here was responsibility on both sides for system

performance and service delivery. How did all of this

happen?

Phase $1$ of UCMS $($wage records$)$ was implemented

in May $2008.$ Phase $2,$ which included the employer

tax portion of the system, went live in March $2011$

but required additional work, which took years to fix.

Phase $3$ for benefit claims processing, payment, and

appeals continued to lag behind with problems and

ultimately never went live.

In $2012,$ DLI enlisted the Carnegie Mellon

Software Engineering Insitute to conduct an independent assessment of the UCMS. The study was

completed in July $2013,$ and recommended continuing work on remaining Phase $2$ problems, but stopping work on Phase $3.$ Many of the problems it identified for Phase $3$ could not be solved.

The Carnegie Mellon study found many flaws in

the systems development process. IBM had extensive

systems experience and technology knowledge but

its proposal underestimated the project$$s scope and

complexity. DLI lacked sufficient staffing and experience for effective oversight and management of the

contract and project. There was no formal delegation

of roles and responsibilities for managing the project.

No one at DLI was held accountable. DLI essentially

relied on the contractor to self$-$manage.

UCMS was considered a large$-$scale software project due to its complexity, large number of information requirements and business rules, and its cost.

DLI$$s solicitation for vendor proposals for UCMS

exhibited ambiguity in communicating all of these

requirements, and also neglected to define and describe quantitative and qualitative performance measures and metrics for the proposed system.

A large$-$scale software$-$intensive system such as

UCMS requires a rigorous and disciplined testing

strategy, but this was not implemented. IBM decided to use DLI users to help develop test scripts.

They provided the business expertise, but IBM did

not use IT test experts on its end. User acceptance

testing was initiated before completing system tests

for Phase $2$ and Phase $3.$ Rigorous testing came too

late in the project. DLI did not specify a minimum

of metrics for UCMS system performance so that

there were no identifiable criteria and evidence for

The Pennsylvania Department of Labor and

Industry $($DLI$)$ is responsible for the administration and operation of the state$$s unemployment compensation program, which provides

temporary income to replace lost wages for qualified workers. DLI employs over $500$ people and

has approximately $200$ offices statewide to serve

Pennsylvania$$s $6\mathrm{.}4$ million workers and nearly

$300,000$ employers. Unemployment compensation

$($UC$)$ claims are usually filed online or by telephone

or mailed to a UC service center.

DLI had a legacy mainframe system for processing

unemployment benefits that was over $40$ years old.

However, it became increasingly expensive to maintain and difficult to modify, with limited functionality for case management and integrating newer tools

and technologies to enhance productivity.

In June $2006,$ DLI awarded IBM a fixed price contract totaling $$109\mathrm{.}9$ million for the Unemployment

Compensation Modernization System $($UCMS$),$ which

would replace the antiquated mainframe system.

The initial contract with IBM called for more modern

and efficient technology and business processes for

$(1)$ maintaining wage records, $(2)$ processing employer taxes, and $(3)$ claims processing, payment,

and appeals, to be completed by February $2010.$ IBM

won the UCMS contract after a three$-$year bidding

process, claiming to be the only vendor with the type

of proprietary databases capable of supporting a totally integrated computer system.

However, this project experienced significant

delays and cost overruns, ultimately costing nearly

$$180$ million, with much of the system never completed when the contract expired in September $2013.$

By that time, the project was $45$ months behind

schedule and $$60$ million over budget. Pennsylvania

taxpayers had paid IBM nearly $$170$ million for what

was supposed to be a comprehensive, integrated, and

modern system that it never got. IBM$$s contract was

not renewed. In March $2017,$ Pennsylvania sued IBM

for breach of contract, fraudulent and negligent misrepresentation, and charging taxpayers for services

it did not provide. IBM said Pennsylvania$$s claims

had no merit and that it would fight the lawsuit. A

spokesman for the company laid some of the blame

for the project$$s problems on the state, saying that

Pennsylvania$$s Unemployment Compensation

Modernization System: Unfinished Business

CASE STUDY

Chapter $14$ Managing Projects $561$

transfer of essential knowledge for the entire project,

a loss of $$project memory.$$ Since the UCMS project$$s

start, $638$ different contractors and staff members

worked on the project. The majority of the project

workforce spent less than one year on the projec