A failed computer project at the Thrift Savings Plan wasted $36 million in federal retirement assets and cost government employees an additional $33 million in developmental costs for a replacement system, a Senate investigation found.

Sen. Susan Collins (R-Maine), chairman of the Senate Governmental Affairs Committee, and Sen. Joseph I. Lieberman (Conn.), the ranking Democrat on the committee, described the probe's findings in a letter yesterday to Andrew M. Saul, chairman of the Federal Retirement Thrift Investment Board, which oversees the 401(k)-style program relied upon by government workers.

The thrift board entered into a contract with American Management Systems in May 1997 for a new record-keeping system. But the project encountered delays and cost overruns for four years, prompting the board to fire AMS. The board and the company ended up in court and reached a settlement in June 2003. The project was finished last summer by another contractor, Materials, Communications and Computers Inc.

"While it is clear that AMS failed to produce a workable system and repeatedly missed its own deadlines and cost estimates, the board should have taken more steps early on to prevent this failure and to protect plan participants and beneficiaries from paying the tab," Collins and Lieberman wrote.

In their letter to Saul, the senators said "both parties to the contract have largely avoided accountability for their share of the project's failure. The burden of that failure was borne by Thrift Savings Plan participants and beneficiaries, who have yet to receive an adequate explanation of what happened and why."

The Collins-Lieberman letter outlined a series of problems with the project. The original plan called for using off-the-shelf software packages to build the system, but AMS deviated from the plan and essentially tried to build a customized system. The code developed by AMS failed tests, however, and attempts to fix errors led to delays and increased costs, the letter said. "AMS did not adequately communicate the consequences of this fundamental design shift, and board staff failed to appreciate its significance," the letter said.

Two outside auditors identified poor communication as a major problem, the letter said. One auditor pointed out that the board and AMS probably got off on the wrong footing because there was no formal agreement on the system's design.

"Without a final, approved detailed design document, both parties were confused about exactly what AMS was supposed to build during the development phase," the letter said. One TSP employee described the project to Senate investigators as "chaotic. He said that at one point he discovered that AMS programmers were writing code from handwritten notes of their meetings with board staff." The TSP employee "was appalled at this because programmers should normally be working from approved, detailed design specifications," according to the letter.

The breakdown in communications led "to an increasingly adversarial relationship between AMS and board staff, which was counterproductive and crippled the project," the letter said.

In addition, the staff heading the project for the thrift board lacked sufficient technology experience to effectively manage the contract, the letter said. The project began to show progress only after a technology expert at the TSP, Larry Stiffler, took control, the letter suggests.

The Senate probe also found problems with how the thrift board structured the contract. For example, the letter said, the board paid about $2.4 million more in travel expenses for AMS employees than was originally estimated under the contract.

Most of the contract decisions were made by board members and an executive director who have since left the government. The new board, led by Saul, has moved to strengthen internal oversight of TSP operations.

Tom Trabucco, a board spokesman, said, "We don't have any comment right now." The letter, he said, "will receive a careful review" at the board.

A spokeswoman for AMS, which has changed ownership and operates as CGI-AMS, said officials had not had an opportunity to review the letter.

Collins and Lieberman made several recommendations to Saul for preventing future failures. The recommendations include assigning qualified employees to oversee such projects and using independent consultants to prevent the board from becoming "too dependent on any one contractor."

E-mail: barrs@washpost.com