TALLAHASSEE — An investigation by Florida’s chief inspector general blamed state transportation officials, private contractors and Conduent State & Local Solutions for the disastrous takeover of the SunPass toll system last year.
Released Sunday, the report into one of the most expensive and calamitous state contracts in recent memory detailed how Conduent’s system broke down when it started processing state tolls last year, and how state officials failed to heed warning signs.
But the report also glossed over perhaps the most pressing question surrounding the SunPass debacle: why the contract was given to Conduent in the first place.
Requested by former Gov. Rick Scott more than a year ago, the report portrays the Department of Transportation as an agency that provided little oversight or controls to the private contractors tasked with carrying out the lucrative contract.
Officials at Florida’s Turnpike Enterprise, an arm of the Department of Transportation, relied on private contractors for virtually every aspect of the project, from its procurement, to development, to its oversight and eventual implementation, the report states.
State officials kowtowed to the vendor as well. They originally signed a contract with Conduent worth $287 million, but the department repeatedly amended the contract in the company’s favor, bringing the total to $358 million. That’s a 25 percent jump in price.
And as the contract became more expensive and Conduent repeatedly failed to meet its deadlines, the state agency that was supposed to oversee contracts raised critical red flags — then abruptly dropped its oversight. A private contractor hired to oversee the SunPass takeover warned that Conduent’s testing was inadequate, but the warnings apparently went unheeded.
Dogged by employee turnover at key positions, Conduent still hasn’t conducted some internal audits required under its contract with the state.
Among the recommendations by the inspector general was to appoint a project director — a department employee, not a contractor — who could provide the “robust project oversight” the project lacked.
Despite the problems, the report does not recommend taking action against any employee or private company involved in the project.
The incompetence and lack of oversight was most evident in June 2018, when Conduent took over processing Florida’s tolls. The company’s software was immediately overwhelmed. More than 2,200 customers saw their bank accounts overdrawn, causing the department to refund nearly $200,000 to customers. Nearly 600 other customers had duplicate charges to their accounts.
As of July this year, the department was still waiting to collect on $184 million in lost tolls. The turnpike’s new executive director, Nicola Liquori, told state lawmakers in September that it expected to never collect $50 million of that because of Conduent’s problems.
The headaches and public outcry prompted the Department of Transportation new secretary, Kevin Thibault, to announce this summer that it would not renew the second half of Conduent’s 14-year contract. The company will still manage the system through 2022.
Thibault responded to the report last week, writing to the inspector general that the department has assessed nearly $11 million in damages from Conduent and that customer call wait times have dropped from more than 45 minutes to less than 40 seconds.
A Conduent senior director, David Schnell, wrote to the inspector general that its audits were delayed because of the technical problems, and that the department had acknowledged those delays. He said the problems have mostly been fixed.
But why the contract was given to the New Jersey-based company in the first place is given little attention in the inspector general’s report.
In 2012, state officials sought to overhaul of the way the Florida processes tolls, centralizing the call centers and software among the state’s four tolling agencies: the state Turnpike Enterprise and the Orlando, Tampa and Miami expressway authorities. It was originally cast as a cost-saving measure.
A handful of companies, including Conduent, then known as Xerox, bid on the contract worth $600 million over two seven-year terms. Conduent hired a lobbyist close to Gov. Rick Scott to advocate on the company’s behalf.
From the start, it appeared the fix was in to ensure Conduent got the job, the company’s competitors would later say.
Records reviewed by the Tampa Bay Times showed the state originally set realistic minimum requirements for bidders: process 1 billion toll transactions per year and manage 4.5 million accounts, about the same number of transactions and accounts the state was processing in 2013.
But then, at the recommendation of HNTB, a private contractor hired to help with the bidding process, the state lowered the minimum requirements — twice. The final requirements required companies to handle just 500 million transactions and 2.25 million accounts.
That shift is not mentioned in the inspector general’s 36-page report, but companies competing with Conduent for the contract would later suspect the changes were lowered to accommodate Conduent. The competing companies touted their own software capable of processing billions of transactions per year. Conduent’s bid touted its systems in two other states that handled tolls “in excess of 500 million” per year.
The inspector general report also doesn’t mention that the Department of Transportation deviated from its procurement policies to award Conduent with the job.
A team reviewing the bids gave a different company, Accenture, the highest marks. Another company, Cubic, was cheaper than Conduent by $47 million. Under transportation department rules, the department was required to negotiate with all three companies to determine, as required by state law, which one offered Floridians the “best value.”
Instead, the then-head of the Turnpike Enterprise, Diane Gutierrez-Scaccetti, and the leaders of the Orlando and Tampa expressway authorities chose to negotiate only with Conduent.
Accenture and Cubic quickly protested, and the then-secretary of the Department of Transportation, Ananth Prasad, would end up making the highly irregular decision to pay Cubic $3.6 million to drop its bid.
When Conduent got to work, it quickly became clear that the company was having trouble. The state would amend its contract with Conduent 20 times and push back its timeline to take over the state’s tolls five times, delaying the original rollout for 16 months.
The problems were flagged by the state’s Agency for State Technology, which by law is required to oversee all information technology contracts worth $10 million or more.
According to the inspector general report, the agency noted serious problems with with the project, including “deficiencies” with “project schedule management” and “cost management,” according to the inspector general report. The agency also noted the project’s primary manager wasn’t a certified project management professional.
However, the agency’s oversight was short-lived. In February 2017, ten months after it started monitoring the project, the agency abruptly decided that Conduent’s SunPass project was not, in fact, an IT project, and the agency therefore didn’t have to keep monitoring it.
The inspector general report does not say why the agency had such a change of heart, or whether the agency’s decision was correct.
The report shows that Conduent officials stubbornly chose to use old toll transaction volumes for its testing, rather than use updated figures that reflected the growing number of motorists on Florida’s toll roads.
The use of old numbers for testing was flagged by employees for Atkins, a company hired to oversee Conduent’s work.
For example, Conduent and Turnpike authorities expected the system to go down for six days when the company took over, requiring the company to process a backlog of 82 million toll transactions during that period. The eventual result was 182 million transactions, however. The difference? The lower figure was from 2013 data, and neither party chose to use more recent data.
Atkins noted that Conduent was required under its contract to build a system capable of handling twice the expected number of tolls.
”As evidenced by your own analysis, this clearly has not been done,” Atkins employees wrote to Conduent, according to the inspector general report.
Conduent employees testily disagreed, saying that if Department of Transportation officials wanted the company to use current toll figures in its testing, those officials would say so.
“It is not incumbent upon the vendor to stumble upon or uncover, or infer that critical requirements have changed on their own,” someone with Conduent employees wrote, according to the report. “Further, it should be noted, there is no contractual obligation to provide bandwidth at the levels currently required to properly handle transaction volume in excess of those stated in the (bid).”
How long those tests would run was subject to debate as well. Florida Turnpike officials wanted Conduent to run its tests for extended periods, to rigorously test the system. Conduent, however, “wanted shorter load durations," the report states.
When Conduent eventually took over processing the state’s tolls, on June 11, 2018, the situation quickly became a disaster. Staff confirmed there was “an immediate sign” the system was “overwhelmed,” the inspector general report states.
On its first day, Conduent’s system had trouble processing payments and was duplicating some of them. SunPass’ website went down and SunPass’ locations at airport terminals stopped working. Calls to Conduent’s customer service center spiked, and the company did not have enough staff in the call center to handle the load.