Health district may sue payroll software provider

Spokane Regional Health District offi- cials have stopped paying bills from Tyler Technologies Inc., a Maine firm they’re considering suing for selling them a $200,000 financial software system they say doesn’t work.

Conflict over the company’s MUNIS system has left the health district with an aging and cantankerous payroll program that must be restarted every five minutes to keep from crashing, officials said. District board members recently voted to bypass public bid requirements to select a second vendor to alleviate “an emergency situation” affecting 250 employees and $1 million a month in payroll.

“What we have no idea about is when this will lead to total failure,” Administrator Torney Smith told board members. “This constitutes a real, immediate threat to the central functions of payroll.”

Smith terminated the district’s contract with Tyler Technologies in January and demanded repayment of about $200,000 in exchange for the return of company software and a portion of travel expenses. He said firm officials did not provide the products or services they promised when responding to a public bid notice issued in 2004. District officials signed a contract with the firm in May 2005.

“This has to do with what we were promised versus what was delivered,” said Smith.

The system couldn’t meet the district’s complicated payroll filing or grant maintenance demands, among other problems, Smith said.

Tyler representatives rejected the settlement offer and demanded more than $25,000 in outstanding bills, contending that health district officials didn’t hold up their end of the agreement.

“My understanding is that they have had a change of heart,” said H. Lynn Moore Jr., vice president and general counsel for Tyler Technologies, speaking by phone from his Texas office.

“The city simply had buyer’s remorse. Or they don’t want to devote resources necessary to the new system. Or they simply wanted to go back to their old system. Our contract is pretty clear that if they pull the plug, we keep the money.”

He said more than 6,000 public entities nationwide successfully use the MUNIS system.

But health district officials said they may sue the firm for breach of contract, following the lead of city officials in Ventura, Calif., who last month filed a nearly $1.7 million civil lawsuit against Tyler. That suit charges that company officials intentionally and negligently misrepresented their products and services.

“Tyler missed every single deadline and milestone set forth in the contract and was unable to make even one of the 19 modules operational,” the complaint filed in California Superior Court contends.

Except for the amount paid out, the Ventura complaint echoes the frustrations of Spokane officials, Smith said.

“We’re not dropping this baby. They haven’t done what they said they would,” Smith said. “I’m not going to walk away from $200,000 and say, ‘Oh, well.’ “

But the health district may have to spend up to $440,000 in reserves on a system provided by another vendor, most likely Sungard/Bi-Tech of Chico, Calif. That firm came in second in the process that attracted five bids from nationwide software firms two years ago, Smith said. Tyler’s MUNIS system was chosen because it was about $100,000 cheaper than the other applicants’ products, he added.

Local officials were prepared to reissue legally required requests for proposals for the second project until the district’s existing KRONOS payroll system began malfunctioning.

“Two weeks ago, we started having KRONOS crash every hour or so,” Smith said. “Now we have two servers we’ve rebuilt from old parts. It’s stable, but we’re having to kill the services and restart them every five minutes.”

Upgrading KRONOS would cost about $40,000. It doesn’t make sense to spend that money, Smith said, if the district is going to purchase a new, integrated system.

Instead, he suggested that district board members invoke a loophole in public bid rules that allow officials to waive the process in an emergency. The waiver, approved by the board, will save about two months’ time in selecting a new vendor, Smith said.

District officials thought Tyler was a capable provider and that MUNIS was a workable system. It wasn’t until after the contract was signed that problems emerged, Smith said.

“We spent an inordinate amount of time on this,” he said. “We did very much due diligence. It’s so frustrating not to see the ethical behavior from the company.”

Still, Smith acknowledged he’ll do things differently when choosing the next firm. “We’ll go over all those points that need clarity,” he said. “I told them: ‘I will videotape what you say.’ ”