Senator Eliot Shapleigh - El Paso, Texas

An $863 million state project with IBM Corp. to streamline the information technology operations of 27 Texas agencies has been hampered by difficulties getting experienced state workers for the startup effort, state auditors said.

The project has also been slowed by high turnover among IBM rank-and-file employees as well as nine key management positions, the Texas state auditor said in a report released Wednesday.

Both factors might have contributed to a delay of the project, which was 273 days behind schedule as of April, the audit said.

Although the employee issue is one factor in the delay, it is not the driving factor, said Lara Coffer, director of technology center operations for the state's Department of Information Resources, which manages the contract.

Much more important has been the complicated nature of working with 27 different agencies and their disparate equipment and procedures, Coffer said.

"We want this process to be right. We don't just want it to be fast," Coffer said.

Coffer said she expects to make up some ground and complete the project by December 2009, a few months after the original September 2009 deadline for completion.

An IBM spokesman referred questions to the Department of Information Resources.

The seven-year project will consolidate at one site the data storage, retrieval, security and backup as well as printing and bulk mail for a wide array of agencies, including the Texas Education Agency, Texas Health and Human Services Commission and the Department of Criminal Justice. The work is now done in 31 separately operated data centers.

It was expected by state officials to save taxpayers $25 million over the first two years of the contract, which started in April 2007, and $159 million over the life of the contract.

Coffer said the project is still on track for those cost-savings and said an independent auditor has been hired to confirm the numbers.

As part of the project, the Department of Information Resources identified 560 state agency positions that were responsible for the work undertaken by IBM.

IBM faced a skills gap because 41 percent of those positions were vacant and only 52 percent of the employees that were most skilled and knowledgeable in their respective tasks jumped to IBM, the auditor determined.

"Some agencies may have made decisions that allowed their employees to continue state employment, while putting their agency systems, other state agencies' systems, and the data center consolidation at risk," auditors said in the report.

IBM and its partners were required to offer jobs to all the employees, who were offered pay raises of up to 10 percent. But the employees were not required to take the private sector jobs, which would have affected their retirement and other benefits.

"The employees have to make the right decision for their lives," Coffer said.

She said she expects any future consolidation efforts to have stronger guidelines for which jobs have to be transferred.

The high rate of turnover at IBM was a function of hiring contract workers to fill the open jobs, Coffer said, while the management changes were joint decisions between the state and IBM to replace leaders who were not performing up to par.