Pennsylvania to not renew IBM contract after delays


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Pennsylvania’s Department of Labor and Industry will not renew its contract with IBM after the company’s work on the Unemployment Compensation Modernization System has gone 42 months behind schedule and more than $60 million over budget.

Julie Hearthway, the department’s secretary, said the findings came after an independent study commissioned by L&I in August 2012 and submitted this past July, recommended the best course of action was to move forward with another vendor.

“The issues outlined in the study detail the challenges the department had to examine in order to determine whether moving forward with IBM is in the best interest of the citizens of the state,” Hearthway said.

She continued, “The bottom line is that the problems we’ve identified cannot be solved and we will not renew our contract with IBM. The level of risk, combined with the critical nature of the system, demands that the Department of Labor & Industry has a system that produces timely decisions reliably and accurately.”

“It is simply unacceptable for the computer system that serves the state’s unemployed to be unreliable,” Hearthway said. “It has to work and it has to work efficiently.”

The Unemployment Compensation Modernization System is designed to calculate and provide unemployment compensation benefit payments in Pennsylvania.

The study, conducted by Carnegie Mellon University’s Software Engineering Institute, analyzes the UCMS program in three key areas as outlined by IBM’s original contract: case management and wage records; employer tax; and claims processing, payments and appeals.

“We are surprised by today’s announcement,” IBM spokesman Scott Cook told ComputerWorld. “This decision is based on a third-party report that we had not seen at the time of the Commonwealth’s announcement, despite repeated requests to the Department of Labor and Industry to review it together.”

“In complex information technology implementations, there is accountability on both sides for system performance and service delivery,” Cook added.

The UCMS program development contract was awarded in June 2006 to IBM, during the previous administration, to provide updated technology for the delivery of unemployment compensation benefits.

Between 2007 and early 2011, a number of program risks and issues were identified; however, the project was already significantly over budget without any measurable solutions.

Shortly after Hearthway took office in April 2011, Labor & Industry began to aggressively manage the system and work with IBM to take corrective actions. Labor & Industry continued to be dissatisfied with the pace and quality of the program development.

The study is available at under Publications, “Carnegie Mellon University SEI Study of UCMS.”

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Julie Hearthway, Pennsylvania, States