Special council seeks more bidders for IT contract to modernize Kansas’ unemployment system

Council’s chairman argues 30-day delay can save taxpayers money

By: - October 26, 2021 8:54 am
Rep. Sean Tarwater, center, a Stilwell Republican, convinced a public-private council with oversight of the IT overhaul project at the Kansas Department of Labor wants to attract more bidders to the project. (Screen capture/Kansas Reflector)

Rep. Sean Tarwater, center, a Stilwell Republican, convinced a public-private council with oversight of the IT overhaul project at the Kansas Department of Labor wants to attract more bidders to the project. (Screen capture/Kansas Reflector)

TOPEKA — A public-private council advising Kansas legislative leaders on hiring of a contractor to overhaul the Kansas Department of Labor’s computer system voted to reopen the bidding progress for 30 days to attract more companies capable of landing the state’s multimillion-dollar contract.

The mainframe relied upon by the Department of Labor was brought online in the 1980s and has remained functional through an endless stream of expensive patches and tweaks. An unprecedented flood of unemployment benefit applications last year in the COVID-19 pandemic nearly broke the agency’s computer network and inspired a consensus among lawmakers it was time to purchase a replacement for the agency.

Rep. Shawn Tarwater, the Stilwell chairman of the advisory IT modernization council, said he was eager to draw into the mix more information technology companies to give the state better options when hiring a firm to upgrade the labor department’s system. Four companies responded to the initial call for bids on the project, but the state’s expanded review of the project could entice companies that didn’t initially submit a bid with the Department of Labor.

“That’s the ultimate goal,” Tarwater said. “Get as many people with as many solutions to the table so that we can make an educated decision.”

He said additional competition among IT companies could save taxpayer dollars and result in a better computer system for the labor department. He has expressed interest in hiring a company that would gradually implement IT changes at the labor department.


IT contract quagmire

The original solicitation issued in April by the administration of Gov. Laura Kelly has been criticized by some GOP legislators for being too rushed, too lengthy and too exclusive. The Kelly administration’s objective was to get something in place before the next major economic downturn applied unbearable pressure on the labor department’s antiquated IT system. She said the agency had been working on a plan to overhaul the computer operation before the pandemic struck.

Debate about how to get there has taken on a political tone at the Capitol. The 2021 Legislature inserted itself into the procurement process by forming the Unemployment Compensation, Modernization and Improvement Council. It’s an unusual creation because it includes legislators as well as people outside state government.

Peter Brady, deputy secretary of the Kansas Department of Labor, said the lawmakers ought to be wary of long delays in awarding an IT contract to upgrade the agency's unemployment claim processing network. (Screen capture/Kansas Reflector)
Peter Brady, deputy secretary of the Kansas Department of Labor, said the lawmakers ought to be wary of long delays in awarding an IT contract to upgrade the agency’s unemployment claim processing network. (Screen capture/Kansas Reflector)

The panel voted Monday to ask the Legislative Coordinating Council, staffed by Republican and Democratic partisan leaders from the House and Senate, to formally extend the bidding process for one month to entice additional firms into submitting proposals for the contract. The public-private council, chaired by Tarwater, voted 7-4 to send the recommendation to LCC.

Council member Jake Miller, executive director of a coalition of labor unions known as Working Alliance Kansas, said he was skeptical LCC had authority to dive back into the IT contract. He also urged colleagues on the private-public advisory council to be careful of statements appearing to favor alternate bidders or of reshaping guidelines to benefit a fresh bidder.

“If we muddy the waters too much the state is going to get sued,” Miller said. “I want to proceed with caution down this path.”

Jason Long, senior assistant in the office of Revisor of Statutes, which helps legislators write bills, said he was convinced state agencies working on contracts could reopen a request for proposals from vendors. He said it was essential the state maintain an unbiased process during consideration of all IT bids.

“The main thing throughout this is to have fairness to all the vendors who have bid and the potential vendors who would bid under a reopened request for proposals. That is the key,” Long said.


Hunt for more bidders

Originally, the only bidders were Accenture of Chicago, FAST Enterprises of Colorado, Sagitec of Minnesota, and Tata Consultancy Services of New Jersey. On Monday, executives with Deloitte of New York City and On Point Technology of Illinois made presentations to the public-private council.

Peter Brady, deputy secretary at the Department of Labor, said the 30-day delay sought by a majority on the council would translate into a 60-day hold in progress to nail down a contract for the modernized IT system at the Department of Labor. It could take an extra month because the state agency must review and score company proposals for compliance with the state’s requirements, he said.

Deloitte executive Scott Malm told a state advisory council working to modernize the labor department’s IT network that COVID-19 prompted an unprecedented criminal attack on state unemployment computer systems. (Screen capture/Kansas Reflector)

He said substantial postponement in awarding contracts on the labor department’s IT overhaul carried risk for state government. It’s not certain when a new operating system will go online and another economic collapse can put the labor department back into IT freefall, he said.

“The system was long overdue for what we needed to respond to the pandemic. There is real need to continue moving forward,” Brady said.

He said a decision to purchase IT hardware that didn’t promptly replace the labor department’s mainframe would be a mistake. All reform roads should lead to a system that ended reliance on the old mainframe, he said, because it was a “substantial liability.”

In addition to high volume of legitimate unemployment claims submitted during the pandemic, Kansas and other states were attacked by organized criminals who submitted an array of fraudulent claims.

“I’ve never seen in my career a more profound attack on an unemployment insurance system than I’ve seen in the last 18 months,” said Scott Malm, of the Minneapolis office of Deloitte.

States suffered at different degrees from that financial plague, but an audit suggested Kansas paid out $700 million in fraudulent claims. About half of that money likely came from the state treasury with the other half from the federal government.

Pedro Rosa, director of product development at On Point Technology, said the original request for proposals from Kansas was written in such a way the company didn’t believe it could serve the state well and prompted the decision not to submit a bid.

He said the company would prefer to implement changes to state IT systems with modules rather than all at once as proposed by the Kelly administration. He said companies that implemented waterfall systems made operational all at once ended up working hard “just to make it barely work.”

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International. He has been recognized for investigative reporting on Kansas government and politics. He won the Kansas Press Association's Victor Murdock Award six times. The William Allen White Foundation honored him four times with its Burton Marvin News Enterprise Award. The Kansas City Press Club twice presented him its Journalist of the Year Award and more recently its Lifetime Achievement Award. He earned an agriculture degree at Kansas State University and grew up on a small dairy and beef cattle farm in Missouri. He is an amateur woodworker and drives Studebaker cars.