After alleged ‘bait and switch,’ Nevada DMV cancels $78 million IT contract

After falling victim to what the state’s lieutenant governor called a “bait and switch,” Nevada’s Department of Motor Vehicles has canceled a $78 million contract with its contractor headquartered in Mumbai, India.

The DMV announced on Jan. 24 it has ended its contract with Tech Mahindra, the company chosen by the state to complete work on a major IT system modernization that the state calls its “SysMod” upgrade. In its announcement, the department cites “a number of varying concerns” with the vendor, likely referencing an auditor’s report released on Jan. 16 revealing several major breaches in contract by Tech Mahindra, including failure to supply documentation in understandable English and supplying fewer personnel to the project than originally promised.

“We will continue to dedicate ourselves to a modernization project. Without this upgrade, our ability to serve Nevadans will always be limited,” DMV Director Terri Albertson said in an official statement.

Though the department reports that it was working with a division of the company based in San Jose, California, problems — including problems with the language barrier — persisted. Having closed its contract on the project to update its 20-year-old system built on old technologies like PowerBuilder and COBOL, the department is now in the midst of a 60-day grace period in which it will choose the next step forward, a DMV spokesperson told StateScoop.

A new vendor has not yet been selected, she said, but a “large portion” of what the state spent on its initial contract went toward hardware and software that could potentially be reused.

Of the total contract value, the DMV reports it has spent nearly $27.2 million so far, which includes about $17 million for hardware, software and maintenance fees paid to the vendor, and about $10 million spent on “state expenses” such as “contractors, equipment, operations and facilities.”

“We’re looking forward and we’re dedicated to moving forward on the modernization project,” the spokesperson said.

The contract with Tech Mahindra was funded through a $114 million allocation approved by the legislature in 2015, which accompanied the creation of a $1 technology fee added to all DMV transactions. Tech Mahindra, a multinational corporation that posted $4.6 billion in revenue in 2017, did not respond to a request to comment on this story.

The state auditor’s report, which was requested by the DMV, shows that problems begin to arise with the vendor several months after the five-year contract was initiated in April 2016.

The report shows that the company originally claimed it would supply an “A-Team” of 25 staff members experienced in dealing with “the public sector, other state DMVs, Oracle database, IT security, and infrastructure,” but as of April 2017, only six people had been put on the project and of those six members, “three did not start until after April 2017, a fourth was removed after two months, a fifth was removed and returned to the project several times, and a sixth assumed multiple responsibilities.”

Auditors said the company was failing to meet basic requirements outlined in the state’s procurement documents such as providing documentation in understandable English.

“DMV had to edit project documentation and meeting minutes provided by the contractor for grammar and spelling because they were not written in a clear manner and were not useable,” the report states.

To compound matters, the auditor’s office found that DMV did not follow protocol after the vendor was found not to be meeting contract requirements, which further delayed the project.

In addition to not meeting an “imperative” requirement that the DMV amend the project with a “master project plan,” the auditor says the DMV also did not use a submission and review process for the work supplied by the vendor, nor did it use the state’s official “resolution procedure,” and opted instead to use an informal email exchange.

Officials told StateScoop the project was not managed by the state’s Enterprise IT Services division, and was managed solely by outside master service agreement contractors hired through the DMV’s internal IT department.

The department dropped the vendor following the recommendation of Lt. Gov. Mark Hutchison, who said he believed it was a “bait and switch” by the vendor, according to a report by the Nevada Independent.

“It’s much better to get out sooner than later,” Hutchison said.

This story was updated on Jan. 30, 2018 to clarify who was managing the contract.