A waste of Thrift Savings

It's no surprise that the launch of two new Thrift Savings Plan investment

funds has been postponed for a second time. But there's also something disturbing

about it.

The Federal Retirement Thrift Investment Board has delayed introduction

of two new funds until at least next spring because of software integration

problems. Those of us who know about designing systems can understand how

a systems development effort can be delayed. No big surprise there.

What's disturbing is the original decision to have a contractor build

a new system instead of outsourcing this function to a service provider

that already has the wherewithal to handle it. Application service providers

exist for virtually any client need — your procurement function, your billing

function or your recordkeeping function.

I understand that the board has to be supercautious about how it implements

new systems. It cannot simply entrust anyone with the task because there

is a lot riding on the integrity of the TSP recordkeeping system. But this

system has been under development for about three years, and that's three

years of time wasted.

I think that the board behaved in a predictably bureaucratic fashion.

I suspect that the information technology professionals employed by the

board did not want to give up their turf. As a result, they voted against

outsourcing. Well, the result is that the contractor hired by the board

to build the new system "has not made sufficient progress" in testing the

new computer system that will track nearly $100 billion in TSP accounts.

It goes without saying that adequate testing is critical for handling

investments within the TSP, and the board cannot launch the two new funds — a small-cap fund and an international fund — if the system doesn't work.

But how do we know that what's needed is more testing? Maybe the system

is riddled with problems that will take forever to fix.

The board could have provided the two new funds to TSP participants

in another fashion — perhaps through a mutual fund company. This would give

TSP investors access to an index fund that invests in small-cap stocks and

an index fund that invests in international stocks. Instead, TSP investors

have been limited from the start to a Standard & Poor's 500 index fund,

a government bond fund and a corporate bond fund.

The board has learned

the hard way that developing systems in-house is not an easy undertaking.

It should have considered an interim approach — such as using an established

mutual fund company — to provide the investment options that TSP participants

want and deserve.

The board has stubbornly refused to bend in its determination to keep

the system in-house. That decision is a major mistake on the board's part

and is a disservice to TSP participants.

—Zall is a retired federal employee who since 1987 has written the Bureaucratus

column for Federal Computer Week. He can be reached at miltzall@starpower.net.