Interior cancels contract for troubled financial-systems consolidation project

The Interior Department’s project to consolidate an array of financial applications into one integrated enterprise resource planning system has ground to a halt with the department’s removal of systems integrator BearingPoint Inc.Interior has been working on the Fi- nancial and Business Management System project as a high priority for more than three years, but has found scant success.Sources said repeated delays and performance failures had plagued the program and prompted Interior’s decision.“The department has severed its business relationship with BearingPoint for implementation of the Financial and Business Management System,” Interior spokeswoman Joan Moody said.She added, “We are committed to the success of the FBMS project, so we are taking the necessary management action to ensure that we can deliver a quality system.”The department declined to provide details of the decision, citing the potential for litigation.Reports have circulated in the vendor community in recent weeks that the FBMS project had been delayed.“We’re disappointed by the Department of Interior’s decision to change direction on its Financial and Business Management System, which will only further delay the launch of this important project,” said BearingPoint spokesman Steve Lunceford. “We hope to meet with [Interior] management to discuss their decision as soon as possible.”Interior expected FBMS to integrate financial management, acquisition, property management, grants administration and other subsidiary systems, and revamp administrative processes throughout the department.Interior announced its contract with BearingPoint of McLean, Va., in January 2003. Interior said BearingPoint’s FBMS contract could run as long as 10 years and eventually replace 16 accounting systems.Interior received $22.2 million for the system in fiscal 2004 and $40.9 million in 2005, according to the Office of Management and Budget. The department requested $47.3 million for 2006, and Congress allocated $46.3 million.BearingPoint was installing an enterprise resource planning system from SAP America Inc. of Newtown Square, Pa.“The removal of BearingPoint does not affect the relationship between SAP and the Department of Interior,” said SAP spokesperson Bonnie Rothenstein.According to Interior, FBMS is planned as an integrated suite of software applications that would help bureaus manage func- tions such as budget formulation and execution; personal, real and fleet property; core financials; acquisition; travel; financial assistance; and enterprise information management.According to Interior’s FBMS Web site, the timeline for the project is being revised.The FBMS budget has been estimated as high as $120 million over the life of the contract. FBMS was slated to be fully operational by 2007.Steve Kelman, professor of public management at Harvard University’s Kennedy School of Government, said, “I think that probably on the whole the government should be more aggressive than less aggressive about pulling the plug when it believes a contractor is not performing well. Presumably the Interior Department was dissatisfied [with BearingPoint]. When it is, they should pull the plug.”Kelman noted that procurement reforms in the 1990s had made it easier both to cancel and issue contracts.“I would hope that the vendor would not react to something like this by immediately suing—they should react by trying to improve their performance,” Kelman said.