

NY Pays 230 “Consultants” $722M For Project 7 Years Behind Schedule - pauldelany
http://www.democracynow.org/2010/3/26/juan_gonzalez_ny_pays_230_consultants
UPDATE: Corrected misleading headline from article. $722m to date, not per year. Average consultant earns $400k / year.
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Eddk
Very common situation in government contracts and dealing with consultants in
general. I am sure IBM and Accenture are in there some how. NYC government
could have created a small crack-team of internal IT people who could build
the system for less than a 5th of the current cost. Unfortunately most
organizations view IT work as something fit for mercenaries and if you ask any
King who has ever had to rely on mercenaries, they'll tell you it should be
your choice of last resort.

~~~
easyfrag
Yes a small competent team could build the IT system for a fraction of the
time and money. However they would only be successful if the business
processes were well defined which I'm willing to bet they were not.

New IT systems often come along with changes in process, a well defined IT
project should produce a system that follows and complements those processes.
Instead what we often get are "boil the ocean" projects that attempt to fix
process issues under the guise of an IT implementation.

~~~
wallflower
One reason companies hire consultants is not to outsource the project but to
outsource blame and accountability to IBM, Accenture.

"How could the project fail? We hired some of the most highly recommended and
expensive consultants. They didn't deliver."

~~~
aplusbi
What's that old saying? "No one ever got fired for going with IBM."

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jamesbressi
Hmm... sounds like an opportunity.

Juan Gonzalez says this is happening all around the country with cities and
states converting to digital systems.

The consultants are being paid $400,000 a year. Nice. Because it is a capital
expenditure no one knew what these people were being paid so you have to dig
into the city records.

For what?

Basically a digital payroll and time-keeping system with features such as
"biometric hand scanners to avoid city workers punching in for other workers"
and digital timecards.

Anyone up for going after cities and governments who are doing this or looking
to do this? It's taken 7 years in New York at a cost of almost $1 billion, I
say we can do it for... oh, I don't know, 1% of that and in 1/7th the time?

~~~
wmeredith
The $400,000 dollars per year isn't all going to product development. $350,000
of it is to compensate the consultants for navigating the nightmarish
government bidding process laced with procedural road blocks to newcomers,
cronyism and incompetence. Been there and done that, would not do business
with again.

I used to put together proposals for a huge general contractor as a marketing
assistant. The completed government proposals usually consisted of between _15
and 30 three inch ring binders_ of information. It would take me 20 minutes
just to load it into FedEx via hand truck from my car. (This would be for
something like a military barracks, I'm not talking about skyscrapers or
stadiums. Not to mention that it wasn't uncommon to have several rounds of
RFP's.) Contrast that with a civilian proposal that would be two or three
binders. Software is not construction, but I'm willing to bet the process of
bidding is similar.

In other words, it's a fat payday if you can stomach the process, but few can.
This is also doubly sinister in that it's a process that is going to be
particularly distasteful to just the sort of person that would make a great
developer; one who holds efficiency and ingenuity on high, etc... Which is
exactly how you end up with terrible DMV sites and CIA, FBI and DHSA databases
that are unsearchable, and won't talk to each other.

Addenda: I'm not trying to put people off. I just want to shed some light on
exactly how much pain is here: A LOT. Maybe the game-changer isn't someone
getting the contracts and doing great, but someone rejiggering the bidding
process?

~~~
aresant
The best part is that the RNPs are designed to create EFFECIENCY in spending
by creating a competitive bidding process.

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bm98
_The city is paying some 230 "consultants" an average salary of $400,000 a
year for a computer project that is seven years behind schedule and vastly
over budget._

This is misleading. The figures in the article are based on the hourly rates
charged by the contractor that employs these consultants, _not_ their take
home salaries.

This is noted only later in the article:

 _The actual amounts individual SAIC employees took home are most likely lower
than their stated rates, since computer firms typically take a cut of each
consultant's charges. Nonetheless, these are breathtaking numbers._

This too is misleading because it suggests that the hourly rate is comparable
to the individuals' salaries except for a "cut". In reality, this "cut" is
likely 50 percent or more. 60-70% would not be unusual.

This is typical of newspaper coverage of "scandalous" IT contractor pay. The
project may indeed be a disaster, but those consultants are not making nearly
the money that the article suggests.

~~~
gaius
In consulting it's typical to get paid a quarter of your billing rate, as a
rule of thumb. I've seen places where it's a tenth tho'.

~~~
ageanm
As you ascend the ranks of consulting and get to the top 3 shops (McK, BCG,
Bain) it drops down to 1/20th to 1/30th. That is once you take into account
the disparity between number of hours billed and the number actually spent
doing the work.

~~~
robryan
And how is this justified, does the companies brand and support structure
really outpace the value that consultant is creating by a factor of 20 or 30?

~~~
gaius
I'm not sure what he means here - the higher up you get, the better the ratio.
For partners it gets inverted - they are making _more_ than their billing
rates because they're getting a cut of everyone below them's billing too.

When you buy consulting, you're buying a commodity. The premium is meant to
insure you against natural variation, key people quitting, and so forth. Joe
Accenture is meant to be interchangeable with any other Accenture consultant.
A lot of the overhead is the extremely rigid, prescriptive methodologies that
are supposed to make this possible. For multi-year projects, enough budget-
holders believe that this is worthwhile for the entire Big Consulting industry
to exist.

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jasonlbaptiste
722m on a fucking payroll system and it's 7 years behind date. Have you ever
tried to contemplate counting the amount of stars in the sky or the number of
grains of sand in the world? Your mind just gets blown, because you cannot
process the scale of information. The same thing just happened to me when
trying to figure out how this is possible.

~~~
aswanson
You're right, the scale is ridiculous.

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bhousel
Most of these consultants themselves are not making all of that money. They
work for companies like Accenture which bill their time out at several hundred
dollars per hour, but then pay the consultants much less.

For example, the 400k/year figure quoted only amounts to about a $200/hr bill
rate. That's far from the worst I've ever heard on a project like this.

~~~
roc
When I consulted via a firm, they regularly billed clients $200-$300/hr for
the work of developers and operations folks who were getting paid ~$20-25/hr.

Granted, this was in fly-over country, but the gap between billable-hour and
developer-hour is quite often massive.

~~~
jamii
The upside of this is that their customers are used to paying those rates. If
you are self-employed or work for a small consultancy you can undercut them
and still make a bag of money.

~~~
lsc
can you? My experience has been that large corporations, never mind the
government, are perfectly happy to pay 2x or 3x the rates in order to deal
with someone large.

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wallflower
This in a nutshell is why the new U.S. health care bill is really a stimulus
package for the IT and healthcare industries.

Integration of systems can be a nightmare.

As the UK can attest, large systems fail from sheer complexity, if the
politics, internal resistance, and silo mentality don't screw you.

One of the reasons SAP succeeded was that in order to implement the software
you had to rearrange how your company worked - not the other way around,
modify the software to fit your unique business processes. Yes, SAP
consultants make a lot modifying the software but those modifications are
constrained.

Enterprise software is lucrative but you give up the freedom to do what you
ever want. Design by committee.

[http://business.timesonline.co.uk/tol/business/economics/pbr...](http://business.timesonline.co.uk/tol/business/economics/pbr/article6946336.ece)

~~~
ZeroGravitas
Are you seriously suggesting that "complexity" was the root problem here?
Rather than say cronyism, incompetence and greed?

edit: amused to see another comment on a different thread that uses the
phrases "cronyism and incompetence". Did I subconsciously read that and copy
it, or is it just the most apt description?

~~~
dasil003
I'm sure incompetence plays a part, but two other factors at play are the fact
that no one person really understands how things work, and when things start
getting that distributed it's probably fairly likely that there are logical
fallacies that have been built into the system and adhered to by strict
processes for decades. It doesn't take much fudging for a bureaucracy to paper
over these edge cases, the accounts shrug and say close enough, and the
consultants are then put in an impossible scenario where different parties
give them different business logic and no one has the authority or will to
reconcile the issues from the top down.

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dpatru
Why does NYC need a custom payroll system? Government agencies are supposed to
be staffed by employees who can be trusted by the public not to abuse
sensitive personal information such as is contained in tax returns. Yet, these
same employees are considered so personally untrustworthy by the government
that it is justified in spending hundreds of millions of dollars to design a
payroll system whose primary feature seems to be innovative techniques for
preventing fraud. Is there any evidence that government employees are more
untrustworthy than other employees so as to justify such a system?

~~~
aero142
Yeah. This seems strange to me as well. If you need biometrics to prevent
people from reporting hours when they aren't even in the building, why would
you even want them to show up in the first place. If you get them to show up
in order to collect a paycheck that doesn't mean they are going to do useful
work. I'm guessing the problem is that you can't fire public employees.

~~~
rbranson
This is because you can't always trust management to report things properly.
My girlfriend works at a liquor store (small business, <50 employees) and they
use a biometrics scanner for their clock in/clock out. It is very efficient
and prevents the problems I stated. If sizable groups of your organization are
cheating the system and your organization is large enough, it's going to be
difficult to figure this out.

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megamark16
Both of my in-laws work for the USDA and they have been complaining for quite
a while about a new system that was also way behind schedule and really didn't
solve the needs of the department anyway. It's a typical case of "gather some
requirements, go off into a black whole and build it for a few years, than
come back and act surprised when it isn't relavent anymore and half the
features don't even work." There are a lot of companies out there making a lot
of money for doing a really bad job, waste is everywhere, and unfortunately
I'm not getting any of it :-)

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S_A_P
Consulting: If you're not part of the solution, there is good money to be made
in prolonging the problem.

or something like that.

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sili
There is a market for an off-the-shelf system or maybe customizable system
with the same core that cities can purchase and install without the need to do
development. Maybe with different levels of strictness as far as scanning in
employees is concerned (biometric scanning vs. RFID cards, etc).

~~~
cschneid
Most likely it's more than time tracking. It's also paychecks. And once you
get into paychecks in government, there are LOTS of nasty little loopholes and
special rules that apply only to this small set of people, etc, etc, etc.

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faramarz
How are these contracts being awarded? Are we talking public RFP's? If so,
that should have produced competitive rates per project, no?

Unless these 'consultants' were already promised the job and the RFP was just
a formality, as is in most city contracts.

~~~
anamax
> If so, that should have produced competitive rates per project, no?

What makes you think that those rates aren't competitive?

Govt projects have lots of overhead. Some comes from procedures intended to
keep them from being cheated. Some comes from trying to make sure that the
"right" people get the job. (Some sounds okay, such as"diversity", but is
actually a cover for graft.) Some comes from all of the stakeholders. And on
and on.

~~~
faramarz
because reading this line is somehow not surprising at all..

 _"The problem is no one knew how much these people were being paid, because
their salaries don’t appear in normal city records."_

I've dealt with city contracts and it's a culture where the oldest members of
the club always land the contracts, no matter what. Finding ways to bury the
actual amounts through loopholes or channels is what keeps city officials at
work. ha!

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SilianRail
I've always said that 2 smart people can get way more done than an army of
consultants in a shorter amount of time. (for the record, I'm an ex-
consultant)

But this is business and this is why these companies make as much money as
they do. When you are in charge of such a project and your ass is on the line
who better to blame than a large Fortune 500 type of company (i.e. Accenture,
Deloitte, IBM, etc). You can't get fired for failing a project with a vendor
that is considered the "best" but you can for using "Jim's Custom Development
Shack".

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raheemm
A friend of mine works as a trainer on this project and he does a great job
because the software is so convoluted - you need a great trainer.

He likely bills $60/hr to a sub-contractor, who then adds in his likely $100
profit and bills SAIC (the main contractor on this project). SAIC probably
bills the city $250/hr for my friend's services!

The numbers are guesses but I spoke to my friend and he said that the vast
majority of the billing goes to the main contractor and subcontractors.

At any rate, its a big waste.

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jacoblyles
Government is a giant Principal-Agent problem.

<http://en.wikipedia.org/wiki/Principal-agent_problem>

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pauldelany
corrected misleading headline - should be $722M to date, not per year.

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tron_carter
State Government RFP opportunities can be frustratingly bureaucratic at first,
but there are real opportunities for IT staff augmentation and IT project
proposals, but there is a ton of competition for these limited opportunities.
For instance: State of Texas has 400+ approved vendors on their roll, S.
Carolina has 200+ vendors. Some states are more progressive and permit
electronic proposal submissions. Others still require submitting 6 identical
binders for each proposal plus a CD or USB drive will all documents in
electronic form. Because they can.

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samd
You know what they say about spending other people's money.

There seems to be a huge opportunity for a website like ChallengePost to get
local governments to post IT contracts online.

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snewe
The story:
[http://www.nydailynews.com/news/2010/03/26/2010-03-26_city_p...](http://www.nydailynews.com/news/2010/03/26/2010-03-26_city_pours_722m_down_consulting_contracts_black_hole.html)

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aresant
Accenture, one of the primary beneficiaries of this $722m, operates offshore.

They're now in Ireland after having been in Bermuda for the sole purpose of
avoiding paying the US governtment taxes on their international business.

So in reality our tax dollars are going to fund a multi-national conglomerate
that's making the spread between the $100/hr consultants and the $400/hr
billings.

I can't wait to see the tricks these companies come up with to service the
$100,000,000,000 a year that we just dumped in the pork barrel for health
care.

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vishaldpatel
Man it must really suck to be the guy thats only making 100k but doing all the
work, and finding out that some guy in the next cubicle negotiated 600k, and
he spends all his time dickin' around with the secretary.

