Business & Economy

State wins $8.37 million back from HP for failed DMV system

The state reached a settlement with Hewlett-Packard over a failed computer project at the Department of Motor Vehicles on Wednesday, winning an $8.37 million refund from the company for its failure to deliver on a new driver data system.

Under the settlement, the state will return to HP physical and virtual rights to all software and documents created by the company, but will retain some of HP’s other materials, such as a retail sales system, along with other equipment and printers.

The DMV’s VT DRIVES project was started in 2006 and cost the state $18 million in total. Shumlin administration officials said the contract governing the project was flawed, and mutual termination was the best way to resolve ongoing issues.

DMV Commissioner Robert Ide hailed the settlement as a victory.

Department of Motor Vehicles Commissioner Robert Ide. VTD/Josh Larkin
Department of Motor Vehicles Commissioner Robert Ide. Photo by Josh Larkin

“A refund of $8.37 million looks like a pretty big number in my world,” Ide said. The refund represents almost all of the $9 million paid to HP. The other $9 million in project costs includes about $5 million for staff time and expenses, and about $4 million for usable products HP provided.

Both Ide and Jeb Spaulding, the secretary of the Agency of Administration, said negotiations went smoothly. Spaulding said Gov. Peter Shumlin’s personal involvement in the talks since the winter of 2011 made a key difference.

“I think it made a difference that he [Shumlin] was personally adamant about getting some refund, and wanted ultimately, all of our money back,” said Spaulding. “I guess it pays to have a governor who is hands-on.”

HP press spokesman Bill Ritz declined to comment on the settlement.

Spaulding said HP deserves credit for giving the state refund.

“They probably took the bigger picture, that they are a good corporate citizen, and that there’s plenty of other business here in Vermont, both public and private,” said Spaulding, of HP. “By doing ‘the right thing’ in the long run, they’d be better off.”

An HP subsidiary has held the contract for the state’s Medicaid billing system since 1992.

Ide said $5 million on staff expenses was not wasted, and the DMV received some value for another $2.7 million in expenditures.

“When you’re knee-deep on a project of this size, to get a refund like that is about as good as you can hope for,” said Ide. “This has been imperfect for a long time.”

Ide said four different firms handled the same contract over the years, as each became acquired by a larger technology company. That, and staff turnover at both the vendor and DMV, compounded a major technical disagreement. HP refused to redesign a system code that the DMV viewed as fatally flawed.

The DMV will revert to its legacy computer system, which has been in service for 35 years. Ide said improvements had been made to that system in the meantime, and that he isn’t overly worried about replacing it immediately.

Ide says he’ll wait to see if another state successfully installs a data driver system first.

“Certainly there are risks in those old legacy systems, but the bigger risk would be to start undertaking a project that you weren’t prepared for, and didn’t have the capacity to execute on,” Spaulding said.

Spaulding couldn’t say whether the administration was involved in helping the state’s Judiciary with similar ongoing negotiations over its suspended $4.3 million IT contract for an online case management system, though he confirmed that Shumlin wasn’t personally involved in those negotiations. It isn’t clear whether a refund will be the best solution in that case, Spaulding said.

View a copy of the settlement here, and the original independent review of the project done by the state’s IT department, done in 2005.

The news about the HP settlement was released the day after VTDigger published a 4,400 word analysis of the state’s $90 million in IT spending from 2005 to 2012 on general government projects, including VTDRIVES, the failed case management system for the judiciary, a timesheet accounting system for state employees, an $18 million online gaming system, a tax program, among others.

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  • Keith Vance

    Wow, what a total and complete failure. The opportunity costs associated with this project and wasted state employee time is pretty substantial. It’s a good sign though that the governor and DMV had the strength to just walk away.

    HP used to be a great company and an innovator. The company has never been the same since Carly Fiorina became the CEO and was essentially fired. Now Fiorina has a high-level position in the Republican party and brags about her business expertise, as if it’s an asset on her resume.

  • Ron Pulcer

    “The DMV’s VT DRIVES project was started in 2006 and cost the state $18 million in total.”

    It was announced on May 13, 2008 that Electronic Data Systems would be acquired by Hewlett Packard.

    http://www.hp.com/hpinfo/newsroom/press/2008/080513a.html

    So it’s quite possible that this project was initially an EDS project, since EDS had other accounts / contracts in Vermont (healthcare access systems). It would be interesting to know if this systems development failure was partly due to the process of one large company ingesting another large company.

    How many of the original EDS personnel on the DMV’s project stuck around after 2008-09?

    EDS has been through a lot since 1984, when Ross Perot’s company was acquired by General Motors, and then later spun off in the late 1990s. EDS unfortunately was hurt by the WorldCom scandal. I know, because I had owned some EDS stock as a former employee in the early 1990s. EDS had nothing to do with WorldCom scandal, but because EDS partnered with WorldCom on some projects and each were reciprocal customers of the other’s projects, Wall Street’s perception of EDS really hurt their stock price badly. That made EDS a prime target by Hewlett Packard few years later. I know because I was “forced” to sell my EDS stock by HP (no HP stock was given in exchange for EDS stock).

    My guess is that there was yet more “churn” within the EDS workforce when HP acquired it. There had been layoffs within EDS in the past decade, and I would guess there were some early retirements involved in the HP acquisition. Employee turnover / transfers can often impact the success or failure of an IT project, if the handoffs / transitions are not managed properly.

    At least Vermont got some of the money back from this project. Glad to see a little bit of contract enforcement going on within state government.

  • Michael Keane

    I have two things to say, based on the fortuitous reimbursement of $8.3MM to the state for a failed HP project:
    1) My own experience looking at “runaway projects” and research shows that some 30% of all major IT projects fail, regardless of industry, location, or purpose. That’s 3 out of 10, most of which are projects in the millions of dollars, and the risk of such failures should be unsettling to companies and governments.
    That’s not to say that the other 7 out of 10 succeed fully, for many of the 7 experience significant cost overruns, schedule delays, and failure to deliver on key features and functionality. Often, by the time the system is delivered, the need it is to fulfill has been addressed some other way or an initiative has changed, and the ROI of the system delivered is questionable. So the return of funds to the state of Vermont is candid recognition of a failure beyond the control of the state but verifiable and provable. Nice job on Vermont’s part.

    2. The second point, concerning HP and Carly Fiorina, is a bit more complicated. I don’t think one can blame Fiorina for much of what has happened at HP. I don’t like Fiorina’s brand of politics, but I believe that she, like subsequent leaders at HP, ran into trouble because Dave Packard, Bill Hewlett, and Lew Platt left a power structure vacuum and instilled bad habits in the company’s board, such as the board’s spying on board members and employees, and the board’s failure at picking CEOs (witness the turnover in the CEO office, Fiorina, Hurd, and Apotheker in relatively quick succession, and now Meg Whitman (with a couple of “interim CEOs” in there too). My view is that HP is in the ER because of systemic problems and unfocused attempts to build a path for itself for the next 20-30 years.

    Just mes deux centimes.

  • Pete Saile

    What in the world is the State thinking?????……..if HP can’t get the job done, how about a company right here in Chittenden County that CAN certainly effectively do the job??????. Was that contract put out for competetive bid and HP came in as the lowest? How about using the expert ( and tremendously LOCAL ) services of a company with a 100 year history of PROVIDING jobs, salaries, and expertise right here under our noses????? I simply don’t get it. Has the State heard of ” Buying Local “??????? Wake up!!!!!

  • Pete Saile

    IBM certainly could have handled a project of this magnitude. Was HP selected because they came in as the lowest bidder in a competetive bidding process???? How about using resources that have been ” LOCAL ” for 100 years????

  • Pete Saile

    Why did the State use HP instead of our homegrown, local , 100 year old company? Was it a competitive bid and awarded to the lowest bidder? Please, shop local, as they say. What a true fiasco…..at least the $$$$$ will be reimbursed for the pain & suffering.!!!!!

  • Lance Hagen

    There are 49 other States in the US that have DMVs. Why in the world didn’t Vermont just select the best of these DMV systems and implement it; versus trying to ‘reinvent the wheel’ with some custom system.