LITTLE ROCK — The lack of a project manager and accountability for vendors contributed to delays and increased costs in the development of a new computerized enrollment and eligibility system for the Medicaid and food stamp programs, a state official told lawmakers Wednesday.

LITTLE ROCK — The lack of a project manager and accountability for vendors contributed to delays and increased costs in the development of a new computerized enrollment and eligibility system for the Medicaid and food stamp programs, a state official told lawmakers Wednesday.


State Department of Human Services Director John Selig discussed the project’s problems in testimony before the legislative Joint Performance Review Committee, which also heard from several vendors attached to the project.


DHS originally estimated the cost of the project at $100 million, but Selig said Wednesday the agency now estimates the cost at between $180 million and $220 million, with the state expected to pay about $25 million and the federal government paying the rest. That estimate still falls below the federal government’s original estimate of $250 million, he said.


The new system is needed to comply with new eligibility rules under the federal Affordable Care Act. Selig said DHS originally received four bids for the project, but after the agency chose one of the bids, it was unable to agree on terms with the bidder, Noridian Systems, and was prohibited by state rules from awarding the contract to one of the bidders that was not selected.


Selig said it was then early 2013, and with enrollment in health insurance under the Affordable Care Act set to begin Oct. 1 of that year, there was not enough time to issue a new request for proposals, so DHS used an existing "staff augmentation contract" to pay various vendors for additional work. The contract requires the agency to pay vendors for their time and materials, not for finished products.


"Because we did this staff augmentation approach, where you’re paying for time and materials, it’s hard to hold the vendors responsible for a particular product at a particular time," Selig said.


Selig also said he accepts responsibility for deciding not to name a project manager.


"I was trying to save some money and manage it ourselves," he said.


Things went well at first, Selig said. But flaws in federal data systems, oft-changing federal rules and a higher-than-expected number of applications received at the state level because of problems with the federal HealthCare.gov website posed challenges for DHS, Selig said.


"When we started to hit all these problems, we did not have the capacity in the department to really handle this project well, and that has delayed our time frames and been an issue for us," he said.


Last year, DHS fired the lead vendor on the project, EngagePoint, because of dissatisfaction with its performance. The company, which had been paid $32 million, was replaced with another vendor, eSystems.


DHS also is withholding $1.2 million from another vendor, IBM Curam, because of issues with software it has provided for the project.


Representatives of IBM Curam testified that the company has spent over $1 million trying to fix those issues at no extra cost to the state.


Selig said DHS has taken a number of corrective actions, including beginning to phase out time-and-materials contracts and creating a project management office so there will be "a single point of authority" over the project.


"In hindsight, we probably should have done that in the first case," he said.


Gov. Asa Hutchinson has said all information technology contracts that could cost more than $100,000 will be reviewed by his office before bids are accepted and said new contracts of any kind will be reviewed by his office if they could cost over $1 million.


DHS also has hired another vendor, Gartner Group, to review the entire project and see "if we’re headed in the right direction," Selig said.


The federal government requires that the eligibility of people enrolled in the food stamp and Medicaid programs, including people enrolled in the Medicaid expansion program known as the private option, be checked every year. Selig said Wednesday that although the verification process was behind schedule for several months, it is going more smoothly now.


"Just last night we did 5,600 re-determinations of people on the private option," he said.


Sen. Missy Irvin, R-Mountain View, expressed "frustration" with the decision to use time-and-materials contracts for the project.


"I would say that was probably a poor decision, based on what has happened here, what has unfolded, because it’s tied our hands to actually go after and hold these folks accountable," she said.