Thrift board dumps, sues AMS

The acrimonious relationship between American Management Systems Inc. and the board that oversees the Thrift Savings Plan turned to cinders last week when the board fired AMS and filed a $350 million suit alleging fraud.

FRTIB's complaint against AMS

The acrimonious relationship between American Management Systems Inc. and the board that oversees the Thrift Savings Plan turned to cinders last week when the board fired AMS and filed a $350 million suit alleging fraud.

On July 17, the Federal Retirement Thrift Investment Board fired the Fairfax, Va., company, which was hired in 1997 to modernize the TSP's computer systems. The board then hired Materials, Communication and Computers Inc. (MatCom) of Alexandria, Va., for a $20 million, one-year contract to fulfill "essentially the same proj.ect that AMS has been unable to complete," the board said.

The suit seeks $50 million in actual damages and $300 million in punitive damages for the alleged breach of contract.

AMS officials rejected the board's accusations, arguing that it was the board's failure to meet its contractual obligations that resulted in the failed four-year effort to implement the Thrift Savings Plan's new recordkeeping system.

The Thrift Savings Plan is the federal government's equivalent of a 401(k) retirement savings plan. The new system was to make it easier for the board to make necessary statutory and regulatory changes to the TSP. It would also enable the 2.5 million federal em.ployees with TSP accounts to access their accounts online and more easily move their contributions between different TSP funds. Another 2.3 million people can join the TSP on Oct. 1 when military personnel become eligible.

The new TSP system was to be operational by May 2000 but has been delayed at least four times. And as the project's delays have mounted, so have the costs. Originally slated at $30 million, AMS' most recent estimate was nearly $90 million, the board said.

The modernization effort has been troubled almost from the start, leaving both sides frustrated. AMS even called on a member of Congress for assistance in dealing with the board, a company official said.

The board argued, however, that the final act occurred when AMS failed to comply with a January 2001 "cure letter," which laid out a requirement that AMS set a completion schedule. In March, AMS officials set a December 2001 delivery date but later extended that to January 2002.

"Last week, however, it became apparent—as AMS refused the board's request for a schedule confirming the January delivery date—that AMS knew it could not make that date, but would not admit it to the board," the board's statement said.

"This appears to be a very different company from the one with which we contracted in 1997," board executive director Roger Mehle said.

AMS said in a statement that it would vigorously defend itself against the lawsuit and accused the board of attempting to "shift the focus from the board's own deficiencies in performance and contract breaches."

The company noted that it has developed more than 1.2 million lines of code—five times the original estimate—to meet what it called the board's "evolving requirements."

In addition to hiring a new contractor, the board said that the new benefits announced last year will be made available to TSP participants through modifications to the board's current system, which is managed by the Agriculture Department's National Finance Center.

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