CGI Group Inc., the company that was paid $87.5 million to install what state officials describe as a faulty computerized tax system, will be allowed to bid on a new $32 million contract to replace the system.

The state contracted with the Canada-based firm, one of the world’s largest information technology companies, from 1999 to 2011 to modernize Hawaii’s tax collection system.

Because the CGI-installed system does not work properly, state lawmakers appropriated $32 million earlier this year to redo the project.

Joshua Wisch, deputy director of the state Department of Taxation, told lawmakers at a briefing Wednesday that a new contract would be open to all vendors despite the agency’s previous experience with CGI.

"The (request for proposals) being drafted is going to be subject to an open and competitive bidding process. I’m not aware of a way that you could affirmatively say a single vendor cannot bid," Wisch said. "The current system has presented a lot of challenges. It’s got limited controls, limited functionality and takes much longer for us to implement tax law changes. It’s certainly outdated. That’s why we are pursuing tax system modernization."

The Tax Department’s IT experts testified before the Senate Ways and Means Committee that the state paid for old technology that doesn’t give it accurate information when determining the budget. Instead, the department that manages roughly $6 billion a year in tax revenues must manually generate the reports without automation.

"The technology is totally obsolete. It’s just terrible. Right now we’re starting from scratch to do a new one (because) the system is so bad," said Robert Su, the state’s tax system modernization program manager. "The state relies on this system to bring in $6 billion revenue. If the system is down one day, $25 million cannot be processed. We need to do it right this time."

When asked if CGI would bid on the new contract, a spokesman said the firm doesn’t publicly disclose its future intentions.

CGI has said its work for Hawaii was successful and enabled the state to collect more than $385 million in delinquent taxes since 1999. CGI’s system also cut the time it takes to generate tax refunds, spokeswoman Linda Odorisio said. Representatives of CGI didn’t testify at the briefing.

In addition to its work on the tax system, CGI won a $53 million contract to build the Hawai’i Health Connector’s website that failed to launch as scheduled on Oct. 1 and has had difficulties since going live on Oct. 15. It also developed the problematic federal health insurance exchanges created by the Affordable Care Act.

Lawmakers questioned Tax Department officials at the state Capitol briefing to follow up on a 2010 audit citing major concerns with CGI’s performance in the last contract and the Tax Department’s relationship with the vendor. The audit in part said the tax processing system "does not have a cash control account, and thus bank reconciliations cannot be performed and the state revenues collected cannot be verified."

"Without tax collections, the government can’t run so they need to have integrity and these kinds of issues that are being raised are not good for government, the department and taxpayers," said Senate President Donna Mercado Kim (D, Kapalama-Alewa-Kalihi Valley). "To see this kind of stuff is still continuing is not acceptable."

Wednesday’s briefing put on display the divisiveness within the Tax Department, with some officials saying the agency’s leadership favored bringing CGI back, but the leadership saying that was not the case.

Kevin Wakayama, the department’s tax compliance administrator, testified that Wisch said he wanted to bring CGI back to fix the revenue accounting system and that the leadership was basically delaying issuing a new request for proposals "in the hopes the system will break and CGI will have to be called back."

Wisch, who was sitting next to Wakayama at the briefing, did not respond to those comments.

After the briefing, Wisch told the Honolulu Star-Advertiser that bringing CGI back was discussed but not acted on.

"We didn’t want to bring back CGI. We certainly had no desire to break the system to have an excuse to bring back CGI," he said. "That would do nothing but harm the taxpayers. It’s nothing that anyone here ever wanted. It was a conversation with them (CGI) that they initiated. It was something that was considered and relatively briefly discussed. They ultimately were not brought in."

The state plans to issue a new request for proposals this month for a contractor to replace the outdated tax system.

Tax Department Director Fred Pablo did not attend the briefing due to a family emergency.