Politics & Government

After meeting Brownback’s circle, firm was on ‘right path’ to $61M no-bid contract

As Americans voted on Election Day 2016, members of Kansas Gov. Sam Brownback’s inner circle huddled with a Canadian tech firm that promised to boost tax revenues amid state budget turmoil.

Weeks earlier, a Kansas Department of Revenue compliance officer had halted a potential project worth millions to the tech firm, called CGI Technologies.

But CGI hadn’t given up. The company met with key members of the governor’s staff and separately with revenue officials the same day, Nov. 8. And Brownback’s former campaign manager lobbied on CGI’s behalf, a former revenue official said.

Within months, with no competitive bidding process, CGI had a contract worth $61 million to create a portal to allow taxpayers to pay back taxes online.

The company now has two no-bid state contracts collectively worth about $110 million over 10 years. But it missed a key October 2018 deadline to improve the processing of tax returns, forcing Kansas to use an old system this year.

Thousand of emails obtained by The Wichita Eagle and The Kansas City Star through a records request reveal for the first time the internal discussions between state officials and CGI representatives that led to the state granting CGI its first no-bid contract in early 2017.

The state provided the emails just before Gov. Jeff Colyer left office, more than a year after a reporter first requested them, and after an attorney for the newspapers demanded their release.

The emails show that after the Nov. 8 meetings — including one involving Brownback’s chief of staff, deputy chief of staff and budget director — CGI appeared all but certain to get the job.

“We are now on the right path and are pleased to work out an arrangement with CGI with the intention again of increasing collections, especially the ability to pay online,” then-Revenue Secretary Nick Jordan wrote in an email to Brownback officials after 5 p.m. on Nov. 8.

Department of Administration Secretary Sarah Shipman, who led the agency that oversees contracts, sent an email the next morning saying her agency “can assist with a sole source contract if necessary.” That meant CGI wouldn’t have to compete with other companies for the contract.

The Department of Revenue, now under the control of Democratic Gov. Laura Kelly, confirmed this week that the agency moved forward with the project after Brownback officials met with CGI.

“KDOR employees were called and told that the project would move forward at the request of the Governor’s Office following a face to face meeting with CGI and Governor’s staff,” the agency said in a statement Thursday.

During the Brownback era, Kansas turned to no-bid contracts at an increasing rate. The state now has more than 7,300 no-bid contracts — double the number five years ago — and Kelly has promised to curb their use.

No-bid contracts, also known as sole-source contracts, are viewed skeptically by government watchdogs, who say they’re a bad deal for taxpayers and undermine public trust in government.

“Any time when lobbyists and close associates of an administration are closely involved with the handing out of significant contracts, those should always raise red flags with the American public or taxpayers,” said Aaron Scherb, director of legislative affairs at Common Cause, a nonpartisan watchdog organization in Washington D.C.

By contrast, a transparent bidding process in which two or more companies compete for a contract helps ensure that the government and taxpayers get the best quality and services at the best price possible, Scherb said.

Brownback confidante involved

Emails show Mark Dugan, who ran Brownback’s 2014 re-election campaign and who previously had been chief of staff for then-Lt. Gov. Jeff Colyer, was among the scheduled attendees for a Nov. 8, 2016, meeting between CGI and the Department of Revenue. The meeting was set for Jordan’s office in downtown Topeka.

Emails show work to schedule the meeting began as early as Oct. 18. On Oct. 27, a message sent from an email address for Dugan indicated that he had accepted a Google Calendar invitation to the meeting.

Information about the meeting lists Jordan as “organizer” of the meeting and Dugan’s email address as “creator.”

During the meeting, administration and company officials discussed whether Kansas could offer CGI Technologies a no-bid contract, Jordan said.

In another meeting the same day, CGI met with Jon Hummel, Brownback’s chief of staff; Kim Borchers, deputy chief of staff; and budget director Shawn Sullivan. It’s not clear who set up that meeting.

Jordan said in an interview that Dugan was lobbying for CGI. But he dismissed the idea that Dugan’s close ties to Brownback influenced the eventual deal with the company.

“He was, but I don’t think even that entered into it,” Jordan said. “I think we really were just trying to find the best way, cost-effective way to do it.”

Dugan didn’t respond to a call and email seeking comment.

A spokeswoman for CGI declined to comment or answer a list of questions.

Efforts to reach Borchers, Sullivan and Shipman were unsuccessful. A spokeswoman for Brownback, now a United States ambassador for international religious freedom, didn’t respond to a request for comment.

Hummel did not want to comment.

“I’m sorry, I have moved on to a different employment and it’s not really appropriate for me to talk anymore about that work so I would refer you to the people at the agencies who can talk about that,” Hummel said before hanging up.

To bid or not to bid?

A key concern among state officials leading up to the Nov. 8 meetings with CGI was whether Kansas could give the company a project without allowing other companies to bid on it.

If CGI had an existing contract with the state, the state might be able to amend that contract to include the new project without putting it out for bid.

But officials in the Department of Revenue concluded there was no contract. That meant there would be no way to avoid asking for proposals, according to one email. Officials also voiced concerns that the project would prove too time-intensive for agency staff.

On Sept. 26, 2016, the agency called off the project.

Department compliance enforcement officer Jeff Scott broke the news to CGI. In an email, he thanked company representatives for the time everyone had invested walking through the changes possible if Kansas upgraded its tax systems.

“Would we like to have them all now? Yes. But, there are laws governing the process as we all understand,” Scott wrote.

That decision marked an apparent end to months of discussions between agency officials and CGI.

Earlier, on Sept. 19, Scott told CGI in an email that he felt the company had the information it needed to put together a comprehensive proposal and to project how much the project would boost state revenues. The email indicated that CGI’s proposal would guide the project’s pricing.

Less than a week before the agency decided not to move forward with CGI, Scott wrote Bryce Berg, a consulting director at CGI, to say officials had searched for a current contract with CGI and couldn’t find one.

“We were under the impression (I was told at the time we [started] talking) there was an active State contract with CGI,” Scott wrote in an email.

As it turned out, Kansas didn’t have an active contract with CGI. What it had was an expired tax systems contract from the 1990s with American Management Systems, a company that was later absorbed by CGI.

Jordan said CGI already had knowledge of the state’s tax systems and that conversations centered on what would be needed to bring KDOR “into the 21st century.” CGI was offering the ability to pay back taxes online, which Kansas didn’t offer at that time.

But he also acknowledged differing views on whether Kansas would have to open the project to bidding.

“To be honest with you, we got into discussions, since it was a company … already involved in the tax systems, do we need to bid it or non-bid it?” Jordan said. “We never came to a conclusion while I was there. We worked with the Department of Administration on it and, honestly, we went back and forth on it.”

Governor’s office role

Despite the Nov. 8 meeting between CGI and governor’s office staff, Jordan said the governor’s office didn’t weigh in on the project while he was the revenue secretary.

But that apparently changed at some point.

“We are working on an urgent, very time sensitive project sanctioned directly by the Governor’s Office of the State of Kansas. We need to fast track this with you please,” Scott wrote to a vendor in May 2017. By then, Scott was directing the CGI project.

Asked about the email he wrote after the Nov. 8 meetings saying Kansas would work out an arrangement with CGI, Jordan said the administration was “more leaning that way” at the time.

Emails show discussions about the project resumed in the weeks after the Nov. 8 meetings.

KDOR officials and CGI representatives discussed a draft of terms and conditions with CGI in Dec. 5 emails. A email that same day from George Schwartztrauber, a CGI vice president of consulting, also references a meeting between CGI representatives and state officials the week before to discuss “next steps” on the project.

Signing a contract

Jordan left the Department of Revenue in December 2016 for a position on the Governor’s Council of Economic Advisors. He said the department had not yet made a decision about whether to go with CGI or not.

Jordan’s replacement as revenue secretary, Sam Williams, signed the contract with CGI on Feb. 15, 2017, after the state went through a process called prior authorization to avoid competitive bidding.

In a document asking to bypass competitive bidding, KDOR said Kansas had a licensing agreement (though not a contract) with CGI in effect through 2025 for work on the delinquent tax collection system first put in place by AMS. The document also listed several benefits of going with CGI, including that it would require no out-of-pocket funding from the agency.

KDOR wrote the project can “be launched quickly, boosting revenue at a time when the state needs it most.”

Reached at home on Thursday, Williams said he was no longer a state employee and did not want to comment.

‘Dealing with the consequences’

CGI landed a second no-bid contract with Kansas in early 2018. The company’s work for Kansas mostly escaped public attention until May, when KDOR told employees that 56 jobs were going away because CGI would be taking over some information technology operations for the agency.

The CGI contracts have come under legislative scrutiny since. Kelly said in a statement that her administration is reviewing the CGI contracts “and our legal options.”

Mark Beshears, 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.

Kelly said in a statement that some department employees had concerns with the contract at the time.

“Yet, it was pushed through anyway,” Kelly said. “Now, the state is dealing with the consequences of that decision.”

Neil Gordon, an investigator for the Project on Government Oversight, a non-profit, non-partisan government watchdog organization, said more competition in contracting helps ensure better quality goods and services and reasonable prices.

Gordon acknowledged there are some emergencies when a no-bid contract may be needed, but questioned whether it was needed for CGI.

“I’m not sure this (IT contract) really qualifies as that. We’re talking national security emergencies, in combat zones, natural disasters, things like that,” Gordon said. “But that has to be done as rarely as possible.”

Bryan Lowry and Lindsay Wise of McClatchy DC contributed reporting

Related stories from Wichita Eagle

Jonathan Shorman covers Kansas politics and the Legislature for The Wichita Eagle and The Kansas City Star. He’s been covering politics for six years, first in Missouri and now in Kansas. He holds a journalism degree from the University of Kansas.
Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.