Report 99028.4 Summary - March 2005

Child Support Enforcement Program:

The State Has Contracted With Bank of America to Implement the State Disbursement Unit to Collect and Disburse Child Support Payments

HIGHLIGHTS

Our monitoring of the Department of Child Support Services and the Franchise Tax Board's (project team) procurement of a single, statewide automated child support enforcement system revealed the following:

  • Nothing came to our attention that would cause us to conclude that the project team deviated from the predefined evaluation process it established to review and score each of the bidders' final proposals for the State Disbursement Unit (SDU). Nor has anything come to our attention that would have resulted in unfair treatment of bidding vendors.
  • The project team rejected final proposals from two vendors for administrative violations of the request for proposal (RFP).
  • One disqualified vendor initially lodged a protest that was ultimately withdrawn.
  • The project team prepared a feasibility study report to obtain the Department of Finance's (Finance) approval to fund the SDU contract with Bank of America, the winning bidder, which Finance conditionally gave.
  • Final approval for the SDU is subject to legislative consent during the annual budget review process.

RESULTS IN BRIEF

In 2003 the federal Office of Child Support Enforcement estimated that accumulated unpaid child support was approaching $100 billion for the nation as a whole and more than $18 billion for California. To better enforce payment of court-ordered child support, Congress passed the Family Support Act (act) in 1988, mandating that each state have a single, statewide automated system for child support enforcement by October 1995. Although Congress extended this deadline by two years, California has yet to complete development of a system for child support enforcement. By failing to meet the deadline, the State has incurred sizeable federal penalties, which may total almost $1 billion by the end of fiscal year 2004-05.

To address these delays and the mounting penalties, the Legislature restructured the State's child support enforcement activities in 1999 by establishing the California Department of Child Support Services (department) and giving it the responsibility, using the Franchise Tax Board (board) as its agent, of procuring, developing, implementing, and maintaining the statewide automated system for child support enforcement. The legislation also requires the Bureau of State Audits to monitor the evaluation and selection stages of the procurement process for signs of bias or favoritism toward any bidder; this report, covering part of that process, finds no such bias or favoritism.

The single, statewide automated system for child support enforcement, called the California Child Support Automation System (CCSAS), will have two distinct components: the Child Support Enforcement (CSE) system and the State Disbursement Unit (SDU). The CSE system will manage and enforce child support obligations of noncustodial parents, and the SDU will perform the banking function of collecting and disbursing child support payments. In 2003 a project team of members from the board and the department, responsible for procuring the statewide automated system, selected the IBM Group to design, develop, and implement the CSE system for $801 million.

With the CSE system contract in place, the project team turned to procuring a vendor for the SDU. Our June 2004 report discussed the project team's procurement process for the SDU contract, whereas this report discusses the project team's selection of a business consortium led by the Bank of America (B of A) to develop and implement the SDU using a request for proposal (RFP). After four business entities that had qualified to partner with the State to provide SDU services (qualified business partners) submitted their final proposals for review in June 2004, the project team began following its established procedures to conduct three evaluations—administrative, business services, and financial—of the bidders' proposals. After the project team disqualified two vendors for administrative violations of the RFP requirements, it gave B of A the highest evaluation score and named it the winning bidder. The board announced its intent to award the SDU contract to B of A on September 9, 2004. The project team's evaluation report found that the B of A proposal addressed the SDU business problems, demonstrated successful past performance, and provided the better value to the State. One of the disqualified vendors filed a protest alleging that its proposal had fully met all the RFP's requirements; however, before the scheduled hearing by the Office of Administrative Hearings, the vendor withdrew the protest. In our review of the evaluation process and vendor selection, we saw nothing to indicate bias or favoritism toward any bidder.

To obtain approval from the Department of Finance (Finance) to fund the contract with B of A, the project team prepared and submitted a feasibility study report (feasibility report) to Finance in November 2004. The feasibility report includes a baseline analysis to compare the existing system for collecting and disbursing child support payments to the SDU solution. The feasibility report also analyzes the two proposals that met the RFP requirements and examines the project team's rationale for selecting B of A as the winning vendor. Finance has approved the project team's proposed funding for the SDU subject to several conditions, including requirements that the project team submit two documents: a benefits measurement plan within six months of the contract signing and another feasibility report before the end of the contract term. Concluding that B of A's proposal meets the RFP requirements and objectives and offers the lowest risks and the best value to the State, the feasibility report concurs with the evaluation of the proposals. In reviewing the feasibility report, we saw nothing to indicate any bias or favoritism toward any bidder.

On December 27, 2004, the executive officer of the board and the director of the department signed a contract with B of A to develop and implement the SDU. Also, although Finance has conditionally approved the SDU project funding, funding now requires the Legislature's approval during the annual budget process.

AGENCY COMMENTS

The Health and Human Services Agency and the State and Consumer Services Agency, representing the department and the board, concur with the information included in the report and believe that it accurately reflects the procurement effort.


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