SCC Statement In Response To 8News Investigation - ABC 8NEWS - WRIC | Richmond, Virginia News & Weather

SCC Statement In Response To 8News Investigation

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"As with any complicated IT project, there were many decisions that had to be made throughout the project to keep it on course. The SCC made every decision in good faith, in accord with its understanding of applicable procurement policies, and with the goal of producing a successful outcome. In government, there is nothing more wasteful than a procurement that spends public money on a project that fails to work or suffers long delays. The clear fact is that the SCC's decisions led to a very successful project outcome and today hundreds of thousands of Virginia businesses are benefiting from the convenience of internet filing of documents required by law.

Why Did the SCC Use a "Sole Source" Contracting Process at One Point in the Project?

Several of your questions relate to this one issue, so we'll address it comprehensively.

It is important to understand how this project began. Given the challenges posed by the project, the SCC determined that the safest and the most cost-effective course was to select from the list of vendors already approved for the Advanced Information Technology Resources contract that had been executed by the Virginia Information Technologies Agency (VITA). There was no legal requirement that a second competitive process be followed at the time if a vendor was already on the VITA-approved list. This contract had been competitively negotiated and awarded by VITA and rates had been established. Throughout this project, the vendor the SCC selected has been compensated at the rates established under the VITA contract framework.

From the beginning, this project posed an especially high risk of failure. There was no "off the shelf" software that could have been purchased. An entirely new software program had to be custom-written that would have to run on top of a 20-year old "legacy" program that was not designed for such functions. Consequently, the SCC chose the vendor, CGI, from the approved VITA list because of CGI's proven track record of successfully completing challenging and risky IT projects for other agencies in state government. The SCC made a judgment call that it was safer to choose a vendor it believed was most likely to deliver a successful product -- and pay the rates already negotiated by VITA -- than to follow a different process. One can question that decision in hindsight, but the decision led to a successful and cost-effective outcome that serves the public.

It is also important to note that CGI, the vendor selected, has in the past and currently performs many other IT projects for state government. It is approved to perform similar work under a state-approved master IT contract. So the SCC did not choose a vendor unknown to, or lacking the confidence of, the rest of state government. Rather, CGI is a vendor that has a positive record of performance for other state government agencies, including VITA and the Department of General Services (DGS).

Later, after the SCC eFile project was well underway, VITA announced that the IT advanced services master contract would expire in late August 2009. The SCC's project was on schedule and making progress to deliver its first eFile functionality to the public by the end of 2009, as the General Assembly had been promised.

At that critical juncture, stopping this project midstream and initiating an entirely new competitive bidding process would have risked, at best, a lengthy period of delay as a bidding process took place. If a new vendor was chosen, it would be unfamiliar with the project work to date and would have to try to get up to speed. At worst, changing vendors in the middle of a complicated project could have resulted in the entire project failing, thus wasting every dollar spent up to that point and delaying for years making this needed service available to the public. The SCC did not think running such a risk of delay or failure was acceptable or a "best business practice."

It was in that context that the SCC made the decision that the safest and most prudent course to complete the project successfully was to issue a sole source contract to the vendor already working on the project, in order to complete the remaining work on the eFile project successfully. Because of this decision, the first functionality was successfully delivered in December 2009 on time as planned and the remainder of the project was successfully completed by early 2012. Moreover, the sole source contract contained the same terms and conditions and the competitively negotiated rates as in the VITA Advanced Information Technology Resources contract.

Sole sourcing is allowed under appropriate circumstances by the Virginia Public Procurement Act and related guidelines. The SCC strongly believes that its use of a sole source procurement at that time, with the project already underway, to finish the remainder of the work was absolutely appropriate and represented the best business practice for obtaining a successful project to serve the public as soon as possible and not waste public money on an IT delay or failure.

Most importantly, this very challenging, high-risk project was successfully completed and is now serving the public. This success further supports the SCC's decisions that resulted in the timely delivery of a much needed and publicly demanded product under challenging circumstances.

Why Did the SCC Not Seek DGS Approval for Contract Amendments of More than 25%?

As a matter of longstanding practice going back for many years, the Department of General Services (DGS) has not issued, supervised or administered contracts for the SCC, a policy which the SCC logically understood to include also not approving modifications of SCC contracts. The longstanding practice has been that the SCC issues and administers its own contracts and does not ask DGS to "sign off" on contracts or contract amendments -- and all SCC contracts are reviewable by the APA. The SCC has no record of ever receiving contrary guidance from DGS, even though this has been the SCC's open and routine practice for many years. If DGS now takes the position that it should supervise SCC contracts and approve contract modifications, that represents a change in longstanding practice, certainly as the SCC has long understood it. This practice stems from the fact that under the Constitution of Virginia, the SCC is an independent department of government and is not part of the Executive Branch.

If the SCC's understanding of the appropriate relationship to DGS has been incorrect all these many years, it stands ready to correct it, but that would represent a change in past practice and should be recognized as such in all fairness.

Why Was there a 25% Cost Increase?

Two reasons primarily: The SCC worked with an advisory group of lawyers and businesspeople who were likely users of the efiling system to get their input. In response to their requests, the SCC asked for more related services, to make the system more "user friendly." The SCC also asked for more IT security features, given the ever increasing threats from hacking and malware, etc. When you ask for more services you expect to pay more. Second, the challenge of building a new IT system on top of old "legacy" architecture turned out to be even more difficult than anticipated, a common characteristic of IT projects as challenging as this.

Public Procurement Act

As a matter of its own practices and procedures, the SCC does work to adhere to the requirements of the Virginia Public Procurement Act and DGS guidelines, but there are many such guidelines and many are subject to different good-faith interpretations or justifiable exceptions. The SCC attempts to document the reasons for its actions carefully in all parts of a procurement in which questions could be raised. The records of any procurement are always available for review by auditors from the Auditor of Public Accounts (APA).

In fact, all procurement and financial matters involving SCC funds are subject to regular audits and review by the APA. These audits are all public documents. In 2012 an anonymous complaint was made to the state employee hotline, alleging possible improprieties in the CGI contract. The APA investigated with the SCC's full cooperation and said such allegations were "unfounded." The APA has been conducting its regular review over the past several months – again with the SCC's full cooperation -- and the APA recently authorized the SCC to reaffirm that no fraud or abuse was found in the CGI contract.

Are You Doing an RFP Now for the Same Service?

Absolutely not. The two procurements are very different. The eFile procurement that has been completed was a solution to a time-sensitive and pressing need, a new system built on top of an aging IT architecture.

The RFP is for a much broader bundle of services, including both hardware and software. It involves a comprehensive replacement of major parts of the SCC's "legacy" system, including an entirely new electronic document management system that the SCC has never had. There is a major hardware component, the replacement of the SCC's old mainframe computer with an entirely new server system. It also includes capability to meet recent legislation passed by the General Assembly to make the SCC's online functionality capable of interfacing with the Department of Business Assistance one-stop program. In short, the RFP is for a much broader package of services that includes efiling capability as just one of several components.

Why Did the SCC modify the sole source contract?

It is common in customized IT projects like this one, which are by their nature inherently risky and challenging, for the client and vendor to discover in the middle of the project new issues as well as the need for enhanced functionality. Such was the case with the eFile project. The needed modifications to the contract were related to security needs and infrastructure issues that were identified during the project. These issues had to be addressed to ensure data integrity and a secure and functional technology infrastructure. Additionally, as the result of recommendations from the business community who provided input to the SCC on their needs, more electronic filing and payment options for businesses not in the original scope of work were added.

Modification 8 to the contract extended the contract from March 23, 2012 to April 6, 2012. Due to numerous issues outside of the control of the project, including the loss of SCC in-house project resources, the hours associated with the 20 days of "post go live" support were used to finalize the project. CGI agreed to provide support at no cost to the SCC from the go live date of March 21, 2012 until April 6, 2012.

Summary

This was a challenging and risky project that required the SCC to make many decisions throughout the process. Every decision was made in good faith to adhere to our best understanding of applicable procurement policies, and with the goal of achieving a successful project that would provide the public with a vitally needed new service. The undeniable fact is that the SCC's decisions led to a very successful project outcome and today thousands of Virginia businesses are benefitting from the time-saving convenience of internet filing."

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