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Cover Oregon Not First Multi-Million Dollar Tech Disaster on Kitzhaber’s Watch

Tuesday, October 28, 2014


Photo Credit: OregonDOT via Compfight cc

A failed technology launch, a department in crisis, a project millions of dollars over budget and a director resigning amid the controversy. No, it’s not Cover Oregon, it’s the state’s mid 1990s failure to implement a technology upgrade at the Department of Motor Vehicles.

The state's DMV upgrade was an unmitigated disaster that shared many disturbing parallels with Cover Oregon's failed online health exchange, include the fact that Gov. John Kitzhaber presided over both of them.

“Both were big IT projects taking on too much in one bite and had problems with governance,” said David House, spokesman for the DMV. “You shouldn't do such a big project on a short timeline. IT projects take a lot of time to build and should have a long phase for testing.”

The failed DMV project had repercussions that are still felt today, and so will Cover Oregon. Critics say the two are an example of history repeating itself for an administration that just can't seem to get big projects right.

DMV Upgrade Went Downhill Quickly

In 1993 the legislature approved a $50 million technology overhaul of the DMV. The major technological improvements were supposed to improve DMV services, reduce staff and wait times for customers.  Long lines would be a thing of the past as the state would consolidate all of its paper records into a centralized computer system that would provide seemless one-stop-shopping for the customer.

But by the time Kitzhaber took the helm in 1995, the project was stymied with technological glitches and delays. Rather than improving the service, issues with the project caused long wait lines at DMV offices and a delay of services. 

By early 1996, the project was facing $75 million in projected cost overruns and experts were estimating the project wouldn't be complete until 2001.

A prototype that launched at a DMV test office had people waiting around the corner.  Instead of shortening lines, they got longer and longer.  The Associated Press said that in some cases the simple act of transferring a car title could take up to three months.

Customers got so mad at the system they started to call their legislators, demanding action, according to media reports at the time,

In an April 1996 press release, Kitzhaber said the state would work on the parts of the program that were working and reassess the rest. 

Gov. John Kitzhaber

"Oregonians deserve better service and a computer system that works," Kitzhaber said in the release. "I'm convinced that we are getting there and that the men and women who work at DMV are trying their best to improve service and get a computer system on line that works."

By the end of that year, the state scraped the New Licensing System (NLS) software project, workers were hired back in order to deal the with the backlog of paperwork and DMV director Jane Cease had resigned amid the controversy.

Eventually, a state audit in 1997 would find $700,000 in questionable expenses to the main contractor, DMR Group, Inc. out of Canada. In some cases, the state paid for the travel of the contractor's employees and their families, including spouses and children, according to the audit. 

Auditors said that the DMV paid more than $550,000 in excess payroll charges and were basically writing a "blank check," since the Canadian company DMR Group Inc. didn't have to account for its charges to the state, stated a Dec. 1996 article in Capital Markets Report.

The state had bitten off more than it could chew, trying to overhaul a complex system in a short period of time, House said. Not unlike Cover Oregon, critics say. 

Technological Difficulties 

Oregon has been reeling since its health exchange website failed to launch last year, prompting the resignation of several employees. Multiple state and federal investigations have been launched and the state and its largest technology contractor on the job, Oracle, are suing one another. The state announced plans earlier this year to mothball the project and turn the exchange over to federal control. 

The FBI is investigating how the state spent over $250 million in federal grant money on a website that failed to launch. 

“We seem to have problems with technology projects,” said state Rep. Kim Thatcher, R-Keizer, a member of the legislature’s Joint Committee on Legislative Audits, Information Management and Technology

Familiar Warning Signs

She said there were signs in the beginning that Cover Oregon had issues. 

“The people who were in favor of this project just wanted to push it forward anyway regardless of the alarm,” she said. 

Similarly, consultants hired by the DMV had warned managers that problems were starting to bubble up even before the computer system began operation, according to a 1996 report in The Columbian.

With the DMV, audits revealed poor internal coordination on the project and poor cooperation and communications among managers.

George Ebel, a consultant hired by the Oregon DMV to salvage the project, summed up the problems to the magazine Information Age in two words - "project management."

That might ring familiar to those who read the recently released, internal report on Cover Oregon authored by consultant Clyde Hamstreet that blasted Cover Oregon for “little accountability,” “inadequate or missing policies and procedures,” “weak financial controls,” “uncontrolled IT spending,” “poor budget practices,” and “piles of untouched work with no plans to address [them]."

For Cover Oregon, the failure to launch the website meant workers had to enroll Oregonians via paper and, at one point, a single fax machine. Several Cover Oregon employees, including former Executive Directors Rocky King and Bruce Goldberg, resigned amid the debacle.  

Apples and Oranges?

The Governor's office said it's unfair to draw a parallel between Cover Oregon and the DMV debacle because the DMV project started in 1993, before Kitzhaber took the office of Governor. 

"Governor Kitzhaber entered office in 1995, after the DMV project was already well underway. To draw parallels between that initiative and Cover Oregon while ignoring successful IT projects such as the DMV’s Expanded Customer Number effort or the promising work-in-progress at the Department of Revenue to replace the core system is an incomplete analysis," Kitzhaber's spokeswoman Rachel Wray said.

Lingering Effect

401(K) 2012 on Flickr

These major technology problems have lasting effects. At the DMV, the system is still in need of major upgrades. 

“We are very limited on what we can do, like taking credit cards, because we are based on mainframe structures,” House said.

It’s likely the impact of Cover Oregon’s flailing will be felt for some time as well. Oregonians will be shifted to the federal exchange when enrollment opens next month. And lawmakers will decide next year whether to end the Cover Oregon agency all together and have its remaining functions absorbed by the Oregon Health Authority. 

House said the DMV has learned from its issues as well. 

“We’ve learned to take projects on manageable size and not to implement a project unless it’s ready,” House said. He added Cover Oregon should not have set such a short timeline for their project and done more testing before releasing to make sure it would be successful.

“The key to success is break up a project up and make sure it works. Quality assurance and testing is very important,” House said. 

More sunlight on these projects couldn't hurt either, Thatcher said. 

“There needs to be more transparency so that it’s not just internal memos as to how a project’s doing,” she said. “People need to know how these projects are progressing.” 


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