Independent Monitor Warns $11 Million State IT Project Is In Jeopardy And Could Fail
The state has spent nearly $3.5 million on its second attempt to develop a financial management system that meets the requirements of Federal Highways Administration.
The latest effort to develop a new financial management system for handling federal highway funds appears to be in deep trouble, with an outside consultant warning the project may never be completed.
The state has already paid a contractor nearly $3.5 million in the latest attempt to develop and launch the Financial Management System Project for the state Department of Transportation, but the new report from outside consultant Ohanasoft describes an array of problems.
The DOT project is running about two years behind schedule, and Ohanasoft said in its most recent assessment that contractor InvenioLSI has still failed to provide the state with an acceptable project plan. The consultant describes that plan as a “foundational” document for the project.
warns “the persistent issues are casting an increasingly grim shadow over the project’s status, strongly suggesting that achieving successful completion may be unattainable.”
But InvenioLSI and state Department of Transportation Director Ed Sniffen disagree with that assessment. They acknowledge there have been problems, but predict the new system will go live sometime this year or next.
The DOT project is known at “H4,” and involves moving DOT’s antiquated existing financial management system off the state mainframe computer and modernizing the system. The new system must meet the requirements of the Federal Highway Administration, which provides much of the funding for major Hawaii roadways.
The state for $10.95 million in 2021 to develop the DOT system. LSI later to become , which continues to work on the project.
LSI was involved in a separate controversy last year when the state scrapped a separate computer project known as the Enterprise Financial System after spending $7.8 million on that effort. LSI was the vendor for that project.
Then-Chief Information Officer Douglas Murdock said that project was abandoned after it became clear LSI could not meet the cost, schedule or performance parameters for the job. He also said LSI wanted to renegotiate the terms of the deal.
Officials with InvenioLSI blame the state for that failure. They contend the state never committed the necessary state staff to make the Enterprise Financial System project work, and say the state attempted to expand the scope of the original project long after the contract was awarded.
Sniffen acknowledged setbacks in the current H4 project, including the loss last fall of about half of the group that LSI originally had working in Hawaii. That team had intimate knowledge of both the new system and DOT’s existing operations, he said.
But almost all of those people who left the project have now been replaced, and “the team is learning our operations now, and learning our accounting to ensure they can redevelop the system,” he said.
InvenioLSI has built out the new system to the point that DOT can get access to it to learn it, test it and begin to de-bug it, Sniffen said. That notable progress was “not really captured” in the most recent Ohanasoft report, he said.
The state hired Ohanasoft in 2018 under a $1.34 million contract to serve as an independent expert monitor of DOT’s complex H4 contract. That job involves tracking, evaluating and reporting on progress on the complex project to protect the state’s interests, and flagging concerns if necessary.
Numerous Concerns
In its latest report filed with the Legislature about two weeks ago, Ohanasoft raised all kinds of red flags.
According to the report, InvenioLSI submitted a proposed project plan, but the project team found that it included unrealistic task timelines, incorrect sequencing of tasks to be performed, “an unrealistic Go-Live date and the inaccurately reported percentages of deliverable completed.”
The report described the projects plan as “a foundational document for a project management and scheduling, and it is one of the most critical deliverables.”
The report also cited “a considerable backlog of pending deliverables, inadequate knowledge transfer and the departure of key consultants last year.”
“It has been consistently observed that DOTH project team members state they find it difficult to understand and follow meetings due to their lack of H4 knowledge,” according to the report. “This has been an ongoing issue of this Project.”
The report also warned that “this gap in training not only reduces productivity but also raises the risk of mistakes and delays in understanding and evaluating project deliverables.”
The state contract with LSI includes training components, but Sniffen said DOT has also hired an additional consultant for about $200,000 to help bridge the communication gaps between InvenioLSI and DOT staff.
The Ohanasoft report acknowledged some members of the project team who left last year have been replaced, but said the new consultants “need more time to familiarize themselves with DOTH requirements and processes.”
Nader Tirandazi, CEO of InvenioLSI, said he expects the H4 project to go live late this year, while Sniffen said he expects the system to go live in fall of 2025.
If Sniffen is correct, that would be about three years after the go-live date envisioned when the contract was awarded in early 2021, but Sniffen said he does not want to rush the project. Rushing it “could potentially have us build out a system that doesn’t work, and that’s not what we’re trying to get to,” he said.
Tirandazi said the DOT project has been “making good headway” during the past six months, and the new system is now 95% built out. That will allow for DOT staff to get hands-on experience with the new system, which is quite effective for training purposes, he said.
“Anytime you take an organization that has been doing a certain process or a certain thing a certain way for 20 or 30 years, it’s pretty hard for them to understand the new lingo, to understand the new processes with these off-the-shelf products,” Tirandazi said. That has taken longer than anticipated, he said.
He suggested the critical report on the project is a sign that Ohanasoft “understands the old system, but has a hard time understanding the new system.”
There is a methodology to implementing the system, and Tirandazi said he does not believe Ohanasoft “clearly understands what that methodology is.”
If the H4 project does fail, it would be the second time in recent years DOT became over efforts to develop a financial management system that meets the requirements of the Federal Highways Administration.
The state paid millions of dollars in the last attempt to develop such a system before former Gov. David Ige finally pulled the plug in 2015 because the new system never worked.
The state Attorney General’s Office then sued the insurers of the previous contractor after that contractor went bankrupt, and the state eventually recovered $31.7 million.
When asked why consultant Ohanasoft is now sounding alarms about the H4 project, Sniffen said that he believes it is their job to call out potential issues to ensure the state can manage those issues.
“We are making sure that the contractor fulfills all the requirements in the contract as we move forward,” Sniffen said.
