place until 6/30/2026.
   • NYCERS has allowed this system run out of support both from Microsoft and IBM.
6. Roughly 30 computer consultant contracts, each averaging $150,000 per year. Yearly cost of $4.5M
7. Office reconfiguration in FY-2020 that cost $3,448,080.
   • In FY-2000 NYCERS moved into 133,000 sq. feet of totally brand-new class A office space. It was the most modern office space in the NYC government. It rivaled anything in the private sector. God help us what they have done to that office.
8. Customer Relationship Management (CRM) software. Contract was awarded to Accenture, the same firm with the LRP contract, on 8/8/2018
   • at a cost = $14,832,123, with two modifications:
   • $654,000 as of 6/1/2020, and
   • $138,780 as of 12/24/2020.
9. In FY-2019 and FY-2020 NYCERS paid Accenture $11,575,713, and $4,381,360 to a third-party firm for licenses & support as part of the CRM project.
   • Not sure what the value of the CRM is to the NYCERS membership.
10. A replacement IVR system contract was awarded on 12/29/2020 to Genesys Telecommunication Labs. Cost = $712,885.
    • The first phase of this system is promised to be in place by 4/30/2021. It will entail switching over from in-house Avaya interactive voice response (IVR) system to a cloud-based phone system integrated with the CRM system. At this point Genesys will not have an IVR in place.
    • Phase 2 does not yet have a timeline, scope of work, or I suspect a price tag. It is not clear whether Phase 2 is covered by the initial cost figure.
    • Phase 2 is the part where Genesys will create the new IVR system. Sounds like Avaya needs to stay in place until after Phase 2 is completed.
    • I do not see how this will solve the call center chaos that exists at NYCERS. In spite of the obvious, there is no word of increasing the call center staff.
11. At the Dec 10, 2020 board meeting the Trustees adopted a resolution approving the ten-year LRP project at a cost of $279.0M.
    • Not sure what value this has except to warn everyone that a tsunami is coming.

On top of Lead Poisoning problems, the Housing Authority will have to pay $13M extra for NYCERS mistakes.

You can read the story in the following link, IT fiasco

FY-2019: The 42% Budget Increase and the Legacy Replacement Project

Introduction

On April 12, 2018 the NYCERS Board of Trustees adopted the agency’s FY-2019 administrative budget with an increase in the total PS(personnel services) & OTPS(other than personnel services) budget from $53,534,128 to $75,940,621. That is a $22,406,493 increase, a 42% jump from FY-2018. What was also embedded in the budget document was a five year projected increase in the OTPS budget of $289M to pay for the “Legacy” project.

On April 13, 2018, I made a FOIL request for the budget document and the associated Q&A between the NYCERS staff and OMB/Trustees. On May 25, 2018, I received part of the budget document. NYCERS, however, refused to send me copies of the written Q&A’s quoting the usual nonsense excuses that government agencies use to hide information from the public.

On May 30, I sent a text to John Adler. I told him that, in addition to the $22M increase in the FY-2019 budget, he had just committed the agency to a total additional $290M OTPS expenses over the next five years. I asked him if he was crazy. He didn’t write back.

This is the new executive director’s first administrative budget.

Unfortunately, in her executive statement she only provided an update on the schedule for the “Legacy” project. That project now includes the

1. legacy replacement project,
2. the customer relationship management program,
3. the contact center modernization project, and
4. an increase in the agency’s training program.

She made no mention of the three year delay in the “Legacy” project or the massive increase in its five year price tag from $132M to $289M. This was her opportunity to critically analyze the project and hopefully impose some corrections on this fiasco. She chose not to.

Bump in the Road

In a bizarre twist, at the June 14, 2018 NYCERS Board meeting, the executive director, out of the blue, notified the trustees that she was trashing the current RFP for the legacy replacement project.

NYCERS had released that RFP on December 28, 2017.

She said that there were cost issues and insufficient responses to the current RFP. She provided no other substantive details. The chair thanked her for her courage for taking the action. She provided the trustees with no financial details about the impact of her decision on the upcoming budget. The trustees asked no questions about her decision. They asked no questions about its impact on the five year $289M cost.

Since 2015, I have posted multiple warnings about the fatal flaws in this project. It is not like this mess sneaked up on anyone. $289M is serious fraud risk.

On the dark side, the executive director is still going forward with the customer relationship management program, the contract center modernization program and the training increase.

These projects should also be held up until basic agency wide IT decisions are settled. The legacy replacement project is the primary building block of the “Legacy” project and should be settled first. I am quite sure NYCERS is still going to still spend the added $22.1M in FY-2019.

Budget Background

Outlined below are the budget items which were significantly increased in the FY-2019 budget.

PS Items

The PS budget was increased by $700,000 with 12 new hires. This brings the regular full time staff to 427 and part-time staff to 35. The Loan program has another 14 full time staff.

Last year, despite the Chair’s objection, the Board approved an increase of 10 new hires in the FY-2018 budget. Four more full time staff were approved in mid-year. This year the Chair had no objection to the 12 added staff.

Two of these staff will to support the effort to improve the WTC disability delays. The remaining ten will support the never ending delays with the computing retirement benefits because of the labor contract settlements which started in 2014.

On a side issue: I suspect these staff increases are going to create workspace problems for the Long Island City business recovery site.

OTPS Items

The remaining increase in the FY-2019 budget, $21.7M, was in the OTPS portion of the budget, primarily to support the “Legacy” project. In FY-2015, NYCERS started cooking up the “Legacy” replacement project spending $800,000 on a contract with Gartner. Over the 2016-2018 period NYCERS has averaged about $1.5M a year on this project, mostly paid to Gartner.

Now after three years NYCERS is ready to open the fire hose on this project. The original completion date was June 2020. The target date is now at least June 2023 and maybe even later. The original five year cost was projected to be $132M. It is now $289M. There never was a public cost/benefit analysis for this massive IT upgrade project.

Note: Part of the OTPS increase is a $500,000 allocation for a new NYS Dept. Financial Services audit. Oh yeah, NYCERS is still waiting the last audit to be published.

Five Year Overview – Actually Eight

Cost Details

Listed below are the OTPS budgets for FY-2015 to FY-2023:

1. 2105 $18.2M
2. 2016 $19.4M
3. 2017 $20.9M
4. 2018 $21.8M
5. 2019 $43.5M
6. 2020 $87.5M(projected by NYCERS)
7. 2021 $89.4M(projected by NYCERS)
8. 2022 $91.3M(projected by NYCERS)
9. 2023 $93.2M(projected by NYCERS)

These figures are taken directly from the NYCERS budget document.

The sum of the OTPS amounts for the five years from 2019 to 2023 is $404.9.

Compare this amount to a normal expected OTPS cost for the same period. The 2018 OTPS amount is $21.8M. If you assume a rational 2% increase each year from 2019 to 2023, the sum of the five year would be $115.7M. See below:

1. 2019: $22.2
2. 2020: $22.7
3. 2021: $23.1
4. 2022: $23.6
5. 2023: $24.1

It appears that NYCERS is going to spend $289.2M on the “Legacy” project over the next five years. This is without the inevitable cost overruns.

Who Pays

Over the next five years the pension costs for the City and the participating employers will increase for this dubious and discretionary project as follows. The numbers below are based on the FY-2017 NYCERS CAFR –Appendix A, Page 7d.

The City

The City will pay $155.0M - 53.6% of $289.2M

The Public Authorities

1. The Transit Authority will pay $65.9M - 22.8% of $289.2M
2. The Health & Hospitals Corp will pay $42.8M - 14.8% of $289.2
3. The Housing Authority will pay $13.6M - 04.7% of $289.2

Budget Details

Listed below are some of the questionable items in this massive budget increase

23rd Floor

What may be the most bizarre item in the budget is a line item for a $2.5M expense recurring over the next five years. The item is labeled as the renovation of the 23rd floor at Adams Street for “Legacy” preparation space. The budget document that NYCERS sent me included no written description/justification for any line items in the budget.

Gartner

Gartner continues their NYCERS contract with an increase from $975,000 in FY-2018 to $2,520,000 for FY-2019. NYCERS has paid Gartner over $3.9M between 2015 and 2017. Gartner’s main business product is IT advice.

When I left NYCERS in FY-2005, NYCERS had 65 IT employees. My guess is that there are currently 80 IT employees on staff at NYCERS out a total of 406. Given this huge dependence on Gartner, either NYCERS’s IT management staff is incompetent or they are just plain lazy.

Training

The training budget was increased from $382,300 to $837,550, a 219% increase. The increase is projected through 2023. Training is generally a positive effort for an organization but there should be some strong justifications for such significant increase in spending in this area. I mean something like putting a dollar value or service measure on both the current expenses and the new added expenses. The obvious saving grace of this item is that it is less than $2.5M for the five years.

Equipment

• Mainframe equipment from $148K to $555K thru FY-2023
• PC/LAN equipment from $215k to $510K thru FY-2023

Contract Services

Mainframe

There is a line item increasing contract services from $115K to $560K in FY-2019 thru FY-2023

PC/LAN

This budget code contains the bulk of the “Legacy” expense for the next five years. There are two separate line items increasing contract services. One, which increases the 2018 charge from $1.297M to

1. 2019: $2.167M
2. 2020: $3.189M
3. 2021: $4.221M
4. 2022: $5.263M
5. 2023: $6.316M

And a second, that increases the 2018 charge from $2.470M to

1. 2019: $17.710M
2. 2020: $59.553M
3. 2021: $60.149M
4. 2022: $60.750M
5. 2023: $61.358M

Note: This is where the Gartner expenses are assigned ($850K in 2018 and $2.4M in 2019).

There are four new items being added in 2019. First, there is a charge of $1.8M for the implementation of Contact Center modernization. I think the contact center is another phrase for customer service center. Second, there is a charge of $9.35M for the CRM (customer relations management) implementation. Third, there is a charge of $250,000 for a CRM post implementation consultant. Fourth, there is a charge of $900,000 for COBOL programmers.

Also in this budget code there are currently 12 independent consultants being paid $1.620M in 2018 and at least 10 additional consultants for a total of $3.0M being paid 2019.

I wonder how many of these consultants are on H-1B visas? I also wonder why DC-37 isn’t pushing to have regular city workers, DC-37 members, do this work.

Software Licenses (recurring for five years)

1. New item in 2019 of $950,000 for CRM software maintenance support
2. A continuation of a $800,000 charge for contact center implementation
3. A reduction from $8500,000 to $230,000 for the CRM software and implementation.

Conclusion

I have used the word lunacy before about the “Legacy” project. So now I am scrambling to find another word. Maybe just stupid will do.

For the record I am the person along with a lot of talented IT professionals who created the original “Legacy” systems at NYCERS. I realize the systems need to be modernized. But don’t you think that $10M would do the job?

The enormity of outlined costs of this projected should require an equivalent benefit justification. Modernization does not by itself justify the huge projected expenses. The risks embedded in this project remind me of the CityTime project. Some of the NYCERS trustees sit on the boards of the other four city pension funds. Is this process being replicated in those systems?

I am also stating with almost absolute certainty that this effort will fail. It will fail so badly that NYCERS will not know how to get out from under its collapse.

The RFP for the Legacy Replacement Project

On December 28, 2017, NYCERS released the main RFP for the Legacy Replacement Project (LRP). This is three years after the NYCERS IT director proposed this project. The RFP itself is 88 pages long. With its 12 appendices and 13 templates it is at least 600 pages in total. We now know what Gartner was paid over $4M to do since the 2014.

Responses are due on March 12, 2018 and NYCERS plans to award the contract in December, 2018. That is another full year. You can guess what Gartner will be doing in 2018.

I have previously stated that NYCERS needs to implement a standard database platform for all agency applications and decide what hardware structure/s the agency will utilize going forward. The mainframe provides heavy duty processing power and can handle sophisticated database software but most modern software is being written for network structures including mobile access. Existing commercial software supporting the public retirement market is most probably running in a network environment.

On a personnel level NYCERS needs to review the IT management at NYCERS. Based on the major failures with database modernization, imaging/workflow systems, and the disaster recovery site, plus the squandering of staff resources over the last 12 years, the new executive director needs to make some hard decisions. She has already made some moves in that direction but she will have to do more.

What has the current IT division been doing the last 12 years to upgrade the legacy systems? What are the current personnel/fringe costs for the IT staff and what is currently being spent on consultants, equipment, software, and other services?

General Scope

On page 21 of the main RFP is the following paragraph

The proposed solution must support all of NYCERS' pension administration core business process areas and use cases, which are provided in Appendix 2 by leveraging robust business process and workflow management.

Appendix 2 is 240 pages long. I love words like "leveraging" and "robust". You can smell them a mile away.

But seriously, NYCERS is asking the vendor to redo the agency's entire IT applications structure, a massive undertaking. The existing legacy system was built over a 30 year period (1974-2005). Any replacement project will be a long process. A successful process will be made up of many clear short term tasks that build on each other and adapt to inevitable changes. It will be driven by competent in-house staff with the help of equally competent outside partners.

Workflow Software

The following is a quote from page 27 of the RFP under the section labeled "Required Applications" to be used in all proposed application architectures:

NYCEwork (IBM FileNet):

While NYCERS is looking to replace the BPM component of Filenet with the propose solution, the new solution is required to integrate with the content and document images stored in FileNet for the purpose of maintaing a single content storgae.

The selected Respondent will be responsible for identifying, testing and implementing all changes to NYCEwork (IBM FileNet software) required to support the proposed solution. This includes any required upgrades to NYCEwork (IBM FileNet) software necessary to support the proposed solution (must be explained in the proposal if needed)

In 2016 I wrote about the problems with NYCEwork. NYCERS only put NYCEwork into production in 2014 and now they want replace all the developed workflows. From 2008 to 2011, NYCERS paid the project vendor at least $2.2M to install this system. At that point NYCERS cancelled the contract but continued with the project. It is not clear what the costs were from 2011 to 2014. After suing the inital vendor NYCERS was only able to recover $301,000 in FY-2017.

So now the selected legacy vendor will have to redo at least all the workflows that NYCEwork is currently supporting. The vendor will, however, also have to utilize the existing FileNet document repository along with its database access structure. Trust me, this is huge job all by itself.

Customer Realationship Sofware

Just in case you thought this job was not hard enough, there is another little clip on page 27:

CRM:

The NYCERS CRM solution (under procurement) must be used as the CRM (customer service) platform for the pension administration solution, including all functionality required to be delivered by the CRM as described in Section D.1.

The selected Respondent will be responsible for providing all interfaces necessary to enable the CRM to act as a robust pension administration portal (see Section D.2.4) and closely collaborating with the CRM project team to help ensure clients receive the optimal self-service experience.

NYCERS is currently evaluating the CRM RFP that it issued in October, 2017. NYCERS expects to award this contract on February 1, 2018. Initially, the CRM vendor will have to interface with the current Legacy systems. In turn, the Legacy vendor will have to interface with the new CRM systems. It is very likely that the Legacy vendor will not fully know what the CRM interfaces look like when the Legacy vendor starts doing its work and may not know for quite awhile exactly what that they are.

Why wasn't the main legacy project structure put in place first and then have the CRM project aimed at the new replacement system?

Time To Stop

Of course, the huge time delay for the LRP project is a definite red flag for this entire effort. If NYCERS does not stop and restructure this project, five years from now we will be looking at $100M down a rat hole and no end in sight.

It is ironic that in 2016 I completed a conversion project of a membership system that was running on a mainframe system using flat files. It now runs on a network platform using a commercial software package with a relational database system. It also provides a web interface. The system was analyzed over 10 month period. The vendor was chosen over a six month period. The vendor installed a live replacement system in 14 months for a cost less than 1/10th of what NYCERS has paid Gartner.

New Oversight for the Legacy Replacement Project

On December 14, 2017 the Trustees approved the new executive director’s request for four new executive level positions. The first position requested was a chief operations officer (COO) who will be responsible for the following major divisions:

1. Operations
2. Service and Disbursements
3. Client Services.

These positions previously reported to the deputy executive director. That leaves only the following divisions still reporting to the deputy executive director:

1. Finance
2. Communications
3. Administration
4. Training
5. Special Projects

It is obvious that the new executive director did not feel that the current deputy executive director, Karen Mazza, was capable of continuing to handle these three operational divisions.

The other three requested positions are all targeted at the Legacy Replacement Project (LRP). They are

1. Deputy Director - Administration/LRP
2. Deputy Director - Internal Audit/LRP
3. Deputy Director – Project Director for the LRP

The deputy director for administration will be responsible for procurement, contract management, and budgeting for the LRP project. The deputy director for internal audit will be responsible for quality control for the LRP project and audit oversight of all IT operations, in particular IT security. The deputy director for the LRP project will be responsible for the LRP project and will report to the executive director and the IT director.

Based on the request for and the approval of these positions, the executive director has determined that there are significant oversight issues with the LRP project. Since the winter of FY-2015 when the former executive director and the IT director introduced this project, it has stumbled along without significant improvements. The consulting firm Gartner Inc., however, has managed to collect almost $4M over the last three years, FY-2015-2017, working on this project.

NYCERS Executive Organization Chart - History

The NYCERS org chart has gotten more complicated since 2004, when I last signed off on the NYCERS org chart, more complicated but not more effective.

As of June 30, 2004:

The direct reports to the executive director were as follows:

1. Deputy Executive Director
2. Legal
3. Human Resources
4. Internal Audit.

The direct reports to the deputy executive director were as follows:

1. Finance
2. Operations
3. Membership
4. Benefit Disbursements
5. Communications & Customer Service
6. Administrative Services
7. Information Resource Management
8. Security

As of June 30, 2017:

The direct reports to the executive director were:

1. Deputy Executive Director
2. Legal
3. Human Resources
4. Internal Audit
5. Information Technology (shifted in FY-2007 when Liz Reyes became IT director)
6. Compliance
7. Security & Facilities Operations
8. Business Rules & Data
9. EEO Officers

The director reports to the deputy executive director were:

1. Finance
2. Operations
3. Service & Disbursements
4. Communications
5. Client Services
6. Administration
7. Training
8. Special Projects

Ongoing Costs for the Legacy Replacement Project

Since the winter of 2014-2015 NYCERS has been kicking around the Legacy Replacement Project. Listed below are some of the costs that NYCERS has incurred with this project.

Payments made to Gartner, Inc.

• FY-2015 -- $ 804,949
• FY-2016 -- $1,993,492
• FY-2017 -- $1,120,000

Payments made to CWI Coaching and Consulting (Ellen Carton's old firm)

• FY-2015 -- $ 99,965
• FY-2016 -- $139,946
• FY-2017 -- $157,055

Note: all these costs were incurred before the new executive director came on board in September, 2017.

Big Trouble with NYCEwork

On December 11, 2015 NYCERS filed a breach of contract claim against enChoice, a firm that NYCERS had hired in FY-2008 to implement a replacement system for its then current document imaging system. NYCERS is seeking $1,444,570 in damages plus interest and costs.

Last May I wrote about the lunacy at NYCERS when it comes to Information Technology (IT) issues. I particularly pointed out the serious problems that NYCERS was having with its new document management/workflow system. The following are NYCERS and my comments:

Comment from NYCERS:

RECENT HISTORY Over the past nine years, NYCERS has made significant infrastructure improvements. Document Management NYCERS continues to ensure the preservation and security of all vital records and to promote an environmentally sound approach to document management. This effort includes the incorporation of all incoming documents into the NYCEWORK system in an electronic format and the ongoing digitization of historical paper documents.

In 2014, NYCERS prepared, scanned and indexed over 200,000 incoming documents and converted over 1 million historical records into digital images. Since the inception of the document management project, over 38 million paper records have been imaged, saving approximately $600,000 in document storage fees.

My analysis:

From this quote you would think that document management was introduced during the last few years. In fact, it was there when D'Alessandro walked in the door. The system in place at that time used a software package called Staffware. It was working well but it was being stressed by the volume of documents that NYCERS was dealing with. It actually continued to function up until 2014 when a new software package, Filenet/NYCEWORK, was finally put into production. I wonder where the $600,000 in saved storage fees came from?

Unfortunately, while Staffware needed to be either upgraded or replaced, Filenet runs significantly slower than Staffware did. That in turn has created incremental delays at every step of every process in the agency. It has created havoc with the production levels for all major functions in the agency.

In FY-2008, NYCERS hired the company enChoice to do the upgrade. enChoice is an IBM partner specializing in implementing IBM's document management software, FileNet. NYCERS labeled the upgrade effort "NYCERwork". Over the next four years the NYCERS IT director, Liz Reyes, had enChoice working on this project.

NYCERS paid enChoice the following amounts:

• $1,609,278 in FY-2008
• $ 327,141 in FY-2009
• $ 267,465 in FY-2010
• $ 25,941 in FY-2011

Then, in NYCERS FY-2013 Annual Report, the agency's executive director, Diane D'Alessandro, made the follow statement:

NYCEWORK: A NEW DOCUMENT MANAGEMENT/WORKFLOW SYSTEM

NYCERS recognizes the imperative to update and link systems that process memberships, evaluate service, calculate pensions, and handle requests for account information as efficiently as possible. In June 2012, after extensive preparations, we launched NYCEwork, our document imaging and workflow system. NYCEwork maintains images of every document in a member’s lifecycle, beginning with the membership application and ending with the final payment of a retirement allowance to the member or survivor benefit to the designated beneficiary. In order to create a complete, imaged record and continue all of the ongoing work that business units handle, the IT team had to ensure that all active and closed work items and every relevant document were transferred from the outmoded Staffware system into NYCEwork, while at the same time accepting new forms and applications for the business units to process.

With the filing of the suit it is now clear to everyone that Reyes failed to properly manage the NYCEwork project.

What is really frightening about this failure is that the suit in no way fixes the problem. The day to day production problems are still there. There are threats to the integrity and security of the documents that have been committed to NYCEwork. Based on NYCERS claim to storage savings I have to asume the original documents have been destroyed. In addition, I know NYCERS's backup and recovery systems are totally ineffective.

And this is the management that wants to spend $132M over five years to do do an IT legacy upgrade.

The NYCERS trustees need to replace the senior management at NYCERS. If they don't, five years from now they will be looking at more breach of contract suits, more broken systems, a $132M in losses (if they are lucky), and five lost years.

Doesn't it ever occur to anyone that D'Alessandro worked for Shelley Silver before she came to NYCERS and that Martha Stark appointed her.

Note:

This is not the first contract suit that NYCERS has brought against an IT firm. At the same time enChoice was ramping up in FY-2008, NYCERS was also working with IBM ($2.36M over two year) to convert the NYCERS file system to a DB2 database system. Reyes again failed with this project and NYCERS subsequently sued IBM. Cleverly IBM settled with NYCERS by giving them a 20% discount on the purchase of hardware and services capped at $1M for a fixed period. NYCERS was only able to utilize $250,000 of the discount before the time period lapsed. These girls are really on the ball.

What is clear is that over the last 10 years the NYCERS administration has failed to put in place a modern relational database system for its applications.

Follow Up on the IT Budget Boondoggle at NYCERS

On March 12, 2015 the NYCERS Trustees approved a $2.25M budget allocation to be squandered on a mindless IT conversion project.

On May 10, 2015, two months later, I released a sharp criticism, of the project.

On May 12, 2015, two days later, the NYCERS executive director, Diane D'Alessandro, released an unsigned memo notifying the NYCERS staff of the fabulous five year IT conversion project.

So after two months D'Alessandro finally decides to let the troops know what she is doing, exactly two days after I point out the insanity of her project. She starts as follows:

As you may know, NYCERS is embarking on a major information technology (IT) and business system project to replace our now 35-year-old legacy pension administration system - PROD, the core of all NYCERS business functions. The project, known as the Legacy Replacement Project (LRP), will affect almost every aspect of our work at NYCERS, taking at least five years to complete.

She carefully describes the vote by the trustees as follows:

At its March 2015 meeting, the NYCERS Board of Trustees conceptually approved the LRP and adopted a budget that funds early project phases.

She also announces an internal PR campaign:

This is major NYCERS project. As a first step, we have begun a series of meetings to brief everyone on the project and to get your input regarding the initial phase of planning.

Without doubt D'Alessanro will be looking to drag in a ton of consultants for this project. She does, however, want to ensure the staff that she supports them totally:

I want you all to know that NYCERS is committed to providing our staff with the resources and support necessary to ensure success at all stages of this project. We will continue to keep you informed and seek your input as we progress.

You can't make this stuff up.

Just for Laughs

As part of the $2.25M, D'Alessandro got $500,000 for a sole source contract with Gartner. Of that amount, $310,000, is supposed to cover the cost of producing a RFP for the vague conversion project. There is nothing vague about its $132M price tag.

So what does Gartner do? They go looking for a recognized public pension expert who has substantial IT background. That probably is a good idea, since they don't particularly know much about public pension systems. Needless to say, neither does NYCERS.

In turn, Gartner contracts with a IT staffing firm to find such an expert.

On May 14, 2015, this firm reaches out to such an expert with the idea of hiring him and assigning him to the the Gartner contract.

On May 18, 2015 the firm calls the expert and describes the assignment. It becomes quickly clear to the expert that this assignment is part of the NYCERS IT conversion fiasco.

I will let you all guess who the expert was.

The expert was kind enough to let the firm know that, in spite of his intense interest in the project, D'Alessandro would never allow him to work on the project.

Budget Insanity at NYCERS

On March 12, 2015 the NYCERS Trustees approved the NYCERS FY-2016 administrative budget. It was Diane D'Alessandro's tenth annual adiministrative budget proposal as executive director.

The key numbers are listed in the table below. For comparison purposes I added FY-2006, my last budget as executive director, and FY-1996, NYCERS's last budget under the city's budget structure. The 1996 budget was draconian to say the least. You can see from the table that the NYCERS's budget has increased by 43% over the last ten years or 4.1%/year.

NYCERS: Admin. Budget Over the Years

	FY-2016	FY-2006	FY-1996
FT Positions	401	342	155
PT Positions	35	13	0
PS	$30.2M	$20.0M	$6.2M
OTPS	$19.4M	$14.7M	$2.6M
Sub-total	$49.6M	$34.7M	$8.8M
Fringe	$8.2M	$4.1M	$0
Total	$57.8M	$38.8M	$8.8M

What is extraordinary about this budget is that it is the beginning of a delusional spending spree on IT upgrades. It is being called the "Legacy Replacement Project". It proposes to spend $132M over a five year period, staring with $500,000 to be paid to Gartner, Inc. and $1.75M to other consultants to be named later. At the meeting D'Alessandro indicated that she was going to pay $310,000 to an outside firm to write a RFP for this "grand" project. Listed below is the five year spending bonanza.

• 2016 - $ 2.25M
• 2017 - $ 9.91M
• 2018 - $27.86M
• 2019 - $46.00M
• 2020 - $46.24M

To OMB's credit they complained about the $310,000 RFP. The trustees, however, approved this budget in spite of making noise about the long term cost of the project.

You would think, considering how well funded that the NYCERS budget is, that the NYCERS staff would be able to write their own RFP. But D'Alessandro got that part right, her staff can't do the job.

Of course, without the results of the RFP where did the $132M amount come from.

In fact over the last ten years D'Alessandro should have been standardizing NYCERS applications on a current client/server platform using a relational database system. This process was underway in 2005 when she first appointed. But thankfully the old CICS/VSAM systems were so well made that they have survived long after the point when they should have been retired. Thank God for small favors.

D'Alessandro, unfortunately, was appointed to her current job in 2005 without any prior relevant experience by Martha Stark and a bunch of compromised trustees. D'Alessandro had never managed anyone. She is not a lawyer, nor an accountant, nor an actuary. She had never worked for a pension system and she had absolutely no IT experience. What she was and still is, is grossly incompetent.

To make the situation worse, the current IT director was working as the NYCERS call center manager when D'Alessandro moved her to the agency's IT division in 2007. At that point she had no IT experience either. Six months later D'Alessandro makes her the director of the IT division. It reminds of when Rudy put a key punch salesman in charge of DoITT. She is as incompetent as D'Alessandro.

D'Alessandro submitted a five page justifying her budget proposal. It is a classic example of using a lot of words to create a fog, lots of hand waving and saying nothing except give me $132M. I actually don't think D'Alessandro wrote the summary. Five pages is far too much work for D'Alessandro. It looks like a cut and paste job from some marketing crap.

This is the justification for $132M.

MAJOR PROJECTS

In a continued effort to provide greater operational efficiency, enhanced customer service and improved quality and production, NYCERS is proposing to undertake a major information technology (IT) and business system replacement project that will streamline and consolidate all applications and functions into a single data repository for common use throughout the agency.

The project which will be known as the Legacy Replacement Project (LRP) will be conducted in three stages over a minimum of five years. The LRP will require a commitment of resources to be phased in over that time.

In order to ensure the success of the LRP, NYCERS is proposing two associated projects including a communications project designed to accommodate expanded electronic interaction with clients and a change management project to address staff training, coaching, and leadership development needs.

You can always spot a IT disaster from the start. It has a long time frame and they don't tell you what they are going to do in the first week of the project, the second week of the project, third week of the project,... You get the picture. Oh yeah, it will also cost a lot of money. I will guarantee you that this project will fail.

When I left NYCERS in 2005, NYCERS had one of the best IT departments in the city. The agency had:

1. between 60 and 65 IT professionals on staff
2. an integrated mainframe (VSE) and a network system (Windows Server 2003)
3. all major work operations automated running under CICS using VSAM and DB2
4. an advanced web site which allowed members and retirees to view their own specific data.
5. an imaging/workflow system covering all paper based applications for all members and pensioners.
6. a dedicated document scanning division
7. a tested computer disaster recovery plan (we were researching a full business recovery plan and site)
8. a standardized accounting package running on the network supporting both pension and administrative operations
9. a nightly backup process of all files including the Exchange Server
10. a project to upgrade major applications to DB2.
11. an advanced Avaya based call center with its own backup PBX.
12. a modern customer service center with its own integrated queuing system
13. an on-site fully equipped training center.
14. a proximity card system for both time keeping and security.
15. a separate network system for the security and a full camera subsystem.

Returning to the executive summary, it is not only short on details about the project but it also has a great deal of deceptive information. The following are a few quotes out of D'Alessandro's write-up along with some clarifying comments.

RECENT HISTORY

Over the past nine years, NYCERS has made significant infrastructure improvements.

Document Management

NYCERS continues to ensure the preservation and security of all vital records and to promote an environmentally sound approach to document management. This effort includes the incorporation of all incoming documents into the NYCEWORK system in an electronic format and the ongoing digitization of historical paper documents.

In 2014, NYCERS prepared, scanned and indexed over 200,000 incoming documents and converted over 1 million historical records into digital images. Since the inception of the document management project, over 38 million paper records have been imaged, saving approximately $600,000 in document storage fees.

From this quote you would think that document management was introduced during the last few years. In fact, it was there when D'Alessandro walked in the door. The system in place at that time used a software package called Staffware. It was working well but it was being stressed by the volume of documents that NYCERS was dealing with. It actually continued to function up until 2014 when a new software package, Filenet/NYCEWORK, was finally put into production. I wonder where the $600,000 in saved storage fees came from?

Unfortunately, while Staffware needed to be either upgraded or replaced, Filenet runs significantly slower than Staffware did. That in turn has created incremental delays at every step of every process in the agency. It has created havoc with the production levels for all major functions in the agency.

This is an example of a mismanaged project being put into production so that management doesn't have to say it made a mistake. We saw this problem with the CityTime project.

While we are talking about mistakes, there have been two major IT disasters at NYCERS in the last nine years costing millions of dollars. One was the DB2 project and the other is the infamous Long Island City disaster recovery site. At least when the DB2 project was cancelled, the bleeding stopped. The LIC-DR project is a never ending cancer.

When I left NYCERS in 2005, the IT department with the help of two consultants was slowly converting over our major VSAM files to a DB2 relational database platform. We had already had two significant systems running under DB2 but there was a long term need to shift all major files over to the relational model. Two months after I left the project was cancelled. Subsequently NYCERS entered into a contract with IBM/Blue-Phoenix to do the DB2 conversion. That project dragged on for years, cost millions, and eventually failed. NYCERS even tried to sue IBM but with very little relief.

Business Continuity

The Long Island City business recovery site enables NYCERS to restore business operations and critical applications in the event of a disaster. This ensures the sustainability of operations and reduces the potential for data loss. Business recovery time is within four hours and the data recovery point is within 30 minutes.

From this quote you would conclude LIC-DR is a success. That is not true in any sense.

The lease on the LIC-DR project was signed in 2006 and NYCERS still does not have a Certificate of Occupancy for the site. I have previously written about this mess. It is not clear what is the legal status of having employees on that site.

For the record, the rent at LIC-DR is $530,000 for FY-2016 plus another $400,000 for other ancillary lease charges. The site has serious water leakage, asbestos, and plumbing problem. The lease comes up for renewal in the spring of 2016. Let's see what the decision will be then.

And in this season of delusion, NYCERS is planning a tertiary disaster recovery site. They even started buying hardware ($250,000 in FY-2015) for this mythical site. Some people just don't get it.

Business Process Automation

NYCERS continues to streamline business processes and leverage infrastructure investments to improve service delivery. As a result, NYCERS has achieved efficiencies in areas including loans and survivor benefits. On-line loan processing time has been reduced from 10 business days to five business days.

In this quote D'Alessandro appears to claim to have automated loans and survivor benefits in the last nine years and that the turnaround time on loans has been dropped from 10 to 5 days. Actually in 2005 both loans and survivor benefits were fully automated. The loans were the first applications automated in the early 1980's and also the first application to be integrated into the imaging/workflow system in 2002. In 2005, if you filed a loan application by Tuesday, NYCERS mailed a loan check to you that Friday. You would wonder why D'Alessandro would have made the above statement.

While all this craziness was going on with the great IT upgrade, D'Alessandro also threw in a request for 12 new employees with salaries of $720,000. No explanation was given. This was on top of 6 new employees in FY-2015, again with no explanation. Since 2013 the full time staff has gone from 372 to 401 and part time staff from 12 to 35. Why are there back logs with production work? Can you imagine what A.C.S. could do with that kind personnel increase.