County Counsel Patrick Faulkner said Deloitte Consulting LLP, paid $11.4 million to customize and install a complex SAP software program, failed to perform as promised, resulting in a snarled Civic Center computer system that "continues to suffer from serious defects" including an inability "to perform basic financial reporting functions."
Faulkner said that "since the disastrous go-live of the SAP system, the county has made several attempts to get Deloitte to accept accountability - and compensate the county - for Deloitte's unacceptable performance" but that "Deloitte has refused to do so."
Faulkner's written statement was issued after he was asked for comment about earlier assertions by Deloitte that the firm would rather negotiate with the county than wage a costly legal war. County supervisors have hired New York-based contract law specialists Kasowitz, Benson, Torres and Freidman LLP to sue in a court case Faulkner said could cost Marin more than $2 million. Faulkner was out of the office Wednesday, but Deputy County Counsel Sheila Lichtblau said the suit would be filed Friday.
The New York lawyers will receive a "blended" fee that combines an hourly rate with a settlement contingency, but details of the compensation package were not
Jonathan Gandal, a public relations executive for Deloitte in New York, said Deloitte would have no comment on Faulkner's assertions beyond a statement it issued two weeks ago. At that time, Gandal reported that Deloitte was confident it would prevail in court because "we fulfilled each and every one of our obligations under the contract, as evidenced three years ago when all of our work was approved by the county officials responsible for the project." But Gandal added that "it remains our desire that this be resolved in a more logical fashion that benefits the county and its taxpayers."
Faulkner, noting that "crippling systems problems" have plagued Deloitte computer work for a number of public agencies around the country, said that because Deloitte "now purports to profess concern for county taxpayers," the firm should make the county a settlement offer to "compensate taxpayers for the tens of million of dollars in damages inflicted on them as a result of Deloitte's misconduct."
Faulkner added that "Deloitte's response is to ignore the facts and blame others, rather than resolve the matter," leading to the county decision to go to court, where Marin officials "will detail Deloitte's misconduct throughout the project, including its action in securing any alleged 'approval' of its work by county officials."
The top-shelf SAP system installed by Deloitte cost about $20 million, or $4 million more than expected, while requiring work from a $600,000-a-year team of consultants. The SAP software package of 15 programs cost about $1 million. Deloitte Consulting got an initial $9 million for customization, configuration and installation work, then $2.4 million more in overruns when the county couldn't cope with what it bought.
A county grand jury investigation last year put all costs, including staff time spent since the installation on trying to make it work, at about $29 million - and counting. One official privately indicated the tab today probably approaches $35 million, but another noted the county would be spending "many millions" on staffing anyway, no matter what system was installed or how it worked.
The system was launched on July 3, 2006, and promptly delayed paychecks for employees. Problems mounted, ranging from an inability to balance the books to a failure to provide pension calculations. Six months later, before resolving initial issues, another program was launched, adding complex human resources systems to the mix. An Independent Journal review indicated the county ignored critics and in-house computer experts, bought an expensive system more sophisticated than necessary, failed to properly train employees or provide consistent management and tried to implement the complex program too quickly.
Officials signed off on work by SAP and Deloitte as completed satisfactorily. A 41-page contract with Deloitte calls for mediation of disputes, rules out a jury trial and says each side will pay its own legal costs.
Read more San Rafael stories at the IJ's San Rafael section.
Contact Nels Johnson via e-mail at ij@firstname.lastname@example.org