The
Office of Inspector General (OIG) of the Pension Benefit Guaranty
Corporation (PBGC) engaged Accretive Solutions, Inc. to assist
the OIG in performing a post-implementation and performance
audit of the Ariel application, a replacement system
for PBGC’s existing Actuarial Calculation Toolkit II (ACT).
Since Ariel has been implemented and used by the Corporation’s
actuaries, many in the corporation, both users and management
officials, have raised concerns about the cost, performance,
and overall management of the Ariel project. Because
Ariel plays a significant role in PBGC’s long
term business needs, has taken a long time to develop, and has
been an expensive system for the Corporation to develop and
implement, our office initiated a review of the Ariel
project. Specifically, the objectives of this audit were to
answer the following questions about the Ariel project.
- Has the Ariel application implementation met
its established performance and cost projections?
- Has the vendor complied with PBGC policy and procedures
during modifications and development, implementation, and
operations?
- Have appropriate information technology and business controls been implemented and tested for proper functionality?
Overall, we concluded that PBGC needs to reassess and verify
the cost and benefits of Ariel before making any additional
investments in this application. The project has experienced
delays and the estimated cost and benefits of the project have
never been adequately documented. As a result, the initial sole
source contract for Ariel's development grew from an initial
obligation of about $500,000 with a ceiling of just over $900,000
to over $2.8 million after six amendments. The second sole source
contract for Ariel's implementation grew from $1.8 million to
over $31 million with 13 amendments. Additionally, there was
a separate sole source contract for a consultant to work with
the implementation of Ariel in the amount of $757,000. PBGC
also needs to solicit proposals, before modifying the existing
contract, to determine if there are other vendors that can provide
a better solution for valuing plan benefits or providing the
necessary services at a competitive cost.
Our review identified various business and technology controls that were in place both at PBGC and at the contractor's site. These controls are related to the business processes performed by Benefits Administration and Payment Department (BAPD) staff using Ariel and technology controls related to application processing, change management, testing, and information security. Although we found instances where controls are generally adequate, we did identify areas where improvement is needed.
Other Observations
The original concept of the Ariel project has not been reassessed to ensure the validity of the original assumptions and requirements. We could not determine whether PBGC intended to simply license a software product from a company or to have a company produce a specific software product to meet PBGC's needs. We believe the original justification attempted to do both with the anticipation that only minor modifications would be required to meet PBGC's unique business needs. This also led to the original sole source contract for the development of specifications of a product to meet these anticipated needs. Based on these specifications, the second sole source contract was awarded to the same contractor, with the understanding that PBGC would not own the software, all changes to the software would be made available for use to all clients and processing and storage of data would take place at the contractor's site in Canada. In the initial phase of the contract, it became apparent that the A Ariel product required a significant number of modifications, but other vendors were not solicited, at that time, to determine if there was a better solution for valuing plan benefits. As a result, PBGC awarded the contracts and associated amendments to the contract assuming that no other vendor could provide a solution.
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