Pa. says $150M IBM deal mostly 'wasted money' - abc27 WHTM

Pa. says $150M IBM deal mostly 'wasted money'

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The problems with the state's Unemployment Compensation system have been numerous and well-documented.

Last winter, abc27's Facebook page and viewer feedback page exploded with upset would-be recipients who couldn't get through to make claims.

There were many complaints by many people, perhaps best summed up by a Steelton woman who succinctly said, "Their customer service basically sucks, to be honest."

The system is administered by the Pennsylvania Department of Labor & Industry, which acknowledges the problem and wants things to work.

"It's simply unacceptable for a computer system that serves the state's unemployed to be unreliable," Pa. Labor Secretary Julia Hearthway said. "It has to work and it has to work efficiently."

The Department of Labor & Industry thought it was fixing the problem in 2006, under Governor Ed Rendell, when it signed a $106.9 million contract with computer giant IBM to upgrade the computers so they could more quickly process claims.

Under terms of the deal, the project was to be complete by 2010.

"Unfortunately, that's not what happened," Hearthway said during a news conference Wednesday morning. "The system has been plagued with problems and delays."

Hearthway says she inherited the contract and knew from the beginning it was problematic. She said she tried numerous times to assist IBM so it could make good on the deal.

In August 2012, L&I commissioned Carnegie Mellon University's Software Engineering Institute to study the problem. The study's findings were released Wednesday and are on the department's website.

"In consultation with Carnegie Mellon, we've determined that the system we had hoped from IBM simply isn't there," Hearthway said. "The problems are too much to overcome and we should not continue to devote resources to complete the project."

The bottom line: 42 months late and now $153 million mostly wasted tax dollars later, and the state is pulling the plug on IBM.

Hearthway is getting credit for being open and honest about a bad situation.

"This is something most people would hide from and the administration did not," said Rep. William Keller (D-Philadelphia), minority chair of the Labor & Industry committee. "You'd think that if you spent $150 million, you'd get a computer to work, but we haven't been able to do that."

Hearthway said 90 percent of the money was spent under the Rendell regime and she said Rendell didn't do enough to make sure the state was getting what it paid for from IBM.

But she and the Carnegie Mellon study singled out her staff for blowing the whistle on a bad deal, helping to expose it and end it.

She had this message for taxpayers:

"Even though this project has not turned out the way we hoped, you have people working for you and looking out for you," she said.

The computer system still needs to be upgraded and modernized. Hearthway says it's back to the drawing board.

Pennsylvanians getting unemployment compensation needn't worry, she said, because the system that's been in place will stay in place. It's not the state-of-the-art system the department hoped for, but it is reliable.

"It's like your old Chevy. It isn't all that pretty any more. It's kind of a clunker, but it gets you from point A to point B," she said. "That's what our Legacy System does and that's what we'll be utilizing. That's what we have been utilizing."

Of course, it's painful to think how many potholes or unsafe bridges that old Chevy wouldn't have to drive over had the $150 million gone to transportation or a myriad of other state needs.

When asked if any money would be recovered from IBM, Hearthway said the state's attorneys are looking into it.


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