Cancel the Contract: Accentures Poor Performance Is Not Worth the Cost A White Paper by the Coalition to Stop

AST Now1 November 22, 2013 As part of its efforts to reduce budgets, the University of Michigan has entered into contracts worth more than $30 million with the multinational, for-profit, Ireland-based consulting company Accenture. 2 Previously a part of Enrons accounting firm, Arthur Andersen, the company changed its name to Accenture in 2001.3 Accenture has proposed two significant changes at the University of Michigan: a rationalization of Information Technology services and the Administrative Services Transformation (AST). In both of these cases, Accenture has overpromised and overestimated savings and underestimated the costs of the proposed transformations. The companys reliance on secrecy its contracts with the University of Michigan are not public and an unprecedented gag order prohibited University faculty from discussing AST before its official roll out has delayed the correction of their inaccurate cost and savings projections.4 Accenture initially promised that AST would save the University $17 million each year.5 They later revised their savings projections downward.6 Currently, the annual savings of the proposed AST are predicted to be less than $3 million, and may prove to be negative.7 Accentures poor performance and inaccurate budget forecasts regarding the proposed Administrative Services Transformation should not come as a surprise to the University of Michigan. Dozens of Accentures former clients have successfully sued for negligence, fraud, and breach of contract.8 Accenture has received kickbacks from third party vendors, misappropriated trade secrets, rigged bids for competitive contracts, and violated the Foreign Corrupt Practices Act.9 Connecticut Governor M. Jodi Rell concluded that Accenture was responsible for an unfathomable breach of security when it lost the records of 440 of the states financial accounts and personal financial data of 1.3 million Ohio residents.10 Connecticut sued Accenture for negligence and breach of contract and won a cash settlement.11 In 2004, Accenture negligently disenfranchised 2,119 Florida residents by erroneously purging them from voter rolls, a fact the company attempted to keep secret until a court order made the mistake public.12 In 2007, the U.S. Department of Justice joined several civil cases which alleged that Accenture violated the False Claims Act.13 In 2011, the Justice Department settled these cases for over $63 million.14 In June of 2013, shortly before Accenture proposed AST at the University of Michigan, the Inspector General of the U.S. Postal Service concluded that Accenture has demonstrated an absence of business ethics, a lack of transparency and

insufficient internal controls in its business dealings and recommended that the Postal Service consider disqualifying Accenture from future Postal Service contracts.15 Accentures record of poor performance extends to cases where clients have not attempted to hold the company civilly liable. Accenture performed work for the state of Colorado that did not meet the states expectations, and was forced to refund the state millions of dollars for unfinished work.16 A Texas Comptroller investigation of Accentures work for the Texas Health and Human Services Commission found that the company was behind schedule and $100 million over budget, without a revised plan to get the project back on course. The report concluded that Accenture has not met its performance requirements.17 Texas terminated Accentures contract in March 2007. The State of Wyoming and the U.S. Marine Corps also modified or terminated contracts with Accenture after the company failed to meet its contractual obligations.18 Accentures work for the University of Michigan is expensive and inaccurate. In explaining why the University has not realized the savings Accenture promised, the Universitys IT Governance Council concluded that Accenture overestimated the savings of its proposals and underestimated their costs by failing to account for the details: The savings Accenture estimated are not as large as expected when the details are taken into consideration, and the costs are greater than expected for the same reasons.19 The University of Michigan, which has already paid Accenture over $20 million, should re-evaluate its relationship with Accenture to ensure that the actions it takes are based on sound research, solid data, and accurate forecasts. This white paper makes the following recommendations: 1. The University of Michigan should conduct an audit of Accentures work for and contracts with the University to determine the accuracy of the work provided and to understand why Accentures contract was continued and expanded despite indications of poor performance as early as April 2011. 2. The University of Michigan should terminate its contract with Accenture, citing poor performance and inaccurate budget forecasts. The University should also seek a refund for inferior services provided by Accenture to date. 3. The University of Michigan should stop implementation of the proposed Administrative Services Transformation. Instead, the University should embrace the development and implementation of Unit-Centric Services (UCS) to bolster the Universitys collaborative academic culture, realize real financial efficiencies that account for the details of University activities, and strengthen the administrative staff who enable the University of Michigans record of excellence in research, academics, and teaching.

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This White Paper was produced and distributed by the Coalition to Stop AST Now. Follow us on Twitter @stopASTnow. 2 Accenture Payments 2001-Present, using Accenture Vendor IDs of 178713, 202686, 48869, and 598109 totaled over $20 million. In 2012 alone, the University of Michigan paid Accenture over $7 million. An additional $11.7 million dollars remain on the Universitys contract with Accenture. See Ry Rivard, Shared Services Backlash, Inside Higher Ed (November 21, 2013), available at http://www.insidehighered.com/news/2013/11/21/u-michigan-tries-save-money-staffcosts-meets-faculty-opposition. 3 Accenture, Andersen Consulting Announces New Name Accenture Effective 01.01.01, (October 26, 2000), available at http://newsroom.accenture.com/article_display.cfm?article_id=4170. 4 Kellie Woodhouse, University of Michigan Staff Demoralized in Downsizing Effort, MLive (November 12, 2013), available at http://www.mlive.com/news/ann-arbor/index.ssf/2013/11/university_of_michigan_downsiz.html; Letter from the Members of the History Department to President Coleman, Provost Pollack, Ms. Thomas, and Mr. Slottow (November 12, 2013). 5 Accenture, Accenture Supports Shared Services Implementation at University of Michigan, Targeting $17 Million in Annual Cost Savings, (July 10, 2013), available at http://newsroom.accenture.com/article_display.cfm?article_id=5785 6 Stephanie Shendouda, SACUA Discusses Concerns with Cost -Cutting Process, Michigan Daily (November 11, 2013). 7 Neither the University of Michigan nor Accenture have published the latest cost and savings projections of AST, and they have never published the rationale for projected costs and savings. The most recent information indicates that AST will eliminate 50 staff positions at the University of Michigan. If each position costs the University an average of $60,000 in salary and benefits, the savings of AST would amount to $3 million. This figure does not include the costs of any proposed transformation. For the most recent information on the Universitys position on AST, see email from Sue Gelman to LSA Faculty and Staff (November 18, 2013). 8 According to a search on LexisNexis, Accenture is named as a defendant in over 50 lawsuits filed in Federal District Courts. This figure does not include suits against Accenture filed in state and local courts. Notable plaintiffs include the U.S. Department of Justice, the State of Connecticut, and British Gas. 9 See United States Department of Justice, Office of Pu blic Affairs, Accenture Pays US 63.675 Million to Settle False Claims Act Allegations, (September 12, 2011), available at http://www.justice.gov/opa/pr/2011/September/11-civ1167.html; United States Securities and Exchange Commission, Accenture LTD Form 10-K, Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, Commission File Number 011-16565, p. 31; available at http://www.contractormisconduct.org/ass/ contractors/5/cases/2/1/e10vk.pdf. Accenture self-reported its violation of the Foreign Corrupt Services Act. 10 Fernanda Santos, Connecticut Says Data on Its Money was Stolen, New York Times (September 17, 2007). 11 Accenture PLC Form 10-K, United States Securities and Exchange Commission, File Number 001-16565 (2009), p. 31, available at http://www.wikinvest.com/stock/Accenture_(ACN)/Filing/10-K/2009/F46741023. 12 Chris Davis and Matthew Doig, Shining Light on Company Behind Felon Voter List, Sarasota Herald Tribune (July 14, 2004), available at http://www.heraldtribune.com/article/20040714/NEWS/407140620. 13 United States Department of Justice, Office of Public Affairs, U.S. Joins Cases Against Hewlett -Packard, Sun Microsystems & Accenture Alleging False Claims on Hardware, Software, and Technology Services Sales, (April 19, 2007), available at http://www.justice.gov/opa/pr/2007/April/07_civ_265.html. 14 United States Department of Justice, Office of Public Affairs, Accenture Pays US 63.675 Million to Settle False Claims Act Allegations, (September 12, 2011), available at http://www.justice.gov/opa/pr/2011/September/11-civ-1167.html. 15 Office of the Inspector General, United States Postal Service, Management Report Accenture Federal Services Contracting Practices Report Number SM-MA-13-005 (June 6, 2013). Available at http://www.uspsoig.gov/sites/default/files/document-library-files/2013/sm-ma-13-005.pdf. 16 State of Colorado, Department of State, Secretary of States Office a nd Accenture Mutually Terminate Software Contract, (December 29, 2005), available at https://sos.state.co.us/pubs/newsRoom/pressReleases/2005/PR20051229Accenture.html. 17 Texas Comptroller of Public Accounts, Letter to Eliot Sapleigh, Carlos Uresti, and Carter Casteel, (October 25, 2006), available at http://www.window.state.tx.us/comptrol/letters/accenture/accenture_letter.pdf. 18 Joseph B. Meyer, Secretary of State, Secretary of State Received $3.7 Million, (April 28, 2006), available at http://www.contractormisconduct.org/ass/contractors/5/cases/882/1136/accenture-wyoming-voter_pr.pdf; Connecticut Office of Legislative Research, Accenture Contracts, Report Number 2007 -R-0572 (September 25, 2007), available at http://www.cga.ct.gov/2007/rpt/2007-R-0572.htm. 19 University of Michigan IT Governance Council Meeting Summary (April 1, 2011), available at http://cio.umich.edu/governance/itcouncil-documents/20110401_ITCouncil_Summary.pdf.