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California Kills $90 Million Contract With SAP

When test runs of approximately 1,300 paychecks contained about 100 types of errors, State Controller John Chiang canceled the contract.

Following the failure of a small rollout of California's new payroll program, California Controller John Chiang has canceled the multimillion-dollar software agreement with Pennsylvania-based SAP, the company hired to implement the project. 

The $89.7 million contract with SAP was awarded for the implementation of the MyCalPays Project, but when test runs of approximately 1,300 paychecks contained about 100 types of errors -- which government officials learned about from affected employees -- Chiang axed the contract, the Sacramento Bee reported.

Paychecks were sent to the wrong people for the wrong amounts, Chiang spokesman Jacob Roper told the Los Angeles Times. The system also canceled some medical coverage and sent child-support payments to the wrong beneficiaries. The state had to pay $50,000 in penalties because of money that was incorrectly sent to retirement accounts.

According to the controller's office, there were errors in one out of every three tasks performed by the system, while the current, aging system's error rate is .29%, Roper said.

So far, the state has paid $50 million to SAP, and plans to use "all means available" to recoup those funds. The state may also sue the company for as much as 150 percent of the contract amount, Roper said. 

Currently there is no timeline for finishing the upgrade, as "moving ahead with this at all would be completely imprudent," Roper told the Times. "This absolutely had to stop."

Via email, SAP spokesman James Dever told the Bee that the company is extremely disappointed in the State Controller's Office's actions. "SAP stands behinds our software and actions. Our products are functioning flawlessly in thousands of government agencies around the world. SAP also believes we have fully satisfied all contractual agreements in this project."

SAP, which was hired in February 2010, is the second contractor to be fired from the project.

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