Cost soars for Minn. driver registration, licensing upgrade

An ambitious effort to modernize Minnesota's driver's license and vehicle registration system has taken years and cost nearly $37 million, but the state has little to show for it so far.

The new Minnesota Licensing and Registration System (MNLARS) was supposed to have been put in place at a cost of $48 million. But late last year, state officials parted ways with Hewlett-Packard Co., the multibillion tech giant initially hired to design and build the new Web-based system. Before the partnership was terminated, the Department of Public Safety paid HP $16 million of the original $41 million contract.

Now MN.IT Services, the state's in-house information technology agency, has taken over the project and the price tag could be as much as $93 million. It is expected to be completed by 2018.

"This is very concerning," said Rep. Tim Kelly, the Red Wing Republican who chairs the Minnesota House Transportation Policy and Finance Committee. The committee got a briefing with agency officials last week, and exchanges with lawmakers bordered on testy.

The current 40-year-old mainframe Driver and Vehicle Services system touches the lives of millions of Minnesotans each year, including anyone who has a driver's license or state identification card, and those renewing their license tabs.

Lawmakers in the 2008 legislative session authorized a motor vehicle and driver's license technology surcharge of $1.75 through fiscal 2012 to pay for the fix. The fee, since reduced to $1, has raised about $75 million so far, according to Dawn Olson, MNLARS program manager.

Hewlett-Packard was hired by the state in the spring of 2012, and, at the time, HP had worked on similar projects in 22 other states. "To build MNLARS, we will combine our government expertise with proven technology to develop the comprehensive solution that will take the state of Minnesota into the future," said HP executive Marilyn Crouther, in a news release.

HP's mandate involved linking 7.7 million vehicle records with 6.5 million driver's licenses, correcting inaccurate data in the system, facilitating data sharing and simplifying data collection by law enforcement officials and others. The idea was to upgrade in four incremental launches.

But within two years, the relationship between state employees working on the project and HP staff appeared to have frayed, according to an audit released in April 2014.

The audit, completed by Minneapolis-based Macro Group, found a disconnect between the HP team and state employees working on the project, fueled by a lack of communication and "incompatible goals and visions." As a result, a "culture of distrust" festered between the two, with "an undeniable negative undercurrent in the project."

Another "theme" unearthed in the audit was that HP was "driving the project" rather than the state, "raising red flags that indicate the state does not have control over the project."

When asked what went wrong, Olson said "we started to experience slippages on go-live dates," meaning certain deadlines were missed. "This wasn't acceptable."

By the end of 2014, HP was let go after releasing the first of four upgrades that, in part, eliminates a paper-based permitting process. "This was a huge step for us, a major hurdle," Olson said. "It was a very amicable ending to our agreement."

William Ritz, a spokesman for HP Enterprise Services, said in a statement the firm is "proud of its work on MNLARS, but understands that client needs sometimes change over time. HP worked closely with [DVS] to ensure a seamless transition of its work to the state."

A decision was made to engage MN.IT instead, and Olson said the two have "a unified approach. We feel we're in a different position to move forward. This project is in a good place."

Sen. Scott Dibble, DFL-Minneapolis, agrees. "I think there's a solid team in place now. People don't realize this will take many years to complete."

But at a Transportation Committee meeting last week, it was clear that several lawmakers were quickly losing patience with the project's budding price tag and the amount of time that has passed since its inception.

"We spent $36 million and we don't have a working system yet?" said Rep. Mark Uglem, R-Champlin. MNLARS officials say an enormous amount of work went into preparing the groundwork for the system, and that's now in place.

"There's nothing like a MNLARS discussion to get everyone going on a Monday afternoon," quipped Rep. Frank Hornstein, DFL-Minneapolis.

Rep. Eric Lucero, R-Dayton, went so far to link the MNLARS project with the troubled rollout of the MNsure health exchange. But DPS officials say the projects are separate and have little in common.

Yet no one seems to dispute the need for an upgrade. "There is definitely bipartisan concern about it, there's a consensus that this is needed," Hornstein said.

Janet Moore • 612-673-7752