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Mass. AG investigating whether Deloitte violated contract

Attorney General Martha Coakley’s office is investigating whether Deloitte Consulting breached its contract to develop new tax software for the Massachusetts Department of Revenue, state officials said at a public hearing Wednesday.

Deloitte was fired by the Revenue Department in August after the software project became bogged down in errors. The agency had already paid $54 million of the $114 million contract value.

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Coakley’s office requested information about the situation in the fall, said Kevin Brown, general counsel for the Revenue Department.

Coakley’s office declined to comment Wednesday. But it would fall to the attorney general to try to recoup money on state agency contracts with vendors in the event of alleged wrongdoing.

Deloitte also declined to comment. In the past, the New York-based firm has said that parting ways with the state was a mutual decision.

The disclosure of Coakley’s effort came during a hearing by a legislative committee that oversees state borrowing, including for information technology. The chairman, Senator Brian A. Joyce , Democrat of Milton, held the hearing following last year’s high-profile computer problems at the Massachusetts Department of Unemployment Assistance, the tax department, and in the federally funded Health Connector online insurance program.

Joyce said there were “serious mistakes” in the way contracts were procured and monitored, and that in several instances, “The taxpayers’ interests were not well served.’’

The unemployment system contract, also handled by Deloitte, came in $6 million over budget and full of errors that clogged the system for months.

Given those problems, Joyce said he was concerned state agencies are planning to borrow $800 million for more IT projects. The senator pressed the Patrick administration to scale back its financial requests and to consider paying the money back more quickly.

Issuing 20-year bonds for technology that becomes obsolete long before then doesn’t make sense, Joyce said.

“Your point’s well taken,’’ Scott Jordan, undersecretary of Administration and Finance, said in response. He also told Joyce the administration would be willing to consider borrowing less and repaying faster.

William Oates, the state’s new chief information officer, said at the hearing that he was devoting much of his time to overseeing large IT contracts, including a recently launched project at the Registry of Motor Vehicles. That $76.8 million contract is going well, Oates said, and will be delivered in smaller slices, in order to improve its chances of success.

He said the state will buy off-the-shelf software packages whenever possible, instead of customized systems that can take years to develop and have more opportunity for errors.

“It should be a very rare thing when we have to build a system from scratch on our own in 2014,’’ Oates said.

Rachel Kaprielian, the new secretary of Labor and Workforce Development, said the unemployment system was “stabilized” and working more smoothly, and that wait times for people who call in with problems on their claims have shrunk significantly.

The average wait time was 18 minutes in April, she said, down from 51 minutes in August, a month after the system was launched. However, the longest times on hold were still 80 minutes last month, Kaprielian said, down from 110 minutes in July.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.
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