Dozens of information technology employees face layoffs at the Kansas Department of Revenue in conjunction with a $50 million, 10-year contract to outsource development and operation of a new tax management computer system.
The technical services deal with CGI, first reported by The Topeka Capital-Journal, would require a portion of the 56 agency employees targeted for layoffs to work side-by-side with CGI consultants prior to their formal dismissal in August. Some state workers due to lose their jobs were expected to apply for parallel positions at CGI, but there was no guarantee of placement.
Revenue department IT staff were informed Tuesday of impending layoffs by middle managers at the agency rather than Secretary Sam Williams.
Privatization of executive branch operations, including Medicaid, corrections, child support collections and services at the revenue department, became a fixture of Republican Sam Brownback’s tenure as governor. Brownback also transferred hundreds of state employees out of Docking State Office Building to office space leased from private businesses in Topeka.
The decision to target IT operations in the revenue department’s tax division under GOP Gov. Jeff Colyer had been speculated by members of the 2018 Legislature, but a spokeswoman for the revenue department declined two weeks ago to comment.
On Wednesday, revenue department spokeswoman Rachel Whitten responded to inquiries by saying IT staff affected by the transition to CGI would have an opportunity to apply for jobs with the company and continue to apply expertise to the state’s tax collection operation. In addition, she said, the revenue department would work with individuals interested in job vacancies elsewhere in state government.
“Tax and revenue agencies responsible for recovering debts owed to government are constantly striving to find ways to maximize revenue and efficiency and improve constituent services,” she said.
Sarah LaFrenz, president of the Kansas Organization of State Employees, said the secretive nature of the agreement with CGI would result in privatization of another vital function of state government to a company with a mixed performance record.
“As we have seen in other state agencies, the performance record with many of these outside contractors is troubling at best,” LaFrenz said.
“Today, Kansans have every reason to ask: If this revenue department deal is really good policy and will yield real results, why not do it in the open?”
House Minority Leader Jim Ward, a Democrat from Wichita, said the Department of Revenue waited to inform state employees until after the Legislature adjourned last Friday.
“They absolutely wanted to wait until we were out of town so there was no oversight and vetting of the contract,” Ward said. “What they’re outsourcing is the most confidential information the state has on people.”
Senate Minority Leader Anthony Hensley, D-Topeka, said the no-bid contract with CGI was of sufficient importance to request the Legislature’s auditing division monitor the project as it has done for other IT outsourcing contracts involving the revenue department.
Parent company CGI Group, of Montreal, Canada, and its subsidiaries are prominent players in the information consulting business and are no stranger to complaints about performance on state and federal government contracts.
CGI was the company responsible for defective software code and basic infrastructure problems that plagued roll out of the Affordable Care Act in 2013. The original website of HealthCare.gov frustrated people attempting to sign up online for coverage under the ACA.
A copy of a Department of Revenue contract dated December 2017 indicated the agreement with CGI would be unbreakable during the initial 24 months of what was calculated to be a 10-year commitment.
The base cost to Kansas taxpayers would be $48.9 million, according to the document. It would be approximately $4 million in the first year, $5.4 million in the second year and $5.2 million in the third year before settling at about $4.9 million in the remaining years.
Actual totals would rise above that given a 2.5 percent annual cost-of-living adjustment and potential of additional costs due to modification of the contract’s scope.
In recent years, the revenue department’s record on computer system overhauls had raised concern among legislators and auditors. Last month, a new platform at the Department of Revenue for self-serve vehicle registrations inadvertently exposed information from other people’s license plate numbers, fees and insurance providers.
The system was the work of PayIt, a Kansas City, Mo.-based software firm that previously led Colyer to praise the system as a vehicle for making government more effective, efficient and accessible. The lobbyist for PayIt, David Kensinger, is a former Brownback campaign manager and chief of staff.
In January, the Department of Revenue was to take a big step in replacement of a 30-year-old system used to issue driver’s licenses, identification cards and process motor vehicle registrations and titles. The project should have been completed in two phases in 2011 and 2012, but half of it remains unfinished.
The first portion, involving replacing the title and registration system, launched 10 months late in 2012. The system resulted in long lines at county treasurers’ offices that raised questions about Brownback’s ability to deliver core government services to Kansans.
Initiation of the second phase, regarding new driver licenses, is overdue by six years. Delays grew to the point the Department of Revenue took action against contractor 3M. A state audit revealed significant “flaws in Kansas’ motor vehicle driver’s license overhaul.”
In December, the Department of Revenue said he wouldn’t unleash the KanLicense system “until it is ready, and our testing indicated it needs a little more work to get it there.” State revenue officials said the system would go live April 30 or May 7, but it’s still not operational.
“When it comes to IT services, the Brownback-Colyer administration has a record of repeated failures,” said Rep. John Carmichael, D-Wichita.
In 2014, North Carolina officials halted development of a $63 million tax collection system and moved to rebid the project after five years of development by CGI. Vermont officials also severed ties that year with CGI due to problems with design of the state’s online health website.
Officials in Hawaii discovered in 2013 the state’s taxation department paid CGI more than $87.5 million over 12 years to modernize the state’s tax collection system, but produced a network prone to frequent crashes other problems. In 2012, CGI’s contract to create a new $46 million diabetes registry for the Canadian government was canceled after a series of delays rendered the system obsolete.