Mar. 26—The Mills administration plans to cancel a contract and potentially seek repayment of up to $22 million from a multibillion-dollar software company over delays in upgrading the state's outdated human resource systems.
A spokeswoman for the Maine Department of Administrative and Financial Services said Friday that the Mills administration "does anticipate moving forward with termination" of the contract with California-based Workday Inc. The decision follows a strongly worded letter sent to company executives last month claiming Workday "has consistently operated in bad faith and has knowingly misled State of Maine officials."
Department spokeswoman Kelsey Goldsmith said the agency was working with the office of Attorney General Aaron Frey to negotiate "the terms of dissolution," but declined to comment further. Frey's office did not respond to questions about the status of the contract dispute review.
A company spokesperson said Maine state government has "no basis" to terminate the contract.
In a February 25 letter to Workday, however, Commissioner Kirsten Figueroa warned the state would seek repayment of nearly $22.2 million either paid to the company or that Maine expects to pay to maintain its outdated HR and payroll systems. Workday had paused all work on the project roughly two weeks earlier amid rising tensions with the department.
"Throughout this contractual relationship, the state has relied upon the expertise and word of Workday," Figueroa wrote to Workday senior vice president Christopher Curtis. "However, Workday has consistently operated in bad faith and has knowingly misled State of Maine officials."
Figueroa accused Workday, among other things, of misrepresenting the status of the project, failing to produce the specific products in the contract and pressuring the state to accept a premature launch date. Figueroa also said Workday's decision to halt all work on the project on Feb. 12 was not allowed under the contract and represented a "default and breach of the agreement."
In a statement, Workday officials said the company has tried to work with the state and will continue to do so.
"Customer service is a core value at Workday and we remain committed to partnering with the State of Maine to successfully complete this project," a Workday spokesperson said in a written statement. "However, technology deployments are highly collaborative and require all parties, including customers, to participate and deliver on their commitments, and we have been doing our part to try and engage with the State to move the deployment forward. The State of Maine has no basis to terminate our agreement for cause."
The company provides cloud-based finance and human resources services to companies and governments around the world. Headquartered in the San Francisco Bay area, Workday reported $4.3 billion in revenue last fiscal year and has offices in 14 states plus more than 20 countries.
In a February 11 email to DAFS officials — sent one day before the apparent work stoppage — Curtis outlined a number of concerns he had with relations between the two parties.
"I am growing increasingly concerned about the overall progress and status of the Workday deployment project, lack of visibility into what the State of Maine is thinking about how to move forward, and the overall relationship between Workday and the State of Maine," Curtis wrote in the email, which was shared with the Portland Press Herald as a public document.
The termination of the contract is the latest setback in a technology upgrade project that is years behind schedule and has cost taxpayers millions of dollars more than originally budgeted.
Meanwhile, a legislative committee voted unanimously Friday to press the Mills administration on the situation.
The Legislature's Government Oversight Committee voted to send a letter to the department requesting more information on the Workday issues as well as delays among other contractors to replace the state's antiquated human resources software.
"It's been six years since the original bid went out to fix this broken system, outdated system, and I think the public has a legitimate inquiry," said Sen. Rick Bennett, R-Oxford. "Two administrations seem to have had problems with this. This is demanding legislative oversight at some level."
The committee took up the issue at the request of Rep. Justin Fecteau, R-Augusta, who had requested a full investigation into the tens of millions of dollars spent on an as-yet-undelivered software upgrade.
Fecteau said he first heard about potential problems with the Workday contract while campaigning as he talked to state employees living in his district. Following his re-election, Fecteau had a chance to question DAFS officials about the contract as a member of the budget-writing Appropriations and Financial Affairs Committee when they requested an additional $8 million for the contract.
"Given all that has become clear and the lack of information that has been shared with lawmakers ... I am urging a full, complete and independent investigation," Fecteau told committee members on Friday morning. "I believe the toxic environment surrounding this program has been a waste of taxpayer funds and put state personnel at risk, even though this modernization is much needed."
Rather than launch a full investigation, the committee took a half-step Friday by opting to send an initial letter to the department seeking detailed information on the Workday contract.
The committee would likely then follow up by asking department officials to answer questions at a future meeting before deciding whether to direct the Legislature's watchdog agency, the Office of Program Evaluation and Government Accountability, to launch a full investigation.
"We escalate our tactics depending on the responses that we get," said committee co-chairman Sen. Nate Libby, D-Lewiston. "In my view, the (committee) writing a letter is an escalation step. Certainly, we have investigative powers and subpoena powers reserved for when we are not getting anywhere."
Maine's current payroll-only software system is roughly 30 years old and is written in computer language that is so obsolete that there are only a handful of state employees left who know how to work in it, according to discussion during Friday's committee hearing. The state has separate human resource software systems to handle non-payroll issues.
In 2015, the administration of Gov. Paul LePage solicited bids for a comprehensive system capable of managing all payroll, vacation time, taxes, health care and retirement benefits for more than 10,000 state employees. The software company Infor was hired in 2016 to build the system with an initial budget $24 million.
But two years and $13.5 million later, the state terminated the contract with Infor for "lack of delivery" and entered into a contract with Workday, with a goal of launching the system in 2020, according to information prepared by the Office of Program Evaluation and Government Accountability. The state then contracted with Workday in 2018 with an estimated initial budget of $15.3 million.
In testimony before the Legislature's budget committee early this month, Figueroa told lawmakers that the state would need another $8 million to bring the system online and that it wouldn't be fully implemented until 2022. She also disclosed that the state had warned Workday of the impending contract termination unless unless the company fixed a long list of problems within 30 days.
Figueroa's letter to Curtis, the Workday senior vice president, indicated that the state would demand the repayment of $22,164,755 "due to incomplete deliverables and failure to meet the state's requirements."
Fecteau also has raised concerns about "sexual misconduct in the program directed at the capable women who work there." Those allegations are currently being investigated by DAFS and will not be part of the Government Oversight Committee's information request because they are outside of the committee's purview.
Fecteau declined to provide further comment Friday on the nature of those complaints other than saying at least one of the alleged perpetrators was a state employee. He said he was pleased the matter was being investigated, however.