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Washington, D.C.—There are few more graphic examples of the dangers in contracting government work to the private sector than the failure over a number of years of a private contractor to deliver on its promises to the Federal Retirement Thrift Savings Board, the leader of the nation’s largest independent union of federal workers said today.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU) said NTEU supports the decision by the Board, which operates the retirement savings plan for some 2.5 million federal employees and retirees, to end its contract with American Management Systems, Inc., [AMS] to develop and implement a new computerized record keeping system for the Thrift Savings Plan (TSP). Kelley is a member of the Retirement Thrift Savings Board.

Earlier today, the Board said it has not only ended its contract with AMS, but that it had filed suit against the company in federal court, seeking $50 million in actual damages and $300 million in punitive damages, alleging breach of contract and fraud.

The TSP, which is similar to 401(k) plans offered by many private employers, was created by the Federal Employees Retirement System Act of 1986, and is administered by the Board. Its assets total nearly $100 billion and could rise substantially at the October 1 start of fiscal 2002 when some 2.7 million members of the uniformed military will become eligible to take part.

Kelley, an outspoken critic of the dangers of unchecked contracting out of government work, said that not only did AMS fail to adhere to five adjusted schedules for delivery of the necessary computer software and

related equipment, but that the company’s initial cost estimate of $30 million had nearly tripled, to almost $90 million.

The Board’s intent under the AMS contract was to acquire a customized product build around a widely-used off-the-shelf computerized record keeping system that would permit the Board to better adapt administration of the TSP to legal and other requirements affecting defined-contribution pension plans. The software also was intended to support implementation of two additional TSP investment funds and certain other benefits authorized by Congress.

“This is the worst-case scenario dealing with federal contracting, “ Kelley said—a contractor substantially underestimating the difficulty and cost in completing a job, forcing interim arrangements to get benefits to the people who have a right to expect them, and then demanding that government pay additional money to get the job done.

She said the AMS case “underscores the need” for congressional passage of the Truth, Responsibility and Accountability in Contracting [TRAC] Act, legislation that would, among other steps, require agencies to implement systems to track whether current contracting efforts are saving money and whether contractors are delivering services on time and efficiently.