Kansas terminates ‘no-bid’ contracts valued at $112 million

Kansas Gov. Laura Kelly terminated two IT contracts worth $112 million on Thursday that she said violated the state’s fair procurement rules.

The contracts, with a subsidiary of the Montreal-based CGI Technologies, were issued in 2017 and 2018 by the administration of then-Gov. Sam Brownback. The 10-year contracts were to upgrade the state’s tax and debt-collection systems, but project delays last year combined with controversial layoffs tied to the agreements brought heightened attention to the state’s failure to use its usual competitive procurement process.

The so-called “no-bid” projects, for which the state has so far paid CGI $28 million, were terminated in a letter sent to the firm Thursday morning, with Kelly writing they were “not in the best interests of our state.”

“The process for initiating these contracts was contrary to the guidelines for state procurement,” said Kelly, a Democrat elected last November. “My administration will continue to review contracts from the previous administration, limit the use of ‘no-bid’ contracts, and increase transparency.”

The only further costs for the state to be paid to CGI will be what’s needed to transition off the project in the coming 90 days, according to the Wichita Eagle.

Revenue Secretary Mark Burghart explained in a press release that the state was able to cancel the contracts and will “take a different approach” to upgrading its financial systems because “CGI was not able to adequately perform its obligations under the contracts.”

CGI missed a key deadline last October on a new system for processing tax returns, forcing the state to revert to an old system during this year’s tax season. The contracts also stirred controversy last year when the state’s revenue department announced with no advance warning to lawmakers that it would lay off 56 employees because the work would be outsourced to CGI. (Laid-off workers were each permitted a chance to interview with CGI’s Topeka branch.)

“So much for transparency and good governance,” Democratic state Rep. Joy Koesten tweeted following the announcement.

Upon receiving notice its contracts had been canceled, CGI released a statement saying Kansas’ decision “stands in stark contrast to the unqualified success of CGI’s IT projects implemented on behalf of Kansas taxpayers over the past 24 years and five administrations.”

CGI has scuffled with other state governments. In 2014, North Carolina terminated an $85 million contract for a new tax system after the claiming the contractor was not meeting the terms of the agreement initially drafted in 2008, though many details of the project’s failure remain hidden as both parties signed an agreement not to disparage one another.