Updates to the university’s financial software have required budget increases of almost $10 million to cover consulting costs this year, based in part on recommendations from the same consulting firm Northwestern is paying to help with the project.
The initiative, called Project Café, began work in 2005 to implement a new system for NU’s internal financial processing. With a launch scheduled for September, the cost for the current fiscal year has increased to $29.1 million after a report recommended an additional $12.3 million for consultants.
The project cost ended up increasing by $9.6 million from $19.5 million. No figures were provided by project management for the actual amount spent on consultants.
An NU employee who had performed work on the project said the high level of spending on consultants may be because the same consultants were involved with the project’s management and review.
Though budget overruns are not uncommon in software development, the possibility of a conflict of interest raises questions, said the employee, who requested to remain anonymous for fear of retribution.
“You go in and try and replace your old systems, and it’ll cost more once you get into the details,” the employee said. “But it just doesn’t look good when you have a consultant in the driver’s seat.”
Peter Eschenbach, who is responsible for quarterly reviews of Project Café, is also a managing director at Huron Consulting, a firm that provides a substantial number of consultants for the project.
Eschenbach has recommended increasing outside resources for the project. In his quarterly reports both before and after the budget increase, Eschenbach said it was questionable whether or not the project had adequate resources, and asked for more consultants to be hired full time.
The initiative’s director, Jason Schober, said concerns about the possible conflict of interest had been brought to his attention and were not unwarranted. However, the committee of university executives that oversees the project – the Enterprise Systems Executive Committee – is comfortable with the arrangements, he said.
Eschenbach was brought on before Huron was chosen to work on the project, and NU staff also conduct reviews, Schober said.
“Ultimately ESEC owns the risk of consulting multiple sources of when they think about how the project is going,” Schober said. “I have regular meetings with two out of the five, and they also get a regular report on the project’s status from NU staff on a monthly basis.”
Vice President for Information Technology Mort Rahimi and Vice President for Business and Finance Eugene Sunshine, both ESEC members, were unavailable for comment despite multiple attempts. Eschenbach did not return a phone or e-mail message seeking comment.
Increases in funding this year were partly because consulting needs were underestimated, but also because the project increased in scope, Schober said. A separate project was absorbed into Project Café last summer before budget requests were made.
“The data systems project was basically brought into Project Café,” he said. “A decent amount of the costs that we needed are attributable to that.”
IT departments at other universities did not respond to inquiries about their consulting practices, but Kellogg professors Adam Galinsky and Keith Murnighan both said, speaking generally, such an arrangement could constitute a conflict of interest.
Consultants should not be placed in positions where they can evaluate an employer’s staff if there is a financial incentive to rate them poorly and increase their profits, said Galinsky, who studies ethics.
An arrangement like Project Café presents a conflict of interest, but one that can be mitigated if the consultant’s advice is considered with its bias in mind, said Murnighan, who studies risk management.
“If I’m a consulting firm, and I’m supplying you with people, would you get the best advice from me? Probably not,” he said. “But everybody should be able to identify how helpful my ulterior motives would be.”
In the long run, Schober said Project Café may not be immediately visible to the students, but the university will benefit as a whole.
“Most functions will not be used by students,” he said. “The main visible benefit for the students will be that the offices that you visit will run better.”
