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NYC mayor demands $600M refund on software project

Contractor SAIC should reimburse New York in full for the troubled CityTime software project, says Mayor Michael Bloomberg

By Chris Kanaracus, IDG News Service
June 30, 2011 12:54 PM ET

IDG News Service - New York Mayor Michael Bloomberg is demanding that systems integrator Science Applications International Corporation reimburse more than US$600 million it was paid in connection with the troubled CityTime software project, a long-running effort to overhaul the city's payroll system.

"The City relied on the integrity of SAIC as one of the nation's leading technology application companies to execute the CityTime project within a reasonable amount of time and within budget given the system's size and complexity," Bloomberg wrote in a letter Wednesday to SAIC CEO Walter Havenstein.

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CityTime was launched in 2003 at a budget of $63 million, but costs swelled dramatically as the project stumbled along for nearly a decade.

The recent indictment of SAIC's leader project manager on the CityTime job, Gerard Denault, as well as the guilty plea to criminal charges made by SAIC systems engineer Carl Bell, who designed the software, are "extremely troubling and raise questions about SAIC's corporate responsibility and internal controls to prevent and combat fraud," he added. Denault and Bell were charged with were charged with taking kickbacks, wire fraud and money laundering.

Also recently indicted were Reddy and Padma Allen, a couple who head up New Jersey systems integrator TechnoDyne, which was SAIC's primary subcontractor on the CityTime project. Federal authorities allege that the Allens and others conducted an elaborate overbilling and kickback scheme that siphoned millions of dollars from the project.

Federal authorities have also contended that SAIC had received a whistleblower complaint about the project as far back as 2005, Bloomberg said in the letter. "It is unclear what SAIC did at that time to investigate these serious allegations."

Although New York has "received a working system that will advance our management ability ... because the project was apparently tainted by fraud and kickback schemes, the City must be made whole," Bloomberg added.

SAIC should pay back the roughly $600 million as well as provide money for "the cost of investigating and remediating this matter," he wrote.

Separately, New York Comptroller John Liu issued a statement on Wednesday regarding an agreement with Bloomberg's office now that the contract with SAIC is over. The pact calls for a "gradual transfer of the management of the system from outside consultants to city employees for a savings of more than $20 million per year."

Bloomberg and Liu have joint control of the city's Financial Information Services Agency, which governs the CityTime project. Liu is seen as a potential challenger in the city's 2013 mayoral election, and has invoked CityTime's woes in publicly criticizing Bloomberg's management of New York's finances.

Some 71 consultants on the project will be let go, according to the agreement. Another 83 will be kept, but will undergo "extensive background checks conducted by an independent third-party." Those 83 consultants will be replaced by city workers over the next several years.

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