A Canadian technology company with more than $100 million in no-bid contracts with Kansas failed to complete a key project on time, forcing the state to use an old system to ensure smooth processing of tax returns this year.
The new leader of the Kansas Department of Revenue told lawmakers Tuesday that Kansas will need to decide whether to move forward with CGI Technologies or look elsewhere.
Kansas’ contracts with CGI have been a source of controversy for months, with lawmakers in both parties questioning why officials in Gov. Sam Brownback’s administration pursued large contracts without using competitive bidding.
Their size – valued at $61 million and $49 million over 10 years – has also drawn scrutiny, and Gov. Laura Kelly has promised to curtail the use of no-bid contracts.
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Mark Beshears, the interim revenue secretary, said Tuesday that CGI Technologies was supposed to “go live” with the tax return processing project on Oct. 1, but that it still isn’t ready.
“We were getting into a position of risk with this filing season, so we asked CGI to move aside and we’ve gone back to the pre-CGI environment of processing tax returns,” Beshears said.
It does not appear the decision is affecting taxpayers. Beshears said that so far the tax filing season is proceeding smoothly.
CGI has an amended project plan for the tax return processing component and the company wants to begin testing in August 2019, Beshears said. Under questioning, Beshears said CGI had not fulfilled its contract for that component.
Other components of CGI’s contracts are working better, Beshears indicated.
Kansas has launched a new system to upgrade the collection of delinquent taxes. But an agreement to provide information technology support for the Department of Revenue is “expensive,” Beshears said.
Beshears said Kansas has already paid out $22.5 million to CGI.
“So that’s where we are. We really need to make a decision. Do we want to proceed ahead or do we want to look at other alternatives?” Beshears said.
Rep. Troy Waymaster, a Bunker Hill Republican who chairs the House Appropriations Committee, suggested Kansas should reevaluate the contract. He expressed concern with the delay in the project’s implementation and wondered whether the state has a way to recapture funding since CGI didn’t fulfill the contract.
“We’re living in this contract right now. I can see why they did it, but if the promises weren’t kept, where do we go forward as far as still being within the confines of that contract?” Waymaster said.
Rep. Barbara Ballard, D-Lawrence, said Kansas should evaluate whether to continue with the contract, but she noted that the state has already spent significant money on the contracts.
“I think you have to evaluate that and what can we do to make sure that it is accomplished? Because I think to just stop it at this point – I think you can – but you’re going to have to enter a new contract with someone else in order to complete it,” Ballard said.
Beshear’s Tuesday presentation to the House Appropriations Committee comes after months of attention from lawmakers on no-bid contracts. The CGI contracts first drew widespread attention in May after the Department of Revenue said it planned to outsource dozens of information technology jobs under the contracts.
In September, legislative researchers revealed that the total number of no-bid contracts in Kansas more than doubled over five years, to more than 7,300 currently.
The total value of the state’s no-bid contracts also has risen sharply over that same time, from $160 million in 2013 — the low point over the past 10 years — to $428 million now.
Sarah Shipman, the secretary of administration under Govs. Brownback and Jeff Colyer, told lawmakers in September that “competitive procurements are the standard rule and non-competitive bid contracts are the exception to that rule.”
Shipman also said then that she believed a large amount of the increase in no-bid contracts since 2009, when the state had just 1,587 such contracts, stems from accounting changes made because of a new financial management system adopted in 2010 and 2011.
No-bid contracts became an issue in the governor’s race this fall, with Kelly promising to clamp down. Kelly said in January during her State of the State speech “we can eliminate waste and improve transparency by ending ‘no-bid’ contracts.”