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Report Number: 2016-125.2

The University of California Office of the President
The University of California Office of the President Increasing Costs and Scheduling Delays Have Hampered the UCPath Project and Originally Anticipated Savings Are Unlikely to Materialize



Summary

HIGHLIGHTS

Our audit concerning the University of California’s (university) planned systemwide payroll and human resources system, known as UCPath, and other information technology (IT) systems revealed the following:


Results in Brief

The University of California (university) Office of the President has failed to keep its planned systemwide payroll and human resources system on budget and on schedule. The University of California Payroll, Academic Personnel, Timekeeping, and Human Resources (UCPath) system will replace the university’s existing legacy system, which is several decades old and has been highly customized by campuses to the degree that the university is operating 11 different payroll and human resources systems. UCPath is the university’s attempt to integrate these functions into one system.

In its initial business case for UCPath in 2011, the Office of the President estimated that implementing the project itself would cost $170 million, and with other related costs, it would total $306 million. It also estimated that the project would be completed by August 2014. However, as the project’s cost has escalated and its schedule has slipped, the Office of the President has revised these estimates. The Office of the President currently projects the implementation cost of UCPath to be $504 million—$334 million over its original estimate of $170 million—and it has delayed the date of UCPath’s implementation by nearly five years, to June 2019. Moreover, the $504 million estimate does not represent the full cost of the project because it includes just a fraction of the cost associated with the campuses’ implementation efforts and a shared services center, known as the UCPath Center. The full cost to the university of adopting UCPath is likely to be at least $942 million.

At the same time that UCPath’s cost has increased, the savings that the Office of the President anticipated would result from UCPath will not materialize. The Office of the President conceived UCPath in 2009 and it later became part of its Working Smarter initiative, an effort it led to achieve administrative efficiencies systemwide by reducing costs or increasing revenues. The Office of the President’s initial business case in 2011 asserted that UCPath would result in $753 million in cost savings, primarily from staffing reductions at the campuses. However, the UCPath project director told us that the Office of the President no longer expects to realize those projected savings. Several campuses also reported to us that they do not anticipate the staff reductions that the 2011 business case promised. In fact, in a status update to the University of California Board of Regents (regents) in July 2017, the Office of the President did not discuss any offsetting savings but rather discussed creating efficiencies and avoiding costs.

In addition to not keeping the regents apprised of the uncertainty associated with the announced $753 million in savings, the Office of the President has only rarely apprised the regents of schedule and budget changes. As a result, the regents have not had the opportunity to participate in critical project decisions. This lack of transparency is particularly troubling in light of UCPath’s importance to the university system, its soaring cost, and its delayed implementation. The reporting lapses occurred in part because until recently, the Office of the President lacked criteria defining the circumstances that warranted updates to the regents. Although the Office of the President expanded the UCPath governance structure in July 2017 to include updating the regents when the project’s cost increases by more than $20 million or its schedule is delayed by more than three months. However, the planned communication is one‑way only: apprising the regents of progress rather than engaging them in decision making. This governance approach, although expanded, does not go far enough in recognizing the regents’ role as an oversight body.

This sort of oversight is particularly important because we identified weaknesses in the Office of the President’s project management that likely contributed to UCPath’s escalating cost and schedule delays. For example, our information technology (IT) project management expert identified that the Office of the President set aggressive schedules for the UCPath project that are susceptible to delays caused by project scope changes or staffing constraints. In addition, the Office of the President did not establish rigorous change management processes that would have allowed it to assess how changes to the project’s scope would impact its cost and schedule. Notwithstanding its project management weaknesses, the next important UCPath milestone is a multicampus deployment the Office of the President currently has scheduled for December 2017, and it will serve as an indicator of the project’s ability to meet its current budget and schedule goals.

In addition to the UCPath project, we reviewed three campuses’ management of their contracts for campus‑specific IT systems. Although we found that each campus reviewed and approved vendor invoices before payment, two of the campuses had vaguely worded deliverables for milestones, an approach that does not align with industry best practices. Because the contracts provided insufficient detail about the deliverables for milestones, the campuses could not effectively measure whether the vendors had met their obligations for payment.

 

Selected Recommendations

Regents

To ensure that they can exercise necessary oversight, the regents should develop by December 2017 status reporting standards for the university’s significant IT projects that the Office of the President and the university locations must follow.

Office of the President

To ensure that it fully reports the cost of IT projects, the Office of the President should develop by December 2017 cost reporting guidelines for UCPath and other significant IT projects. These cost guidelines should identify cost categories at both the Office of the President and university locations to ensure that the Office of the President’s estimates capture and communicate all development and implementation costs. In addition, the Office of the President should produce cost reports to share at least quarterly with stakeholders.

To ensure that it consistently follows best practices related to project management, the Office of the President should develop and implement guidelines for IT project development by June 2018. The guidelines should apply to IT projects undertaken by any university location with a cost estimate of $5 million or more. The guidelines should include, but not be limited to, advising project managers on ensuring that schedules are realistic and implementing rigorous change management processes that establish a means of assessing the implications of changes to a project’s scope, cost, and schedule.

The Office of the President should require by December 2017 that all university locations follow the best practice of including well‑defined deliverables in contracts related to the development of IT projects.


Agency Comments

In its response to the audit, the regents stated that they welcomed the constructive input on IT project oversight and agreed to implement the recommendation in the time frame specified. Similarly, the Office of the President stated that our recommendations are helpful and constructive and align with its efforts to improve the university’s operations, policies, and transparency. The Office of the President agreed with most of the recommendations in the report and expressed its intent to implement them.




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