We recently blogged about the problematic ERP system implementation undertaken by the State University of New York’s Downtown Medical Center (SUNY DMC, or “the Center”). We reported that the Center spent $2 million over four years, and at this point about five percent of the Center’s departments were using the system. The New York State Comptroller’s Office concluded—

It has been more than four years since the initial implementation began, however, and a majority of the Center’s units are not currently using the software as was intended. Thus, we find that management did not effectively implement or use the product it purchased, thereby diminishing its value.

But we don’t want SUNY DMC to feel that it is alone in having a problematic IT system implementation. No. SUNY DMC has lots of company in that regard.

For example, Federal Times reported that the U.S. Air Force has experienced similar problems. Reporting on USAF testimony before the Senate Armed Services Committee’s Subcommittee on Readiness and Management Support, Federal Times stated—

A seven-year, billion dollar investment by the Air Force in a new logistics management system has turned out to be a bust, officials say. ‘I am personally appalled at the limited capability the program has produced relative to that amount of investment,’ Air Force Comptroller Jamie Morin told the Senate Armed Services readiness and management support subcommittee on Wednesday.

The Air Force is now trying to sort out what can be salvaged from its investment on the Expeditionary Combat Support System and map out a way forward in a new report likely to be delivered to Congress next month.

So SUNY DMC should not feel too sad at having wasted only $2 million over four years. That amount pales in comparison to the USAF’s $1 billion waste over seven years. We wonder if CSC (the Air Force’s prime contractor) will be held accountable in some fashion.

In related news, this story at The Southeast Texas Record concerned a lawsuit against an accounting firm that installed software at a medical practice. The owners of the medical practice filed suit because they allege that the accounting firm botched the installation, which permitted an employee to embezzle $1 million over a five year period. The story reported—

The [accounting] firm … installed an accounting software system used by the medical practice's employees … However, when installing the software, the accounting firm failed to install a security function that would prevent manipulation of the system, the suit states.

In turn, an employee at the medical office allegedly embezzled nearly $1 million … from 2005 until September 2010, the complaint says.

‘Defendants, despite obvious indications of embezzlement in the records that were sent to them monthly and which they were responsible for reviewing and reconciling, failed to notice the irregularities, advise Plaintiffs of ways to identify or check for the same, and/or expose the embezzlement,’ the suit states. ‘Defendant … Begnaud in fact, would ridicule Plaintiffs when they would express to him they were not receiving the monies as indicated in the quarterly statements prepared by Defendants and provided to them.’ It was not until Sept. 23, 2010, that the [owners] discovered the embezzlement, the suit states.

The [owners] allege negligence against the defendants, saying they negligently failed to properly train the plaintiffs on the software and failed to properly install the software, among other negligent acts. They also allege negligent misrepresentation and breach of fiduciary duty against the defendants.

We should note (in a subtly self-serving way) that government contractors seeking to implement a new accounting system—or, indeed, any significant management system—need to navigate far more than simply the software. Policies, procedures, and practices all need to be updated and enhanced. Disclosure Statements may need to be revised. The last thing a company needs is to have a Business System declared to be inadequate because a system implementation was blown.

We also want to point out that the funds spent on a system implementation that went wrong are subject to being questioned by government auditors as being unreasonable. If upheld by a Contracting Officer, those questioned costs would then be unallowable. So not only would you have wasted time and money, such funds would not be recoverable in billings to the U.S. government.

Which would really be adding insult to injury.