The state of Ohio in 2012 planned to update its massive worker’s compensation billing and claims systems, paying a contractor $52.7 million and expecting a new system online by December 2013.
Four years later, the state has paid out $59 million to the IT company which has been criticized for failing to deliver on past government projects and the system has not yet gone live.
Why?
Bureau of Worker’s Compensation spokesman Bill Teets said the agency’s existing systems were far more complicated than thought at the beginning.
“We’re committed to putting in a system that’s going to meet our needs,” Teets said. “We’re very close to being ready to go live.”
The BWC provides wage-replacement and health insurance coverage for employees hurt on the job to more than 250,000 Ohio businesses — making it the country’s largest state workers’ compensation insurer. The BWC operates as a $28 billion company with 2 million open claims.
In 2011 the agency decided to integrate its core systems, including claims, policy and employer billing, in one new system.
The agency contracted with CGI Group Inc. to replace two systems with customized “off-the-shelf” software. The new system was expected to be online in December 2013, then November 2014 and then sometime before July 2016. It is now expected to go live in November, the BWC told employees last month.
Two dozen other vendors are also working on the project and have been paid more than $27.3 million for ancillary work, according to the agency.
Who is CGI Group?
CGI Group is an IT company based in Montreal and has 65,000 employees around the world.
CGI is best known as the architect of the troubled health insurance exchange websites set up under the Affordable Care Act. Subsidiary CGI Federal was a primary contractor on the federal site HealthCare.gov, which experienced delays and technical problems when launched, and for several state sites, some of which had problems.
The BWC contract was finalized years before CGI’s work on Healthcare.gov.
“BWC was impressed with CGI’s successful track record of delivering large-scale, complex projects in the state of Ohio and across the nation on time and on budget,” Steve Buehrer, former BWC administrator said in a news release when the company was hired for the project.
The company had experience in Ohio including work on Medicaid and Medicare programs for the Department of Job and Family Services and an auto dealer title database for the Department of Public Safety. After errors and delays, state officials ended its contract for the dealer license database.
Why has the project taken so long and cost so much?
Under the initial nine-year contract, CGI was to be paid $52.7 million. That figure included about $30 million to develop the system over two years and about $18 million to maintain the system for seven years.
But the BWC changed its original request at least a dozen times, adding millions to the final price tag and pushing the schedule further and further back, according to a cleveland.com examination of records obtained under Ohio’s public records law.
Twelve additions made through March 2015 totaled $22.6 million. Changes included connecting the BWC’s website with the billing and claims system. Many changes were smaller, more technical tweaks. For example, adding a column to show the attorney general’s office collected what was due cost $113,000.
Soon after starting the work, the contract was amended to include an online account and payment system. The May 2013 change cost $2.6 million, which CGI reduced to $1.5 million, and added 177 days to the project’s timeline.
Halfway through the process, the BWC decided to change how it bills employers to a prospective billing method. Instead of paying premiums based on actual payroll, after employees had been paid, employers would be charged a premium in advance based on estimated payroll and settle the difference the following year.
In September 2014, the BWC and CGI amended the contract to include the billing changes at a cost of $1.5 million.
Teets said the project grew in scope to tailor the PowerSuite system to meet Ohio’s laws and the agency’s myriad tasks, many of which cross over into other agencies or IT systems.
“We started as ‘let’s find a way to better process our claims and premiums,’ but we found all these other areas this touches and felt there were ways we could better improve other areas of our operations,” Teets said.
Did campaign contributions influence CGI’s selection?
CGI’s political action committee has contributed $97,200 to Ohio political campaigns since 2010, according to campaign finance reports filed with the secretary of state.
That includes $35,000 to the Ohio Republican Party’s candidate and restricted funds since 2010, most of which after the BWC awarded the contract to CGI.
CGI gave $15,000 to Gov. John Kasich’s 2010 gubernatorial campaign and transition fund and $10,000 to his opponent, then-governor Ted Strickland, according to campaign finance reports. Since the BWC contract, the company has given $33,699 to Kasich’s campaign and 2014 transition funds.
Teets said the BWC followed the established bidding process, and career IT professionals at the BWC and Department of Administrative Services selected the company with the best proposal.
What do critics say?
Rep. Tom Brinkman, a Cincinnati-area Republican, said the state has spent too much on the project and should have pulled the plug years ago. Brinkman said attorneys who use the BWC systems told him the upgrade isn’t needed and might never be complete.
“It’s a mess and it’s wasting millions and millions of dollars with no end in sight,” Brinkman said in an interview. “Some have said it may never work yet it continues.”
Brinkman said if the BWC were operating more like a business, it would have stopped paying CGI years ago. He said he plans to work on a solution over the summer. If the project can’t be ended, he said, at least lawmakers can review the expenditure during next year’s state budget talks.
Teets said there’s no “turning off” at this point, and employees began training on the new system earlier this month. Teets said the BWC is holding CGI accountable for the work promised.
“We are using a software system that has been successfully used in other states so we’re confident we’ll be able to adapt that to meet our needs,” Teets said.
Date: June 15, 2016