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Paradyne Case

The Paradyne case began on June 10, 1980, when the Social Security

Administration (SSA !ublished a re"uest #or !ro!osals ($%P #or com!uter

systems to re!lace the older e"ui!ment in its &eld o'ces )ts re"uirement was

#or com!uters that !ro*ide access to a central database This database was

used by &eld o'ces in the !rocessing o# bene&t claims and in issuing new social

security numbers SSA intended to !urchase an o+theshel# system already in

the *endor-s !roduct line, rather than a customi.ed system This re"uirement

was intended to minimi.e the &eld testing and bugs associated with customi.ed

systems )n /arch o# 1981, SSA let a contract #or 11 million #or 1,800

com!uter systems to Paradyne

Problems occurred immediately u!on award o# the contract, when the

Paradyne com!uters #ailed the acce!tance testing The re"uirements were&nally rela2ed so that the com!uters would !ass A#ter deli*ery, many SSA &eld

o'ces re!orted #re"uent mal#unctions, sometimes multi!le times !er day,

re"uiring manual rebooting o# the system 3ne o# the contract re"uirements was

that the com!uters #unction 984 o# the time This re"uirement wasn-t met until

a#ter 51 months o# o!eration A#ter nearly two years o# headaches and much

wasted time and money, the system &nally wor6ed as !lanned 7a*is, 1988

Subse"uent in*estigation by SSA indicated that the !roduct su!!lied by

Paradyne was not an o+theshel# system, but rather was a system that

incor!orated new technology that had yet to be built and was still under

de*elo!ment Paradyne had !ro!osed selling SSA their P8:00 model with the

P)3S o!erating system The bid was written as i# this system currently e2isted

;owe*er, at the time that the bid was !re!ared, the 8:00 system did not e2ist

and had not been de*elo!ed, !rototy!ed, or manu#actured 7;ead, 198 com!uter

manu#actured by igital ?"ui!ment Cor!oration (?C !laced in a cabinet that

was labelled P8:00 A!!arently, many o# the ?C labels on the e"ui!ment that

was demonstrated to SSA had Paradyne labels !asted o*er them Paradyne

disingenuously claimed that since the ?C e"ui!ment was based on a 1

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widely di+erent o!erating characteristics in terms o# s!eed, so#tware that can

be run, etc

There were also "uestions about the o!erating system A!!arently, at the

time o# Paradyne-s bid, the P)3S system was under de*elo!ment as well and

hadn-t been tested on a !rototy!e o# the !ro!osed system ?*en a #unctioning

hardware system will not o!erate correctly without the correct o!erating

system o so#tware has e*er wor6ed correctly the &rst time, but rather re"uires

e2tensi*e @debugging@ to ma6e it o!erate !ro!erly with a new system

Signi&cantly, the ?C system with the P8:00 label that was actually tested by

SSA was not running with the !ro!osed P)3S system

Some o# the blame #or this &asco can also be laid at the #eet o# the SSAThere were si2 bidders #or this contract ?ach o# the bidders was to ha*e an on

site *isit #rom SSA ins!ectors to determine whether it was ca!able o# doing the

wor6 that it included in its bid Paradyne-s ca!abilities were not assessed using

an onsite *isit /oreo*er, Paradyne was Budged based on its ability to

manu#acture modems, which was then its main business A!!arently, its ability

to !roduce com!lete com!uter systems wasn-t assessed As !art o# its attem!t

to gain this contract, Paradyne hired a #ormer SSA o'cial who, while still

wor6ing #or SSA, had !artici!ated in !re!aring the $%P and had hel!ed with

setting u! the team that would e*aluate the bids Paradyne had noti&ed SSA o#

the hiring o# this !erson, and SSA decided that there were no ethical !roblems

with this ;owe*er, when the Paradyne machine #ailed the initial acce!tance

test, this Paradyne o'cial was directly in*ol*ed in negotiating the rela2ed

standards with his #ormer boss at SSA

This situation was resol*ed when the Paradyne com!uters were &nally

brought to the !oint o# #unctioning as re"uired ;owe*er, as a result o# these

!roblems, there were many in*estigations by go*ernment agencies, including

the Securities and ?2change Commission, the eneral Accounting 3'ce, the

;ouse o# $e!resentati*e-s o*ernment 3!erations Committee, the ;ealth and

;uman Ser*ices e!artment (o# which SSA is !art, and the Justice e!artment