N.J.'s $118 million canceled social service contract did not protect state's interests, auditor says

By Susan Livio NJ Advanced Media 

TRENTON — The agreement with a private company to build a massive software program that would operate New Jersey's multi-billion-dollar network of social service programs lacks a basic element found in nearly every other state contract: language that would have given the state the power to penalize the vendor should something go wrong, the State Auditor said.

 

"Generally a contract has some type of performance penalty," State Auditor Steven Eells told the Assembly Human Services Committee during a hearing Thursday discussing the recent collapse of the $118 million contract with Hewlett Packard to develop CASS, the Consolidated Assistance Support System.

But the Treasury Department's contract only protected the state's investment in the event HP delivered a product that contained a virus, said Eells, whose staff last week released an audit report on fraud within the food stamps and welfare programs that also revealed numerous delays and deficiencies with the CASS project.

The state even spent $10 million to hire Maximus as the project's quality assurance manager, Eells said. "Maybe they felt they had protection because they had a QA vendor, but they didn't use it."

The state originally awarded the contract in 2007 to Electronic Data Systems, which was acquired by HP the following year. Work began in 2009, during Gov. Jon Corzine's administration. Gov. Chris Christie took office the following year. The system was supposed to unify the Medicaid, food stamp, public assistance, child support and other programs that are run separately and most agree inefficiently by the Department of Human Services and each of the 21 county welfare agencies.

In August, Maximus notified the Department of Human Services the delays and other problems with the project "jeopardized" the project's federal funding to pay for it. Maximus noted HP had changed project manager three times since 2010, including one the state rejected for not having the proper qualifications, 
according to the audit.

Human Services could have filed a complaint with Treasury about the project's troubles, but Eells said his office's review of the related documents found no evidence of that.

The federal government committed to picking up 90 percent of the project, with New Jersey paying the remaining 10 percent, said Helen Dublas of the Office of the State Auditor. But if the federal government "saw that the project wasn't happening, they can insist the state pay back 50 percent," she said.

The U.S. Center for Medicare and Medicaid Services, the federal agency supporting the CASS project, declined to comment Thursday.

A state Human Services spokeswoman also declined to comment Thursday on contract until negotiations with Hewlett Packard terminating the contract are complete. Human Services Commissioner Jennifer Velez was invited to the Assembly hearing, but declined.

It is not clear how much the state has paid HP. A company spokesman has also declined to discuss the matter until the contract was formally severed. 

The total cost of the project is about $227 million, according to the audit.

Committee Chairwoman Valerie Vainieri Huttle (D-Bergen) said she called the hearing "to get some answers" on what went wrong, but with key players refusing to talk, she and other committee members came away with more questions.

"Five years later, the state has spent millions of dollars," Huttle said. "We certainly applaud the department as they try to attempt to implement and update an integrated computerized system, however something clearly went wrong."

The department is also facing an inquiry by the U.S. Department of Agriculture for taking too long to process people’s applications for the Supplemental Nutritional Assistance Program (SNAP), formerly known as food stamps. CASS was expected to help fix many of those delays.

The audit may be found here.