ERS settles suit
for $1 milThe state's pension fund
agrees to pay a Colorado firm
after a computer system
replacement goes awry
A dispute over a $12.7 million contract to replace the Hawaii Employees' Retirement System's antiquated computer system has been settled with the agency getting back some 5 million pieces of data on its 97,000 members.
The ERS does not have to pay the contract fee agreed to in 1999, but is left without a new computer system and must pay about $1 million to settle the dispute.
Colorado-based Quovadx Inc., the international computer-management firm that won the ERS contract, had been holding onto the personal data on Hawaii government workers and their families pending resolution of the dispute.
In the settlement, ERS gets out of what turned out to be an unworkable contract.
Quovadx said it gets $1.14 million, of which $745,000 will be treated as an ERS payment for services and $395,000 will be a payment for software licenses and other rights that ERS will keep.
ERS officials late yesterday agreed with the general figures but said some of the cost will be born by other parties.
The retirement system said it is working to replace its 16-year-old Wang system and it is glad to avoid what could have been lengthy and costly litigation.
Lawsuits were filed by both sides of the dispute in Hawaii Circuit Court in June last year.
The computer contract was a major point in state Auditor Marion Higa's critical report on ERS in December, in which she said disputes arising from mishandling of the computer system replacement had cost the ERS $3.5 million "in wasted resources."
Higa called the old computer system ineffective and inefficient and said it was hindering the retirement system's ability to perform its mission. She also blamed ERS administrators for failing to manage and implement the contract for the new system, which was not installed.
In preparation for the new system, records were copied and transferred to Quovadx. ERS officials acknowledged it owed Quovadx money for the imaging work, said Wesley Machida, ERS assistant administrator.
ERS is now able to move ahead on other ways of getting away from the old system, he said.
"We are taking steps to not be dependent on the Wang hardware," he said.
In an official statement David Shimabukuro, ERS administrator, said the dispute was prolonging the implementation of a new computer system.
He said a mediator who was involved called the settlement "reasonable, prudent and in the best interests of the ERS."
Other parties to the settlement were Thermo Electron Corp. and Federal Insurance Co., which were working with Quovadx, ERS said.
The ERS is a $7.8 billion fund that primarily invests in stocks, bonds and other securities to fund retirement, disability and survivor benefits for more than 97,000 city, county and state employees and their beneficiaries.
