News 3 Investigates: Multi-million dollar state project to overhaul online benefits system stalled

Contractor ceased work in March 2018
News 3 Investigates: Multi-million dollar state project to overhaul online benefits system stalled

A software update meant to modernize and secure the system offering retirement benefits to thousands of public employees has stalled despite five years of work and millions paid to a contractor, News 3 has learned.

The Department of Employee Trust Funds has been working on a system called myETF, an upgraded computer system to administer the state’s retirement system programs.

NEW THIS MORNING: We’ll be asking more questions today about this– after 5 years and millions of dollars, why is a project to overhaul the state’s online retirement benefits system stalled? #news3

— Jessica Arp (@news3jessica) November 14, 2018

In 2013, ETF contracted with a company called Vitech Systems Group to implement its V3 System for a total of $22 million. A release from Vitech said the new system would “serve more than 550,000 active, inactive and retired members and approximately 1,500 employers of the Wisconsin Retirement System.”

That same release said the state believed that the new system would help improve efficiency and expand its services.

“Our goal is to provide Wisconsin Retirement System members and employers with convenient and secure web-based services,” Mark Lamkins, director of communications at ETF, said in the news release. “We look forward to working with Vitech to implement an integrated benefits administration system and, ultimately, achieve a higher level of customer service.”

Lamkins confirmed to News 3 that the company ceased work on the project in March 2018, following development and testing of the product. The project was initially supposed to be implemented in three phases, Lamkins said. Two of those phases were rolled out, he said in an email, but the third was delayed from an planned January 2018 rollout date. Documents show testing found issues with the product and ETF changed project leadership and requested changes from Vitech. ETF says Vitech asked for additional funds to finish the work. Lamkins said the agreement with Vitech is a fixed-price contract, so ETF “insisted that the vendor deliver the mutually agreed-upon deliverables before discussing any financial restructuring of the contract.”

In minutes of a meeting of the state’s Group Insurance Board executive committee In June, Deputy Secretary of ETF John Voelker said Vitech had ” walked off the project .”

State records show that Vitech was contracted to spend at least $15 million on the project through the 2018 fiscal year, and has been paid at least $8 million by ETF for the work.

The legal counsel for Vitech Systems Group said in an email to News 3 that a review of the matter is ongoing and declined comment “other than to strongly deny that Vitech ever ‘walked off’ the ETF project.” Counsel C.J. Krawczyk said a review of the matter by the company should be complete in four weeks.

State lawmakers were made aware of issues with the contract as part of a memo provided by ETF on the Monday before the Fourth of July holiday this year, documents show.

The 2013 state budget required ETF to update the Joint Finance Committee on a yearly basis on the progress of “modernizing their business processes” and ETF sent that update to committee members on July 2.

The final two paragraphs of the 10-page document had what should have arguably been the lead for lawmakers: Vitech had ceased working on the project on March 27, 2018, and had yet to return to work.

“ETF continues to work mutually to resolve the matter but is prepared to take all steps necessary to enforce the contract and protect its investment in the project to date,” the report said. “In the coming months, ETF will develop a plan for next steps of the modernization effort.”

Joint Finance Committee co-chair Rep. John Nygren told News 3 that he didn’t believe he knew enough about the status of the project to say whether it had been managed appropriately, and was not clear on whether the project would have to be re-started with a new company.

“From our perspective on joint finance if the ETF needs additional resources to be able to get the original project completed I do believe we’ll take a look at that,” Nygren said in an interview Wednesday. “I do believe that the original contract should either be honored or that it will end up in some kind of litigation.”

Lamkins, when asked additional questions about the project, declined requests for an on-camera interview and referred all questions to the Wisconsin Department of Justice.

A DOJ spokesperson confirmed that the agency had received a referral for representation from ETF and the matter remained under review.

The chair of the state’s Group Insurance Board declined comment to News 3 during a meeting Wednesday.

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