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Company Pushes Controversial Contractor-Monitoring Legislation

Legislation being lobbied for by tech company TransparentBusiness would mandate contractor monitoring to ensure work/time verification. Critics contend it would cause unnecessary security risks to government data.

A tech company has sought to change the law in statehouses across the country, using lobbyists to promote a controversial sea swell of legislation that would create a larger market for their services.

TransparentBusiness has hired lobbyists to push nearly identical bills in more than two dozen states that would mandate the digital monitoring of government contractors engaged in high-end IT work.

The company proffers that such work verification services would help state governments save millions of dollars by cutting down on fraud and waste, while critics contend that it would create unnecessary risks for state data.  

One of the company’s primary products is software that captures regular screenshots and keystrokes on the systems it is installed on, making it a natural fit to supply the services required under the newly proposed laws.

Related legislation has been introduced in at least 30 different states, according to Alex Konanykhin, the company's CEO. All of the legislation was modeled on language suggested by the company itself, and has been advocated for by the company’s lobbyists, he added.  

As example, a new bill in Arkansas would require a contractor to procure and use software to “verify the legitimacy of the hours billed for work performed on a computer under a contract with a state agency or a political subdivision” for work in excess of $100,000, according to the text. Bills introduced in Hawaii, California, Texas and other states include similar language.

Konanykhin, a former Russian banker with ambitions to create the next tech company that will, in his own words, “change the world,” has stated that his ambition is to use the “transparent management” paradigm to develop a "solution which can save tens of billions of dollars [for] government agencies and corporations." 

In an email, Konanykhin said that he felt the services his company were offering would help state governments save money while avoiding waste and fraud.

"In absence of transparent verification of billable hours, some contractors rob their government clients blind," Konanykhin said in an email, referencing alleged incidents in New York, Pennsylvania and Maryland

Konanykhin also provided Government Technology with a manual he said had been used to "evangelize" to legislators about the benefits of transparency. 

The manual lists alleged examples in which state governments were cheated by contractors, while also describing the company’s endeavor as “part of [an] overall trend to transparency in business, like body cameras for police or fleet control for transportation companies.” 

Konanykhin's vision has been hotly disputed by some who allege his model would cause unnecessary risk with nebulous payoff. The wave of bills recently caused the National Association of State Chief Information Officers to take the largely unprecedented step of issuing a statement condemning the legislation

“While NASCIO certainly supports contractor productivity, cost efficiency and successful project outcomes, legislation of this nature could introduce unnecessary risks to citizen data by essentially transferring ownership of private citizen data to a third party,” the statement reads.

NASCIO Executive Director Doug Robinson said that it is largely unheard of for the organization to come out against legislation the way that it has.

“In my tenure of 15 years as executive director, we have not issued any oppositional statements to state legislation — it’s not something we generally weigh in to,” he said.

Reiterating points made in NASCIO’s recent statement, Robinson said the biggest concerns were the “potential impact on privacy and security." As state contractors are utilized more and more by states to do crucial work, the notion of transferring large amounts of their data to a third party seems an inherent security risk, he said. 

“While being exceedingly broad in what we would consider to be some pretty key areas, it’s also extremely prescriptive in terms of what has to be done,” he said of the language in the legislation. 

Indeed, of the over two dozen pieces of legislation that have been introduced, all of them refer to screenshot capture on a three-minute basis, and all but six refer to mouse and keystroke movement tracking. The majority also set the threshold for contracts at projects over $100,000.   

Robinson added that the information NASCIO had received from its state leaders implied that the legislation going around had been “crafted to benefit only one company,” TransparentBusiness. Meanwhile, he and other NASCIO officials felt they knew almost nothing about the technology that the company would use should it deliver these services. “We have no direct knowledge of this software, its functionality or the efficacy of any of it, and that’s a key challenge,” he said.

Proponents of the legislation have reiterated the company’s stance that its services would save states money while also increasing efficiency.

Michael McKeon, a partner with New York-based lobbying firm Mercury LLC, which represents TransparentBusiness, said he felt the criticism from NASCIO is “likely to remain a major embarrassment” for the organization “for decades to come."

“It’s based on a false premise, contradicts accepted practices and was issued without any semblance of due diligence,” McKeon said in an email.

McKeon further argued that the legislation could help save New York millions of dollars.

He also disputed that the New York legislation would transfer data to a third party, as the bill states that data collected "shall be considered accounting records belonging to the contractor. The contractor must store, or contract with another to store, the data collected by the software for a period of seven years and provide the access to the contracting agency or state auditors on their request.”

“If NASCIO had a genuine concern, they’d communicate it to the bill sponsors and proponents, requesting an explanation and/or modifications," McKeon added, claiming that NASCIO officials had made no such attempt. 

If there is a true need for the kind of services TransparentBusiness is offering, legislatures have largely failed to capitalize on it. Of the over two dozen bills that have been introduced, a fair number have died in committee and are no longer under consideration. None have been passed into law.

In Hawaii, for example, legislation was pushed that would have required contractors to procure work verification software for projects upward of $100,000. A hearing for the bill was held, but a bevy of interest groups — many representing contractors — came forward to object to the legislation.

One such interest group was the American Council of Engineering Companies of Hawaii, which represents many of the contractors that do work for the state. A representative for ACECH offered that the “legislation is being pushed by a single firm solely motivated by the profit it could receive by getting states to require this software of all their professional and technical service providers and is not in the best interest of government agencies in Hawaii."

Konanykhin has called such allegations "utter nonsense."

"There are competing solutions on the market and there are thousands of software companies in America capable of producing new compliance solutions," Konanykhin said, while also adding he hoped TransparentBusiness would lead the way in developing such solutions.

Konanykhin also compared his company's legislative efforts to those of other tech giants Uber and Airbnb.

"It's a typical situation," he argued. "Uber and Airbnb, for example, pushed through major changes in most jurisdictions and their valuations are now measured in tens of billions of dollars; however the legislators permitted those new practices because they benefited the public, not as a favor to Uber or Airbnb," he said.

Lucas Ropek is a former staff writer for Government Technology.