• State Auditor: FI$CAL on the Border of Oblivion?

    January 12th, 2012 by admin Categories: Blogs Tags: , , , , , , , , , , , ,

    The SacBee’s State Worker columnist and TechLeader.TV friend Jon Ortiz weighs in today with a story about the State Auditor again ripping FI$CAL, the state’s new $1.6 billion financial system modernization project at the Department of Finance. However, I want to take issue with certain findings the Auditor presented in her report regarding IT project cost estimates which Jon highlighted in his story today.

    That $1.6 billion estimate, made in 2007, is squishy. State Auditor Elaine Howle said in a report to lawmakers on Tuesday that it’s hard to know what FI$Cal will cost, because its funding is uncertain.

    Project officials kept it going this year with a loan and a hodgepodge of special fund dollars. They’ve concluded that a 2008 plan to sell bonds to finance the project is off the table, a victim of the state’s economy and “a law that prohibits the use of bonds to finance a budget deficit,” Howle’s report says.

    FI$Cal leaders have some other funding options, like leaning on vendors for credit, paying cash or issuing special bonds with lawmakers’ approval. But until there’s a solid financing plan, it’s impossible to come up with a new cost appraisal, Howle said. [Italics: JTF]

    I don’t want to infer that funding for a project isn’t critical; of course it is, and the project should not be started without it (see below). However, funding availability should not dictate the project budget. Never put the cart before the horse. The pathway to IT project failure especially in California is paved with the skulls of CIO’s, project managers and budget officials who initially low-balled IT project budgets in order to get them approved by the Department of Finance and the legislature. These IT managers knew that they could always come back next year, and the next, and the next with Special Project Reports (SPRs), the state’s traditional and time honored practice of heaping change order upon change order to reflect the realistic, and previously hidden, actual cost of project implementation. (Just as a note, FI$CAL’s fourth SPR is due next month.)

    Truth be told the projected cost of FI$CAL can’t be estimated until the system integration vendors submit their proposals later this year. Their proposed costs will comprise the greatest proportion by far of total project cost. Unfortunately, those estimates together with the state’s own costs to support the project in terms of staffing (over 150 positions today!) and other computing resources will actually represent only the starting point for predicting total actual costs which will inevitably rise. It’s these state IT managers’ jobs to utilize strict risk management and project oversight to keep these budget overruns at a minimum. Again, unfortunately, this is a skill set that the state has not heretofore adequately demonstrated, as Jon Ortiz reminds us, whether on FI$CAL, CalPERS, the AOC Case Management System, 22nd Century Project and so on.

    Finally, though, the Auditor has raised a very valid point, but with all due respect, has come to the wrong conclusion. Without a sign of a significant budget support from the legislature for this potentially multi-billion project, and by support I mean more than just another annual budget allotment of $40 million or so, serious consideration should be given to cancellation as TechLeader.TV has recommended before: $5 billion IT related budget Cuts/Efficiencies

    Start over by designing a funding mechanism and obtaining legislative support over the next several years, and come back with a cloud based solution at a fraction of FI$CAL’s multi-billion dollar, 12 year implementation. Seriously, does Jerry Brown support an IT project that will be completed when he’s 85?




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