State promises cost control during payroll system overhaul

After Always Investigating revealed payroll problems because of last-century technology, the state is now shopping for a new system. But how much will this and other big information technology projects cost taxpayers?

We looked into not only what the sticker price might be for some of the largest high-tech investments on the state’s list, but how can the costs be controlled and success guaranteed?

Last year, after workers complained to Always Investigating about late pay, we tracked down the problems to the state’s antiquated payroll system — decades old and some of it on paper-and-pencil index cards. That’s now teed up for replacement with the state asking for bids this week on a payroll overhaul.

“The RFP (request for proposals) is open-ended so they can either take it out and run it themselves on their system, some companies do that, or they can help us build our own system and run it here with the state workers,” explained state comptroller Doug Murdock.

The cost estimate isn’t being revealed so the bids won’t be tainted. But the governor put an extra $15 million in his proposed budget on top of other already-planned capital investments, in part to cover the payroll upgrade.

“We have about 80,000 people that get paychecks from the state payroll every year and we can’t do anything else unless we’re paying people,” Murdock said. “We can’t afford to take chances with something as important as payroll.”

But could fixing it cost you a lot more than expected? The state’s history managing big-tech projects begs that question:

  • Take the tax system modernization, nearly $90 million for a system the state said has to be scrapped.
  • The same tech vendor from the tax project became one of many under auditor scrutiny over the now defunct Hawaii Health Connector, a $130-plus million debacle now abandoned.
  • The state is locked in a legal battle over an incomplete highway money system it dumped more than $14 million on before pulling the plug.

Why will something like this be any different this time?

“I think one of the important things is we did a lot of market research before we started and wrote the RFP, so we know exactly what these companies can and cannot do,” Murdock said. “We’re also going to try to use more government workers in the process of configuring the system and less of the contractor’s employees. So as we’re going along, we really will be comfortable setting up the system ourselves so when the contractors go away, we’ll still be able to run it. We need to have state workers who can run these systems.”

Running new systems has been part of the problem over at the Department of Human Services.

A public benefits system called Kolea started out with a base price of more than $80 million. It’s now up to nearly $150 million of mostly federal money. Front-line workers complain it’s made Medicaid qualification more cumbersome, and a state audit said the pricey project was rushed without defining how it was going to be used.

“That should have been done ahead of putting out the RFP so you have a process that you’re then going to build a system that would support,” said state auditor Jan Yamane, “as opposed to contracting for a system and building the process as you go.”

Kolea’s next major phase will at least double or triple its current scope by adding qualifications for food and cash assistance, child welfare and adult protection. That should be out for bid this year, but at what cost to taxpayers and can we make a crucial deadline?

“The only limitation we have in time is to make use of enhanced funding from the feds,” said Rachael Wong, director of the Department of Human Services. “That ends in December 2018, and that’s a 90-10 match.”

Both departments — the one in charge of payroll and the one covering public welfare — say they’re working with the state IT department and the procurement office to rein in spending and keep contractors in line.

“The vendors will have to go through gates with all three offices in order to be successful,” Murdock said.

“The state‚Äôs newly implemented IT governance processes will require state-executed contracts to include all necessary functional and technical requirements, including measurable performance delivery metrics in order to approve and remit contract payments,” CIO Todd Nacapuy told KHON2 in a statement. “Should the contract delivery metrics not be met as determined by the designated state contract administrator, the state will reserve the right to withhold payment delivery due to insufficient performance.”

Lawmakers question if that’s enough. They’re moving on a slew of bills to cover audits, more training, better tracking and checking of fair prices, and even considering a vendor’s past performance when they put in a new bid.

We’ll follow up to see if all of this helps keep better tabs on your tax dollars.

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