State scraps controversial contract with tech company

Gov. Kim Reynolds announced Friday the state has terminated a controversial contract with the software company Workday.

The move comes 27 months after Reynolds was forced to return $21 million in federal pandemic aid to the state’s coronavirus relief fund after the federal government said the money had been improperly spent on a contract with Workday for personnel software.

The Treasury Department’s inspector general had raised questions about Reynolds’ decision to use federal CARES Act money to pay for Workday’s five-year, $20 million contract, noting the contract was signed in 2019, before the pandemic began.

The company had been hired by the state of Iowa to provide soft Theware for an upgrade of the state’s information technology infrastructure. There were two components to Workday’s contract: one for personnel management, and one for financial-management services.

The first component was successfully launched in 2021, but the financial-management component never got off the ground, and the state has now hired a different vendor to perform that work.

Reynolds, a Republican, had asked the GOP-controlled Legislature to approve the Workday project during its 2020 session. Lawmakers turned her down, saying there wasn’t sufficient gambling revenue in the state’s infrastructure fund due to the pandemic.

At the time, some lawmakers also expressed concern that the state had bypassed the competitive bidding process before contacting with Workday, which hired the governor’s former chief of staff as one of its lobbyists. The Legislature approve $21 million for the contract in 2021, after Reynolds returned the federal money.

The governor’s press release announcing the termination of Workday’s contract did not state how much money the state has spent on the aborted financial-management element of Workday’s contract. Reynolds’ spokesperson, Kollin Crompton, did not respond to a request for comment.

In announcing the termination of the contract, the governor’s office said Friday that after delaying the launch of the financial-management project last year for additional review, the Iowa Department of Management and the Iowa Office of the Chief Information Officer determined the platform developed by Workday could not meet the state’s needs.

“This is not the outcome we wanted, but I’m confident in our team’s recommendation and greatly appreciate their diligence throughout this process,” Reynolds said in a written statement. “Despite the time, effort, and money invested, this decision is the responsible and prudent course of action to ensure the state has the right tools to support our operations, save money over the long term, and improve service to Iowans.”

In 2019, the state selected Workday to update its systems for “human capital management” – the state’s term for personnel management — and for financial management with modernized, cloud-based systems. After the personnel platform was launched in September 2021, the state began working to deploy Workday’s financial-management system.

Last summer, as that project was nearing the testing phase, unspecified “issues” were identified, and the state decided to temporarily suspend implementation and conduct a thorough review of those issues and their potential solutions.

“It was extremely important to take the time to better understand whether the issues could be resolved without impacting data integrity or compromising the goals of the initiative,” said Matt Behrens, chief information officer for the state. “Ultimately, the decision was made to reassess the platform.”

The state then began to evaluate options to upgrade its existing financial systems with another vendor, CGI.

In 2019, when the state selected Workday, CGI did not yet have a cloud-based system to offer. Since then, Reynolds’ office said, multiple state and local governments have successfully implemented the CGI platform.

The state has since negotiated a contract with CGI to upgrade its financial management platform to the new cloud-based solution.

While the state has terminated the Workday agreement pertaining to the financial management system, the state intends to continue using Workday’s personnel system. Reynolds’ office said that system has already created a “number of operational efficiencies.”