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States Eyeing Restrictions on Technology Outsourcing

In response to the Cover Oregon health exchange fiasco, the Beaver State has placed tighter restrictions on outsourcing IT projects. But the effort could signal the start of a national trend.

by / May 6, 2014

Outsourcing complex technology projects to the private sector has become increasingly common for state government agencies. But after a slew of high-profile delays and failures over the last several years, some state lawmakers are introducing policies to get a better handle on large IT investments.

Oregon Gov. John Kitzhaber recently signed House Bill 4122 into law, which improves the state’s oversight of IT contracts awarded to vendors. Under the legislation, any agency technology project totaling more than $5 million or initiatives that meet specific standards set by the state CIO must be independently reviewed by a qualified contractor.

In an interview with Government Technology, Rep. Mitch Greenlick, D-Portland, one of the bill’s primary sponsors, said that Cover Oregon – the state’s beleaguered online health insurance exchange that was spearheaded by Oracle – was the trigger point for the legislation. But he indicated that the state has had other IT project issues over the years that highlighted the need for more technology oversight.

Greenlick explained that HB 4122 was also a reaction to the hiring of Alex Pettit as state CIO. The legislation enables Pettit to have his finger on the pulse of what’s going on with technology projects and better coordinate them statewide. According to Greenlick, in addition to serving as state CIO, Pettit is now also acting CIO of Cover Oregon.

HB 4122 prohibits large technology initiatives that hit that $5 million threshold from being broken apart by state agencies to avoid the project receiving an independent review. The measure was amended a few times during the legislative process, but Greenlick said it wasn’t difficult to get passed. He felt “pretty sure” HB 4122 would get to Gov. Kitzhaber’s desk, but many of his fellow legislators wanted to craft pieces of it to be a part of the process.

“This was not a challenging bill in terms of getting a 31-16 [vote],” Greenlick added. “But it was pretty complicated with a lot of people with many ideas. There’s also a lot of pissed off people about Cover Oregon.”

A Trendsetter?

Oregon isn’t the only state taking a closer look at IT outsourcing practices. The California State Assembly passed House Resolution 29 earlier this year stating that it opposes irresponsible outsourcing of public services.

Carried by Rep. Jimmy Gomez, D-Los Angeles, HR 29 was sponsored by the American Federation of State, County and Municipal Employees and aimed at curbing most public-sector outsourcing. Although the resolution is non-binding, it and the Oregon law may influence other IT state outsourcing policies in the years to come.

Harold Tuck, former CIO of San Diego County, told TechWire last month that outsourcing needs safeguards, but those stipulations could be worked into contracts. He doesn’t see IT outsourcing ending, noting that the high cost of application development and other specialties aren’t practical for many local government agencies.

TechWire and Government Technology are owned and published by e.Republic, Inc.

But from a state government perspective, measures aimed at curtailing or keeping better tabs on outsourcing seem to be increasing. In the Public Interest, a group focused on responsible contracting, revealed that in addition to Oregon, two other states – Maryland and Nebraska – have enacted laws that strengthen outsourcing protections for government agencies in 2014.

“Oregon is the only state where we've identified legislation that specifically pertains to IT,” said Richard Allen Smith, communications director of In the Public Interest. “However, we've identified outsourcing protection legislation [in] 18 states. Many of those states have seen IT contract failure on a massive scale that, along with other poorly executed contracts, led to the introduction of legislation.”

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Brian Heaton

Brian Heaton was a writer for Government Technology magazine from 2011 to mid-2015.

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