With the launch just months away, Maine’s finance agency conducted test runs in early 2020 of a state-of-the-art but costly payroll program slated to replace a decades-old system that state officials said was “held together with duct tape and paperclips.”

The test results did not inspire confidence.

More than 50 percent of the payroll tests contained errors – a major red flag, given that that system was supposed to begin handling the paychecks and benefits for 13,000 state employees starting on April 1 of that year. The subsequent decision to delay the launch for a second time was a turning point that eventually led to the state’s decision to cancel the contract and seek $22 million back from the company, Workday Inc.

“Any attempt to launch the product in its current condition would have been a catastrophic failure,” Kirsten Figueroa, commissioner of the Maine Department of Administrative and Financial Services, wrote to Workday executives in May 2020. “There is a shared responsibility for these issues for both the Workday and State of Maine project staff. However, the Workday project staff have shown no accountability for their part in this flawed process.”

Figueroa’s letter was among dozens of documents shared Friday with members of a legislative committee considering whether to launch a formal investigation into an information technology upgrade that has cost the state more than $34 million to date and is years behind schedule.

In lengthy testimony to the Government Oversight Committee, Figueroa estimated that the entire project cost will likely hit $55.4 million by the end of fiscal year 2023. But the commissioner said that massive figure is less than half what some larger entities pay for a fully integrated human resources management system with fewer features and less complexity.

And Figueroa sought to assure lawmakers that the eventual system will be “a superior product that improves accuracy, performance and decision making and which is not held together with duct tape and paper clips.”

“Workday Maine has suffered its fair share of bumps, sharp corners, and breakdowns,” Figueroa said. “There will be more inevitably. But there has not been fraud, waste and abuse of funds. Throughout, DAFS has been – and will continue to be – good stewards of the state’s interests.”

Lawmakers expressed frustration at not having received the dozens of documents – including contracts, change orders, emails and other correspondence between state and Workday representatives – before Friday’s hearing. The department made the documents available for download on Thursday morning, but the massive files were too large to email so most committee members had yet to see them before the 9 a.m. start of Friday’s meeting.

“I think DAFS should have gotten them over to us two or three days ago since they knew this was coming,” said Sen. Jeffrey Timberlake, R-Turner. “This is a lot of information and we should have had it.”

The committee plans to question Figueroa and other DAFS staff again on April 23 and expressed an interest in hearing Workday’s take on the sequence of events in mid-May last year.

The Government Oversight Committee is debating whether to direct the Legislature’s independent watchdog agency, the Office of Program Evaluation and Government Accountability, to launch a formal investigation into Maine’s nearly decade-long effort to implement a new human resources management system.

That process formally began in 2012 under former Gov. Paul LePage, although there had been talk about the need for a new system years earlier.

Maine’s current paper-based payroll software system is more 30 years old and is written in a computer language – COBOL – so antiquated that only two state employees even know how to program in it. One of those recently retired, Figueroa said, and the second is close to it. The state also has separate human resource software systems to handle non-payroll issues.

In 2016, the LePage administration hired the software company Infor to build the system with an initial budget of $24 million. But two years and $13.5 million later, the state terminated the contract with Infor for “lack of delivery” and entered into a contract with Workday, with a goal of launching the system in January 2020.

Headquartered in the San Francisco Bay area, Workday provides cloud-based finance and human resources services to companies and governments around the world. Workday’s $4.3 billion in revenue last fiscal year is roughly equivalent to the current annual budget for Maine state government.

DAFS officials testified Friday that Workday was “one of the two top providers in the country” and that they were selected based on the company’s track record and because it offered the suite of features Maine was seeking. The LePage administration then entered into two contracts with the company: one with Workday Inc., to develop the human resources management system and a second with Workday Professional Services to manage the integration and implementation of the system.

But within a few months, Workday notified DAFS that it would not be able to provide a major part of the contract: a “labor cost distribution” feature allowing a breakdown of employee time and benefits costs, which is useful in seeking reimbursement from the federal government. The company proposed a work-around solution, instead.

In November 2019, the state and Workday Professional Services agreed to push back the Jan. 1, 2020, “go live” date until April 1, 2020. But after tests of the payroll system yielded a more than 50 percent error rate in early 2020, the state again pushed back the launch date despite assurances from Workday Professional Services that April 1 was still realistic.

Relations appeared to deteriorate further after that.

In May 2020, Workday Professional Services briefly withdrew its staff from the job amid escalating disagreements with state officials. Figueroa suggested in the May 2020 letter that the work-stoppage showed a lack of engagement and willingness to work with the state before adding, “This is not the partnership we need and expect from Workday.”

The state and Workday Professional Services then engaged in a monthslong and still-unresolved attempt to agree on a new “change order” spelling out the company’s obligations. Then in February of this year, Workday Professional Services employees again walked off the job.

Workday officials said Friday that they remain committed to the contract.

“We’ve done our part to try and make this a successful deployment,” a Workday spokesman said in a statement. “We did not walk off the job – we paused so that the state could meet certain requirements necessary for success and did not want to spend the state’s resources in the interim. The state has no basis to terminate our services agreement for cause. We are currently engaged with our state contacts to try and find a path forward.”

A day before the work stoppage, a Workday official outlined a number of concerns he had with relations between the two parties.

“I am growing increasingly concerned about the overall progress and status of the Workday deployment project, lack of visibility into what the State of Maine is thinking about how to move forward, and the overall relationship between Workday and the State of Maine,” Workday Senior Vice President Christopher Curtis wrote in the email to DAFS officials.

Following a 30-day warning to “correct all defaults,” DAFS began the process of terminating its contract with Workday Professional Services on March 26. The Maine Attorney General’s Office is negotiating the terms of the termination, although Workday officials said in a statement last month that the state had no basis to terminate the contract and that the company was still committed to completing the project.

The state is moving to terminate only the professional services contract, not Workday’s development of the human resources management system. But the state is also requesting the repayment of $22.2 million from Workday.

Some Government Oversight Committee members indicated Friday that they want more information about the 2018 decision to partner with Workday and the events that led to the breakdown of the relationship – and potential cancellation of the implementation contract – between the state and the company.

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