photo by: Peter Hancock

Kansas Revenue Secretary Sam Williams defends his decision to outsource dozens of IT jobs in his department to an outside company that was awarded a contract through a no-bid process, Friday, May 11, 2018.

Kansas Revenue Secretary Sam Williams on Friday defended his decision to outsource the job of modernizing and maintaining software that runs the state’s tax collection system, saying the state cannot afford to compete with private industry for the talent required to perform such work.

In a wide-ranging, informal conversation with reporters, Williams also said he followed all state purchasing rules when he awarded what was essentially a no-bid contract to a Canadian firm, CGI Group, one of several firms involved in the troubled launch of the federal government’s healthcare.gov website in 2013.

The contract for maintaining and supporting the software that runs the tax collection system will result in 56 information technology workers in the agency losing their jobs.

Williams said some of those people will shift to working for CGI, and the agency is trying to help the remaining people find jobs elsewhere in state government. But he said he doesn’t think the Department of Revenue should be in the business of developing software.

“The reason we’re doing this, folks, is because we just can’t compete with the talent, having the talent we need, and the means to be able to continue to support and at the same time accomplish” the core functions of the agency.

Those core functions, he said, do not include software development.

“I am not an Oracle. I am not an Apple,” he said. “And so if I’m trying to get resources to creating software, I’m taking resources away from those core competencies where I can compete for the right people, for the talent and so forth.”

The “core competencies” he mentioned refer to the five basic functions of the Department of Revenue: collecting taxes; issuing driver’s licenses; issuing and regulating liquor licenses; managing the state’s property valuation system, which both the state and its 105 counties rely on for levying property taxes; and working with the Legislature in developing tax policy.

Williams said when he was named revenue secretary in December 2016, one of the first things he observed was that the agency was focusing a large amount of time and resources in other areas.

“We were, and are, spending significantly more of our payroll in supporting and developing software than we should be,” he said.

The contract with CGI has come under scrutiny, both because it outsources state jobs to a Canadian-based firm, and because it was awarded through a process that offered only limited opportunity for other software firms to compete.

But Williams said state procurement laws allow agencies, in certain cases, to negotiate with companies with whom they already have a working relationship, especially if it’s believed no other company is able to perform the same task.

The tax collection software currently in use, he said, dates back to 1995 and was designed by a company, then called American Management Systems, which was later acquired by CGI in 2004.

As a result of that, CGI became the owner of the software, and so he said it was reasonable to contract with that firm to modernize the system and then take over the maintenance and support functions.

After the contract was negotiated, he said, the Department of Administration posted notice of the contract, which opened a seven-day period during which other firms could file an objection and ask to be given the opportunity to submit other proposals.

Williams said only one firm filed an objection, and the Department of Administration determined that company could not perform the job.

Williams said it would have cost the agency upward of $100 million to perform the same tasks in-house. The contract with CGI calls for paying that firm $48 million, according to agency spokeswoman Rachel Whitten.

But the contract also comes in the wake of a number of other “modernization” projects at the Department of Revenue that have been outsourced to private companies and that have resulted in delays, cost overruns and faulty work.

Most notable among those modernizing systems is in the Division of Motor Vehicles, which deals with vehicle titles and registrations, driver’s licenses and identification cards.

The entire project was originally budgeted at $40 million. But when the new title and registration system was launched, it was plagued with problems that led to long delays and long lines in county treasurer’s offices as people tried to renew their tags.

The driver’s license system, known as KanLicense, was originally scheduled for completion in 2012. But by 2015, after numerous delays, the project was canceled and later moved in-house at the agency.

The agency had hoped to launch the new system in December 2017, but that was later pushed back to Jan. 1, then to April 30, and most recently to May 7, which was Monday.

Williams acknowledged that project, which began long before he took over the agency, has been plagued with problems, but he said the agency still hopes to launch the new system “within days.”