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Florida Imposes $15K Daily Fine On Deloitte For Flawed Software

By - Source: Toms IT Pro

The Department of Economic Opportunity (DEO) located in the state of Florida has imposed a $15,000 per business day fine against Deloitte Consulting citing continued frustration and complaints regarding a buggy unemployment benefits system, in which Deloitte has been both developer and system integrator.

According to a statement posted on DEO's website last Friday, the state of Florida will continue to accrue the fine until Deloitte fixes the problems in the unemployment compensation software system, referred to as Connect. Additionally, Florida is holding back $3 million in payments owed to Deloitte for its work on Connect.

"While Deloitte has made progress over the last few weeks, and many claimants are able to process claims without incident, the bottom line is that the overall system is still not working properly and the base code has not been stabilized. The people of Florida deserve better and after two months, Deloitte's failure to provide this functionality is simply unacceptable. They must and will be held accountable to the taxpayers of Florida. Accordingly, DEO is withholding the $3 million payment and imposing liquidated damages of $15,000 per day until the system is fully functional," said Executive Director Jesse Panuccio.

According to the document, the most significant issue related to the software is the defects in its adjudication function. While specific defects are not mentioned in the statement, Panuccio indicated that even after hiring additional adjudication staff the defects had increased caseloads and wait times for completion of reviews to unacceptable levels.  

Panuccio posted a Notice of Failure letter to Deloitte on the DEO site, which kicked off the $15,000 a day liquidated damages. In it, a 5 page list of open issues of what Panuccio referred to as "high impact deficiencies" was attached. This list outlined the remaining problems that Panuccio stated needed to be completed before the liquidated damages would stop and the $3 million dollar payment would be released.

The DEO executive indicated that additional programming resources would be required to fix the system and they expect Deloitte to provide the necessary staff. "If Deloitte cannot deliver on that need," Panuccio continues, "DEO will have no choice but to pursue other options, including the retention of additional consultants and vendors to direct and monitor Deloitte's work. As such options would likely be costly and burdensome, and DEO would have to recoup associated costs, we hope to avoid this course of action."

"In just 60 days, the new system has surpassed the performance of the unsustainable systems it replaced, meeting or exceeding longer term key performance indicators by reducing average time to adjudicate separation issues, reducing the number of claims requiring staff intervention, and decreasing average time to implement lower authority appeals," Deloitte spokesman Johnathan Gandal said in a statement Friday. "Performance will continue to improve as the system matures and as both departmental users and claimants become acclimated to its new functions."

Gandal also indicated that Deloitte had completed the "tasks and activities outlined in our contract" which the DEO disputed citing the 5-page list of both existing and new issues related to the software.

In an email from a DEO spokesperson in October, it was clear that this was not a new problem.

"More than a year ago, Deloitte was not meeting the contractual deliverables before the design for CONNECT was complete. DEO took action with intent to terminate the contract with cause. However, it had been determined by several consulting firms that our old system was at serious risk of failure and engaging in another procurement process would further delay the implementation date so a Corrective Action Plan was instituted. Deloitte agreed to pay financial restitution and abide by the contractual performance conditions. Deloitte also changed their project management team and added additional staff to the project site. The project has been rigorously monitored by DEO, external auditors and consultants specializing in systems implementation. With Deloitte meeting the contractual requirements of the design, development, and testing phase gates, it was recommended by the Executive Steering Committee, that had guided the project since inception, that CONNECT be launched."

The dispute between the state of Florida and Deloitte is not the only recent case where a vendor failed to meet the expectations of a government organization. In September, Tom's IT Pro reported on the terminated SAP and state of California IT project that cost the state $373 million.

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Bill Oliver has been working in Healthcare for the past 30+ years in a variety of management roles including Material Management, Purchasing, Nurse Registry, and IT. In the past 12 years his focus has been on the business end of IT Contracts, Software Licensing and Purchasing.

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