NYC's Computer-System Cash-Dump Disaster

New York City threw away a mountain of cash over a new computer system. Now, finally, someone is going to pay.

Valcich accused the company of cutting the city out of the project, creating needless delays, and wasting time and money. He said key personnel weren't showing up at meetings and records weren't being updated. He said the company repeatedly stopped work to "review" progress. He even questioned SAIC's credibility.

"SAIC's commitment to quality is almost nonexistent and is reflected from the top down," Valcich wrote. "This lack of commitment to quality permeates matters both great and small."

He added, "It appears to the city that SAIC seems to think [it] could take as long as possible to finish an activity. . . . The city of New York has spent approximately $35 million on CityTime and does not have a tangible system to show for it."

Living the good life: CityTime’s
former overseer, Joel Bondy
Photo from Bondy’s Facebook page
Living the good life: CityTime’s former overseer, Joel Bondy

Despite the almost angry tone of the letter—written by the city's point man on the sprawling project, the man who had been shepherding the project since 1995—it did not appear to have any impact. No one from either the mayor's or comptroller's offices appeared to have jumped in to light a fire under SAIC.

The system kept becoming more complex, and at some point SAIC began to resist going forward. SAIC hired a consultant, Ariel Partners, who warned that the technology the city had paid for couldn't handle all the things the city wanted it to.

SAIC finally said it would go forward, but only if it was paid on an hourly basis, rather than a flat rate per piece of the element. The city agreed, which meant SAIC now had a kind of green light to spend whatever it wanted to make the system happen.

By 2004, Valcich had retired from the payroll post, to be replaced by Joel Bondy, a former consultant with Spherion, the company supposedly vetting the project for the city. Bondy had also worked with Mazer, the recently indicted Spherion consultant, at the city's foster-care agency.

The effort to redesign the system took two more years. An SAIC spokeswoman was now saying the two sides were "working well together, and approved our personnel, approach, and overall architecture."

In 2005, with the redesign complete, the city had a chance to walk away from the project. The city instead turned to Spherion for advice, and, of course, the conflicted firm said, "Let's keep going," the comptroller's audit said.

With a rough squiggle, Bondy signed off on a contract extension that gave SAIC another three to six years to finish the project. The amendment justified the extension only by saying it was needed because of unspecified "delays."

By February 2006, the official contract cost was now at least $225 million, triple the original project cost. This time the increase was blamed on "a major increase in the cost of deployment."

Meanwhile, the alleged fraud involving the Spherion consultants had already begun, the indictment said.

Mazer awarded big-money contracts to friends, who then kicked back $25 million to him. They billed the city for phantom work and squirreled the money away in shell companies. He and his accomplices allegedly pursued this fraud for the next five years, eventually stealing some $80 million.

Meanwhile, the public focus was on the effect of the payroll system on city employees. From 2006 through 2009, unions mounted a campaign to limit the system, especially palm scanners, which were seen as potential health hazards. They also charged that the system violated civil rights, and imposed unfair demands on employees. They held demonstrations, testified at City Council hearings, and spoke to the media. Forster's union filed an unfair labor complaint.

Also in 2007, a former SAIC employee on a federal contract alleged that he and several colleagues were fired for going to the feds to complain about improper billing practices by the company.

A city Vendex form indicated that in June 2007, the Department of Defense Inspector General began investigating SAIC based on those allegations.

Did that disclosure, now more than three years old, trigger any concern about SAIC in city government? It is unclear.

In May 2008, Bondy testified before the City Council. In his written remarks, tellingly, he expended not a word on the cost of the project. Not one word.

But behind the scenes, he repeatedly gave project contractors high performance evaluations in 2008 and 2009, The New York Times reported.

Over the objections of unions and some council members, Bloomberg kept the project going.

In January 2009, the anonymous letter floated onto that CNN bulletin board. In September 2009, Bloomberg added another $140 million to the CityTime budget—bringing the total to more than $700 million.

And then, columnist Juan Gonzalez started writing articles about the project, reporting on December 4, 2009, that Spherion consultant Mitchell Goldstein made $490,000 that year. The top 11 consultants, he wrote, made an average of $307,000 a year through 2012.

On December 17, he reported that Bondy convinced Spherion to hire Goldstein—a possible conflict of interest because the two men had been business partners.

Gonzalez quoted a former consultant who said he hardly did any real work, but got paid $120,000 for it. "The unwritten rule was to keep billing for the hours you showed up, not the work you did," this consultant told Gonzalez.

And even after the disclosure that Bondy had close ties to the people he was supposed to be overseeing, Bloomberg left him in office for another year.

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