May 9, 2025 Current Resources

Workday handed no-bid deal to fix staffing meltdown at Uncle Sam's uber-HR agency

The US Office of Personnel Management (OPM) awarded Workday a sole-source contract to overhaul its human resources systems - bypassing any formal competition - citing critical failures in its aging, fragmented HR infrastructure and binding deadlines from President Trump's executive orders on workforce restructuring.

OPM acts as the federal government's central HR shop, setting workforce policies, handling background checks, and managing benefits programs for the more than two million civilians across federal agencies.

That made OPM an early target when the new Trump administration froze most federal hiring and issued orders to root out waste and dismantle diversity, equity, and inclusion (DEI) programs. Trump also launched DOGE, a Musk-led initiative aimed at shrinking the civil service.

DOGE has leaned on agencies like OPM to carry out its workforce reduction agenda, which has turned out to have saved a lot less money than originally promised.

Under that pressure, OPM said its current HR software stack is fragmented, outdated, and has "reached a critical failure point," causing payroll errors, disrupted benefits, and forcing staff into unsustainable levels of manual work - all while trying to meet Trump's directives to revamp the federal workforce.

"Recent Presidential directives impose strict deadlines for workforce restructuring and merit-based hiring reforms, requiring real-time workforce data and integrated HR capabilities that OPM's current systems cannot deliver," the justification letter stated. "Market research confirms Workday is capable of meeting these urgent federal-specific requirements within the required implementation window."

So OPM is turning to Workday to fix the mess, and announced the one-year contract award in a sole source justification letter [PDF]. It's rushing the award to get the new system in place by July 15, when it expects a federal hiring freeze to be lifted.

Opening the contract to bids would have delayed deployment by six to nine months, OPM claims, putting it out of compliance with Trump's workforce mandates and risking reputational damage, as well as screwing with payroll, benefits, and retirement processing.

The OPM justification noted that Dayforce, another cloud HR software vendor, had expressed interest in the deal, but that Workday's prior experience with the Department of Energy, as well as Walmart and other top Fortune 500 customers, gave it a better "track record of scalability" than Dayforce. Agency benchmarking and other federal deployment histories were also cited as reasons to award the deal to Workday. Dayforce did not respond to a request for comment by press time.

Workday doesn't have a perfect reputation when it comes to government projects. As we covered in a December interview with Workday CEO Carl Eschenbach, Workday's attempts to integrate its systems with the state governments in Maine and Iowa ran into serious trouble.

Iowa still uses Workday for HR functions but terminated its financial management contract in 2023 after the system failed to launch. The state reverted to upgrading its legacy platform through the original vendor. Maine, on the other hand, publicly accused Workday of showing "no accountability" for missed deliverables and failing to meet requirements after two failed go-live attempts.

Eschenbach told us in December that those were just a few bad examples among plenty of successful implementations, but given they're both government cases, they seem relevant.

Like the OPM deal, the Iowa contract arrived at without any competing bids, which drew criticism when it was signed in 2019.

Workday declined to comment on its OPM contract beyond what was publicly available through the justification letter and the Federal Procurement Data System [PDF], which values the one-year deal at just $342,200. That doesn't seem like much for an HR system for the agency that sets HR guidelines for the whole federal government, but a Workday spokesperson specifically told us they weren't going to answer our questions. For comparison, Workday's five-year contract, signed in 2019 with the state of Iowa to modernize both HR and financial systems, was valued at about $21 million.

OPM did note that manual HR processing alone was projected to cost more than $600,000 in FY 2025, and claimed that Workday's proposal would cut HR technology costs by more than 70 percent.

It should come as no surprise that Workday is expanding its presence in the government. Eschenbach said on the company's Q4 earnings call that Workday's implementations with the DoE and the Defense Intelligence Agency had opened a number of other opportunities thanks to the Trump administration and DOGE's mission to modernize government IT.

"As we think about DOGE and what that could potentially do going forward … we find that as a really rich opportunity," Eschenbach said.

In classic federal efficiency style, OPM says it'll open up a full competitive bidding process once Workday's contract expires in May 2026, potentially putting the whole HR system back on the chopping block in just 12 months. ®

PS: DOGE operative Kyle Schutt's computer was infected by malware at some point, it appears, as his credentials were reportedly found in info-stealer logs.