Apr. 23—State government will save about $206,000 a month after it released 15 independent contractors who were hired to help the Department of Administration and Financial Services implement a costly new human resources and payroll management system that's been in the works for nearly a decade.
The nearly $55 million project spans the administrations of the last two governors, one Republican and one Democrat; involves contract cancellations for two different vendors and is now unlikely to be in place before 2022 — although posters scattered around offices in state government still promise a January 2020 launch date.
"As good stewards of the project and fiscal resources, while we are in this transition we released 15 independent contractors," DAFS Commissioner Kirsten Figueroa told lawmakers on the Legislature's Government Oversight Committee Friday.
Figueroa said state employees and several other independent contractors continue working on the cloud-based software system, despite an ongoing legal dispute with Workday Inc., the California-based software maker.
Documents provided to the committee by DAFS summarizing the state's ongoing spending on the Workday Maine project show it has gone far over budget — with expected costs rising from $15.3 million to $34.7 million. Meanwhile, another $4.4 million for continuing work on the project in 2022 and 2023, plus another $1.9 million for debt service on the project, has been earmarked in future state budgets.
A previous effort with a different company, under the administration of former Republican Gov. Paul LePage, spent $13.5 million before LePage's team terminated that contract and hired Workday in 2016.
The project is ultimately meant to help the state move into a modern payroll and human resources management system to serve the state's 13,000 workers. The system is supposed to provide secure, mobile access that will allow workers and managers to make entries or changes to payroll, benefits and other human resources information.
Attorney General Aaron Frey is working to recover $22 million from Workday, which the state says has breached its contract by stopping work on the project in February — the second work stoppage by the company in two years.
Headquartered in the San Francisco Bay area, Workday provides cloud-based finance and human resources services to companies and governments around the world. Workday's $4.3 billion in revenue last fiscal year is roughly equivalent to the current annual budget for Maine state government.
Earlier this month, Figueroa told the committee she was pleased the state had not moved forward to launch the system before it was ready as it could have resulted in problems like those experienced by the city of Baltimore, where a premature launch of a Workday system left some employees without paychecks and others with large overpayments.
Payroll tests of the Workday Maine system in early 2020 had a 50 percent error rate — a major red flag, given that that system was supposed to begin handling the paychecks and benefits for 13,000 state employees starting on April 1 of that year.
The subsequent decision to delay the launch for a second time was a turning point that eventually led to the state's decision to cancel the contract and seek $22 million back from the company.
"Any attempt to launch the product in its current condition would have been a catastrophic failure," Figueroa wrote to Workday executives in May 2020. "There is a shared responsibility for these issues for both the Workday and State of Maine project staff. However, the Workday project staff have shown no accountability for their part in this flawed process."
Rep. Kathleen Dillingham, D-Oxford, questioned the cost of the contractors who had been released saying at $206,000 a month for 15 workers would meant they were being paid over $13,000 a month on average. Figueroa responded that $108 an hour was "about standard for an independent contractor."
Kelsey Goldsmith, a spokeswoman for DAFS, later said the state kept the contractors on until April in hopes of reaching an agreement with Workday.
"These so called "project nomads" understand that they are contract workers hired individually and competitively, at-will, in order to complete a specific task or set of tasks related to the State's portion of the project work," Goldsmith wrote in an email message Friday. "Like in many other states where this model is used, their pay is commensurate with their high level or technical ability and for the risk they assume in accepting these assignments, which may be indefinite or may end at any time."
Also released Friday was a new letter from Workday to the oversight committee disputing various allegations by state officials that the company is in breach of its contract with Maine or that it has acted in bad faith.
Workday's Chief Customer Officer Emily McEvilly submitted copies of additional correspondence between Figueroa and others at DAFS and other Workday executives. Those messages shed some additional clarity on the legal dispute between the state and the company. So far, Frey's office has declined comment on the case, saying it's an ongoing legal matter.
A March 9 letter from Christopher Curtis, Workday's senior vice president for global professional services, to Figueroa blames the state for breaking its side of the deal. Curtis said Workday had provided more than it was required to under its contract with the state. He said the state still owes Workday at least $72,000 in fees for its "Learn On Demand" and "Adoption Kit" products.
"Although the State currently has access to both products, it has yet to pay the outstanding invoice, which was due on June 30, 2020," Curtis wrote. Curtis also details other efforts he said shows Workday was acting in good faith, including adding some functionality to its system that was not detailed in its initial contract with the state.
In an April 5 letter, also provided to the committee by McEvilly, Curtis writes, " . . . DAFS has refused to even engage with Workday to determine a strategy for completing the project."
Curtis claims Workday has also provided more than $2 million in free consulting services to the state, in an effort to demonstrate it is working in good faith.
"Workday has bent over backwards in an effort to help the State go live on Workday's innovative software platform," Curtis wrote.
In her letter, Workday's McEvilly also accepts an invitation from the Government Oversight Committee for the company to appear at the committee's next meeting on Friday, May 14.
The committee is comprised of an equal number of Democrats and Republicans. It directs the work of the Office of Program Evaluation and Accountability, the agency that serves as the watchdog for fraud, waste and abuse in state government, and has been contemplating whether it wants OPEGA to launch a full investigation into the state's dealings with Workday.
The panel voted unanimously Friday to table that decision to give Frey's office time to possibly reach a legal settlement with Workday.
Sen. Nate Libby, D-Lewiston, the Senate chair of the committee, said he also did not want to tie up staff resources at DAFS while they continued to work to bring the over-budget and overdue system online.