Why Governments Should Insource their IT

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It turns out that, after millions of dollars poured down the drain, the unemployment websites created by companies like DeLoitte and IBM do not work.

It’s a hell of a racket. You get paid to create the website, and then you get paid to fix your own piss-poor work:

In 2010, California hired the consulting firm Deloitte to overhaul the state website people use to apply for unemployment benefits. Things didn’t go well: Later that year, technical errors led to the halting of payments for some 300,000 people, according to the Los Angeles Times. And, the paper reported that, at $110 million, the final cost of the system was almost double the initial estimate.

A decade later, the taxed, aging system built by Deloitte in California is struggling again, this time under the strain of new applicants put out of work by the pandemic.

But Deloitte still won a fresh contract last month to again help out with California’s unemployment system. The Sacramento Bee reported that the company has received another $16 million to provide unemployment call center services and help deliver benefits. Deloitte still receives nearly $6 million per year under the contract to maintain the system, the Bee reported.

The move is part of a pattern: States continue to spend millions of dollars hiring Deloitte, IBM, and other contractors to build and fix unemployment websites, even amid growing concerns about the quality of their work. And the crush of unemployment applications flooding in around the country since the pandemic hit have only made the situation worse.

This problem is as follows:

  • Basic capabilities are outsourced to consultants.
  • The knowledge to supervise these projects beyond the most superficial walks out the door as the personnel are hired by these consultants.
  • The consultants do their jobs poorly, but the government cannot spot this until it is too late.
  • The consultants are then paid to fix the problem because the government lacks the ability to fix the system.
  • The consultants are paid to maintain the system because the government lacks the ability to fix the system.
  • Rinse, lather, repeat.

Somewhere along the line, there are likely some campaign donations, or similar skulduggery, but that’s a feature, not a bug.

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