Despite ongoing problems, Kansas not penalizing company in charge of DMV upgrade

TOPEKA, Kan. - In the wake of a computer upgrade that has created a headache for DMV customers across Kansas, 41 Action News uncovered documents surrounding the multi-million dollar contract.

State records show that despite a lengthy delay in the implementation of the new system, the State has decided against imposing pricey penalties against 3M, the company overseeing the transition.

Why did the state choose not penalize 3M?

The State agreed to partner with 3M for its expensive overhaul of the DMV system, signing a contract in July, 2009.

The contract detailed a number of "performance guarantees," which would allow the State to assess penalties if 3M did not meet standards or established deadlines.

"Liquidated damages shall only be due from Contractor if the failure was solely and directly caused by acts or omissions of the contractor and not caused directly or indirectly in whole or in part by acts or omissions of the state," the contract stated.

For instance, the failure to "go live" with Phase 1 of the upgrade by the scheduled date could result in a daily penalty of $75,000 with a cap of $1 million.

Documents obtained through an open-records request indicate the original "go live" date of the project was slated for July 6, 2011. But the actual rollout of the new system did not happen until earlier this month—nearly a year behind schedule.

A memo obtained by 41 Action News shows the State and 3M "mutually agreed" to extend the implementation date twice (December 5, 2011 and May 1, 2012).

"When the administration took office, the project was scheduled to go live within six months," said Department of Revenue spokeswoman Jeannine Koranda in an emailed response. "We evaluated the system and did not feel comfortable with the functionality at that point."

41 Action News asked why the penalties spelled out in the contract were not assessed in this case.

"Right now, we are focusing on working with 3M and the counties to develop the best system possible for Kansas," Koranda said.

When pressed for more details or explanation, she wrote, "That is really all we can say."

So how much does the DMV upgrade actually cost?

Since issues first surfaced in early May, the DMV Modernization project has been referenced as a $40 million project, both by media and state officials.

However, the contract reviewed by 41 Action News displayed a far different price tag.

"The total price for this Contract shall not exceed $25,093,483," the contract stated, while also detailing a "fixed-price schedule" of payments.

Why is there a $15 million difference in the two amounts?

"The $40 million figure includes not just the 3M contract but the total project cost," Koranda said. "That includes staff time and equipment purchases such as computers, printers, scanners and network upgrades at county treasurers' offices for all 105 counties."

Deal with 3M almost never happened

A review of 3M's proposals for the project show the Minnesota-based company almost did not land the project.
In two instances, the State requested 3M to send a revised offer for the bid. After the first revision, an evaluation team identified 26 different "deficiencies" with 3M's proposal.

After the second revision, former Department of Revenue Secretary Joan Wagnon wrote to 3M officals about the "disappointing" results.

"In addition to cost constraint, additional concerns have surfaced based on evaluation of 3M's latest response," Wagnon wrote on May 15, 2009. "Be advised that the Kansas Department of Revenue has decided to indefinitely suspend contract negotiations until further notice."

41 Action News requested any documents that would show if any other companies were also in the running for the project, and how much their proposals cost.

However, a records custodian for the Department of Revenue said 3M had submitted the only bid.

Was transition smooth in other states?

The computer system upgrade in Kansas was essentially modeled after a similar transition overseen by 3M in Iowa.

Mark Lowe, an official with the Iowa Department of Transportation, was surprised to hear of the issues in Kansas. Lowe said Iowa rolled out the implementation of the $42 million project in two phases, beginning in 2005.

"We did not have any disruption in service," said Lowe. "We had to go back and make a few minor adjustments, but there were no catastrophic issues. We are very happy with the system."

Officials in Kansas maintain that once the issues are resolved, the new system will offer a large improvement in efficiency.

Johnson County's treasurer, Tom Franzen, hopes it happens soon. On Thursday, he briefed Johnson County commissioners on the status of the upgrade, telling them there is still "plenty of work" ahead to get back to pre-upgrade production levels.

"We don't have an answer for that and that's the challenge I have is I can't tell our community when this thing is going to be better," said Franzen.

Ryan Kath can be reached at You can follow him on Twitter

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