Firm in jobless agency woes could get $75M contract

Michael Gerstein
The Detroit News

Lansing — A company that previously designed glitchy software and a problematic fraud detection system for Michigan’s unemployment agency is close to getting a contract worth up to $75 million to revamp the Secretary of State’s computer system, a state official said Tuesday.

Officials with Secretary of State Ruth Johnson’s office are “very close to an agreement” with Colorado-based Fast Enterprises to upgrade a Lyndon Johnson-era state computer system, according to Fred Woodhams, a spokesman for the office. Woodhams said they’re negotiating “minor issues” with the company, which will begin working on an anticipated five-year-long overhaul a month after the office signs the contract.

The state previously delayed its decision on whether to go forward with the company over concern about its role in the state’s bedeviled unemployment insurance agency. The company designed a software update that potentially exposed nearly 1.9 million Michigan residents’ Social Security numbers to unauthorized viewers. It also developed an automated fraud detection system that led to false fraud accusations against more than 20,000 Michigan residents, resulting in two lawsuits against the state, one of which was recently settled with accompanying broad policy reforms for the agency.

Woodhams said the department is tapping the company for the project only after a “careful review” from staff at Ruth Johnson’s office and the Michigan Department of Technology, Management and Budget. He said the company “has delivered DMV computer modernization projects nine times in seven states — all of them on time and on budget. FAST is the only company nationally that has delivered a DMV legacy modernization project successfully in multiple states.”

He said other states that use similar systems — Arkansas, New Mexico, North Dakota, Oklahoma, Tennessee, Utah, Washington — have not had problems with the software. Colorado and Massachusetts have pending projects with the company, too, Woodhams said.

The office’s current computer system processes more than 17 million vehicle plate registration, driver’s license renewals and other transactions with the current “antiquated,” 1960s-era software system that runs on modern equipment, the office says. The old computer system also processes some $2.4 billion in related fees annually and offers driver information to state law enforcement and receives and records traffic violations from state courts.

It runs on a computer language that hasn’t been widely taught in decades, which is partly why it’s so expensive to update, the office says.

Johnson’s office also points to a Jan. 27, six-hour mainframe outage that froze transactions statewide as one example of why the system should be replaced with something newer.

The latest update comes after a failed 2005 computer overhaul for the office. Michigan had hired Hewlett Packard Enterprise to create a new system, but after years of delays, the state canceled its contract and filed a lawsuit against the company to recoup public money. Michigan is still embroiled in that lawsuit.

Gov. Rick Snyder on Feb. 10 did not give a firm answer about whether Johnson’s office should stick with Fast Enterprises.

“Well again, we had issues,” Snyder said after a State Trooper graduation ceremony in Dimondale. “...The recent IT (information technology) issues are something we’re still investigating, but we always need to be careful about that with any kind of IT projects in this environment.”

Democrats, including House Minority Leader Sam Singh, D-East Lansing, have criticized Snyder for not finding a new company after learning about Fast Enterprises’ problematic software.

“This company has proven to be totally incompetent,” Michigan AFL-CIO President Ron Bieber said in a Tuesday statement.

“After screwing over tens of thousands of innocent Michigan workers, they don’t deserve to get one more red cent from Michigan taxpayers,” he continued. “It is simply outrageous that Republicans would give this company a brand new $75 million contract to overhaul the Secretary of State’s computer system when their software had a 93 percent failure rate on unemployment cases. Gov. Snyder and Ruth Johnson need to stop giving handouts to their corporate buddies and start protecting Michigan’s hard-working taxpayers.”

Fast Enterprises spokesman James Harrison said last month that few companies “can do what we do.”

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Twitter: @MikeGerstein