OPM pulls plug on $290 million RetireEZ contract

The Office of Personnel Management terminated its 10-year, $290 million contract with Hewitt Associates to modernize the federal employees retirement system because the company failed to deliver a functioning benefits calculator, said Ronald Flom, OPM’s senior procurement executive and associate director of the Management Services Division.The benefits engine was part of OPM’s RetireEZ system, which seeks to make the federal retirement process more automated, accurate and efficient. OPM has paid Hewitt $21 million of the $27 million cost for development and delivery of the calculator, Flom said.OPM awarded the contract to Hewitt in May 2006 to provide the technology for RetireEZ, including a version of the company’s commercial benefits system modified to comply with federal regulations. The system as planned would automatically calculate annuity checks for federal employees under different financial scenarios so they could determine the best time to retire, OPM has said.OPM issued a stop-work order in May against Hewitt because of performance issues related to the benefits calculator engine, but officials worked with the contractor to resolve the problems, Flom said.“Unfortunately, they have failed to meet the requirements of their contract,” he said at a briefing with reporters to announce the contract termination.In response, Hewitt said in a statement that it was disappointed by OPM's decision to terminate the contract by default. “We have delivered on our contractual commitments and taken extra steps to try to ensure the success of the project despite serious program management deficiencies on the part of OPM. We will vigorously challenge OPM’s attempt to terminate this contract for default and are confident in our position. “ In the letter of termination for default sent to Hewitt, OPM said the contractor was unable to meet the acceptable quality levels of 95 percent accuracy in total test cases and 100 percent in critical test cases that simulate 132 retirement scenarios.Hewitt has the right to appeal OPM’s decision to the Civilian Board of Contract Appeals within 90 days or the U.S. Court of Federal Claims within a year, Flom said.OPM has continued to update its retirement system with data conversion and business process improvement activities, which did not involve Hewitt, said Michael Hager, OPM's acting director.“Since the stop-work order was issued, we have worked diligently to carry through with the other elements of RetireEZ, and the progress we have made is significant,” he said.For example, OPM has integrated data from multiple sources for 1.5 million federal employees and converted 2 million paper records to electronic ones, Hager said. The agency has also scanned 8 million records for 1 million employees.