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WSI closes book on failed $17.1M software project

BISMARCK – North Dakota’s workers’ compensation agency has closed the book on a bungled software project that cost $17.1 million but produced few tangible results, and the state is still considering legal action against the company contracted to do the project.

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Workforce Safety and Insurance had hoped replacing its software system would save the agency $3.4 million annually and provide injured workers, employers and medical providers with 24/7 online access to account and claims information.

But the project, which began six years ago with a budget of $12.8 million, became fraught with delays and cost overruns, leading WSI to end the contract with software vendor Aon eSolutions a year ago and terminate the project before it was finished.

Clare Carlson, deputy director of WSI, presented the project’s closeout report on Tuesday to the Legislature’s interim Information Technology Committee. He said it produced “a few successes,” namely the scanning of 14,000 policy-related documents into electronic form and upgrading WSI’s document management system at a combined cost of about $791,000.

“I suppose an intangible is learning some lessons and being better on our requirements and that type of thing, but that’s hard to put a dollar number on,” he said.

Rep. Corey Mock, D-Grand Forks, asked how much of the software code developed for the project is usable for a future project. Carlson said the code is proprietary to Aon, so it can’t be used, but WSI has salvaged some features and requirements that could be presented to a potential future vendor for development.

Carlson said WSI continues to use its old claims system and is catching up on making subtle improvements that were deferred during the project. At the same time, "We are examining the possibility of going forward with another system that would do essentially the same thing,” he said.

The agency also continues to evaluate its legal options in regard to recouping losses from Aon, he said, telling committee members a decision should be made before their next meeting in three to four months. The Legislature appropriated $750,000 last session to cover the potential costs of legal action.

Aon spokesman Glenn Peake declined to comment when reached by email Tuesday. A company executive previously told The Forum of Fargo-Moorhead that multiple parties shared responsibility for the program delays, including Aon, WSI and other third-party vendors.

Carlson said WSI still has a backlog in paying medical bills, with its latest report showing an average turnaround time of 47 days, but he said that’s a “vast improvement” from the height of the backlog that resulted from the software project. The agency has hired about 35 temporary workers to help with the workload, he said.

Meanwhile, another state agency grappling with a software project plagued by delays reported Tuesday that it’s nearing completion.

The Department of Human Services received approval Tuesday from the state’s Emergency Commission to spend another $5.8 million in federal funds and $775,000 in state funds for Xerox Corp. to complete testing of the Medicaid Management Information System by an Oct. 1 federal deadline.

More than $56 million has been spent on the project so far, including nearly $50 million in federal funds and $4.7 million in state funds. That’s roughly double what DHS had hoped to spend when it began planning 10 years ago to replace its outdated system for processing bills from medical providers who serve Medicaid clients. The project’s total budget through October was $81.9 million.

Sheila Peterson, fiscal director of the state Office of Management and Budget, noted that both New Hampshire and Alaska have launched their Medicaid management systems developed by Xerox.

“So we feel that there is certainly light at the end of the tunnel for North Dakota,” she said.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.