Politics & Government

Kelly cancels no-bid tech contracts worth $110M that Brownback staff helped secure

How a tech firm secured its no-bid contract with Kansas under Brownback

CGI Technologies received a $61 million no-bid contract to upgrade Kansas tax systems after key, never before revealed meetings with state officials in 2016.
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CGI Technologies received a $61 million no-bid contract to upgrade Kansas tax systems after key, never before revealed meetings with state officials in 2016.

Kansas is terminating two no-bid technology contracts valued at more than $110 million that previous Gov. Sam Brownback’s team helped secure.

Democratic Gov. Laura Kelly canceled the state’s agreements with CGI Technologies on Thursday, several months after state officials said the company was having trouble doing the work.

Kelly said in a statement that she had voiced concern for years “about the frequent use of ‘no-bid’ contracts under the previous administration. This practice bypasses the official state bidding process designed to ensure that contracts are transparent and in the best interests of Kansans.”

The decision came after The Wichita Eagle and The Kansas City Star obtained thousands of emails that show CGI appeared all but certain to get a no-bid contract after key meetings with Brownback’s staff in November 2016.

The Department of Revenue hired to CGI to overhaul and outsource its information technology operations. In 2016 and 2017, Kansas’ budget was in turmoil, and CGI promised to boost tax revenues.

The company planned to create a portal for taxpayers to pay back taxes online. And it was supposed to improve the state’s processing of tax returns.

But the company missed a key deadline in October 2018, forcing Kansas to use an old system to process tax returns this year.

Kansas sent a letter to CGI on Thursday morning ending the contracts.

“CGI was not able to adequately perform its obligations under the contracts,” Revenue Secretary Mark Burghart said in a statement.

CGI said in a statement that Kansas’s decision “stands in stark contrast to the unqualified success of CGI’s IT projects implemented on behalf of Kansas taxpayers over the past 24 years and five administrations.”

The company said its recent projects for the Department of Revenue over-performed estimates and recovered $46.4 million in new revenue in less than two years. It said its projects give the state $2 million to $3.5 million in additional revenue each month.

The state has spent about $28 million so far on the contracts with the Canada-based company. It wasn’t immediately clear how much it will cost Kansas to cancel the contracts.

Lauren Fitzgerald, a spokeswoman for Kelly, said the cost of canceling will be based on the services already completed and the cost of services needed during a 90-day transition period.

The cancellation won’t affect the Department of Revenue’s ability to provide services, she said. The Department of Revenue will “reassess its IT needs” going forward, Kelly’s office said.

Lawmakers voiced mixed feelings following the announcement.

Rep. Kyle Hoffman, a Coldwater Republican who chairs a committee on information technology, said he wished officials at the time would have used competitive bidding for the contracts. But he wondered how the change will affect the Department of Revenue.

“My only concern would be going forward that we don’t have any lapse in service,” Hoffman said.

Jim Gartner, ranking Democrat on the House Taxation Committee, applauded the administration’s decision.

“I think it’s highly appropriate,” Gartner said of ending the contracts. “I think we can do better internally managing our IT department for the Department of Revenue with state employees.”

Over the past several years, Kansas government has turned to no-bid contracts at an increasing rate. The state has more than 7,300 no-bid contracts — double the number five years ago. In September, legislative researchers pegged their collective value at $428 million.

No-bid contracts became an issue in the governor’s race, and in January, Kelly promised in her State of the State address to limit their use.

CGI’s contracts had drawn little public attention until May 2018 after the Department of Revenue said it planned to outsource dozens of information technology jobs as part of the agreement.

Emails obtained by The Eagle and The Star show that on Nov. 8, 2016 – Election Day – CGI met with key members of Brownback’s staff and with revenue officials the same day.

CGI appeared all but certain to land a contract after the meetings.

“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. that day.

Then-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.” In other words, the department could help CGI get a no-bid contract.

Jordan said in a previous interview that “we really were just trying to find the best way, cost-effective way to do it.” Other former Brownback officials have said they would not comment on the CGI contracts.

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