Software company lost out on big California payroll project. Now it’s suing the state
A software company that hoped to help revamp California’s outdated payroll system is suing several departments, accusing the state of cutting the firm out of the procurement process at the last minute and lowering the technical requirements for the project.
Earlier this week, the Pleasanton-based software vendor Workday filed a lawsuit in Sacramento Superior Court, alleging the Department of Technology and the State Controller’s Office violated California procurement rules by changing the parameters of the project and failing to give the company proper notice.
Last month, State Controller Malia M. Cohen proudly announced the years-long effort to modernize California’s payroll system had reached a significant milestone by reaching the final stage of approving the large IT project.
On March 13, the California Department of Technology notified unsuccessful applicants that hoped to undertake the massive project of replacing the state’s legacy personnel and payroll, travel and expense systems. Just days after Workday learned that it was one of the losing bidders, after several years of working on the proposal, the firm sued the state.
The software vendor accused the state of running afoul of the bidding process by changing the project’s parameters and lowering the necessary qualifications after key deadlines. Additionally, the state failed to notify the company of changes to the project, which led to the firm submitting a likely higher cost estimate than other proposals due to the negotiation between Workday and the state, the complaint alleges.
An SCO spokesperson said the department was served with the lawsuit Friday morning and declined to comment at this time. The Technology Department also declined to comment, citing pending litigation.
Nearly a decade ago, the SCO began an effort to modernize the state’s payroll and human resources systems, which dated back to the 1970s. The California State Payroll System project was subject to a design and solicitation process known as the Project Approval Lifecycle, which was overseen by the technology department.
Negotiations started three years ago
In 2022, Workday worked with the IT company Accenture to put forward proposals during the early stages of the procurement process. According to the lawsuit, after several rounds of developing the software and engaging in “confidential negotiations” with the state, the two companies submitted a best and final offer in April 2023.
Shortly after, the lawsuit stated that the negotiations stalled.
The complaint alleges that, at the eleventh hour, the state reversed course on the arrangement between the two companies, “which resulted in Workday being shut out of the contract procurement process and resulting negotiations.”
Additionally, the company alleges the state changed the solicitation and watered down the technical requirements of the project. Workday stated that two years into the bidding process, the state issued new technical requirements that expanded which companies could compete in the procurement process.
“Now, the State is prepared to gamble taxpayer dollars on a less qualified contractor,” the lawsuit read.
A SCO spokesperson said CGI Technologies Solutions Inc. was selected as the solution integrator for the CSPS Project.
“This protest is not just about fairness to Workday — it is about protecting the integrity of the procurement process,” the company wrote in the lawsuit. “The State cannot rewrite the rules mid-game to justify a flawed outcome.”
Workday asked the court to invalidate the state’s contract with the recently selected vendor and re-issue a bid for the new payroll system “that allows for a true comparison of all bids.”
This story was originally published March 21, 2025 at 4:54 PM with the headline "Software company lost out on big California payroll project. Now it’s suing the state."
