Office of Personnel Management officials said today they shut down work by Hewitt Associates on RetireEZ, the agency’s retirement systems modernization project, after the contractor allegedly failed to deliver critical pieces of the system on time.

OPM issued a show cause notice May 29 to Hewitt, giving the company 10 days to respond to the performance issues OPM raised regarding Hewitt’s benefits calculation engine. The agency was scheduled today to add 61 additional benefits-calculation functions to the first phase, or Wave 1, of RetireEZ, which covers about 26,000 employees at four agencies. But only four of those functions passed user-acceptance tests, OPM Director Linda Springer said.

Also, Hewitt failed to live up to its earned value management requirements in the contract, another part of the show cause notice, said Ron Flom, OPM’s associate director of management services, chief human capital officer and chief acquisition officer.

In a statement, Hewitt officials said: “We believe we have complied with our contractual obligations and remain committed to helping OPM meet its objective. The first wave was delivered successfully and on schedule on Feb. 25, 2008 and we were on schedule to make our next delivery on May 30, 2008. We stand behind our system, have a clear plan for delivery, and a strong commitment to service our clients.”

Hewitt officials said they wouldn’t “publicly debate” OPM comments about the situation. “We will convey our position in detail in our response to their show cause letter,” the officials said. "We expect to engage in a productive dialogue based on a full disclosure of the facts in this complex program.”

If Hewitt fails to respond to the show case notice in 10 days, OPM will “have no choice” but to begin termination of the contract for default, Flom said. 

OPM awarded a 10-year, $290 million life-cycle contract in May 2006 to Hewitt to furnish the technology for RetireEZ. Hewitt is tasked with modifying its commercial system, the Defined Benefits Technology Solution, to comply with federal laws and regulations. The cost to buy and implement DBTS was $27 million, Springer said.

Springer said OPM will move ahead on the two other major elements of its retirement systems modernization effort, data conversion and business-process change management, neither of which involves Hewitt.

"We will come out of this pause," she said. "I don't know whether we'll be going forward with Hewitt or going in another direction. That remains to be seen...In the meantime, we'll be focusing on the other two components of RetireEZ."