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Don’t pay vendors all they are owed until work is done

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For so long, Hawaii government has had such a huge “kick me” sign affixed to its technologically-challenged backside that it must seem irresistible, an easy target, for savvy contractors to oblige.

Over the past year or so, easily more than $100 million in IT contracts have emerged as woefully faulty, wasteful or possibly outright fraudulent. A significant course correction is needed, and it includes purposeful steps, ranging from incremental payments only upon completion of successful benchmarks, to going after vendors for shoddy work.

So it was encouraging, on that latter point, to see the Hawaii Department of Transportation bringing suit last week against Ciber, Inc., alleging the consulting firm defrauded the state and engaged in other misconduct on a software project for the Highways Division. This was the FAST (Financial Accounting System Transportation) contract cancelled in spring after nearly $14 million was paid for missed deadlines, missing functionality and software glitches.

Ciber allegedly pulled a “bait and switch” by misrepresenting its capabilities for a new computer system to run the state’s highway financial management operations. The suit claims HDOT has documents of senior Ciber managers acknowledging submitting “erroneous invoices and fictitious change orders,” billing HDOT for work the firm knew was of no value.

“This lawsuit reflects Hawaii’s commitment to ensuring that vendors who violate the public trust will be held accountable for their misconduct, and that taxpayers will be protected,” said state Transportation Director Ford Fuchigami. For the sake of taxpayers, let’s hope the evidence proves strong and the state is successful in recouping damages.

Sadly, though, a lawsuit represents the reactionary side of a bad-contract situation. It represents failure resulting from a gamed system. What should be occurring, regularly and transparently, is more diligence at the front-end formation of contracts — aligning expectations, scope of work and paying vendor incrementally when scheduled project promises are met. Clearly, that’s all needed.

Now, to go from theory to practice: The state Tax Department is taking another costly stab at overhauling its notoriously antiquated system. From 1999 to 2011, $87.5 million was paid to Canadian-based CGI Group Inc., ostensibly to modernize the state’s tax collection system, but which instead, bought us old technology.

The department is trying again with a $60 million contract split into two phases; an initial $30 million, four-year contract was signed in July with Fast Enterprises of Colorado. There’s hope this time around that taxpayers will get what is paid for, since this company has done similar tax projects in 21 other states.

But given our Tax Department — let alone our state’s — dismal track record with IT, it makes perfect sense to restructure the payment schedule, as advised by state Sen. Donna Mercado Kim; she says too much money is given to the contractor too early in the project.

The Ige administration should work on taxpayers’ behalf to have this vendor, as well as future others, show that newly installed equipment and software actually work as promised before payments are made.

The contracts outlined here are but the tip of the disastrous IT iceberg. Recently, there’s been the Hawaii Health Connector, the online exchange that burned through the bulk of $200 million in federal grants, before being scrapped as worthless and unsustainable; state investigators are urged to dig into those contracts to see if any laws were violated.

There also was the touted statewide systems overhaul, dubbed SURF (Statewide Unified Resource Framework), that was ditched this spring after $11 million went into developing requests for proposals. Enough already.

Instead of more “kick me” signs, a serious reboot of procedures is needed to end these botched IT contracts.

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