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New User Fees Fund Pennsylvania's No-Bid Website Contract

Users will pay fees for using Pennsylvania's official websites to pay the private company that manages the sites.

By Melissa Daniels | PA Independent

HARRISBURG — Pennsylvania teamed up with a private company to revamp and manage its official websites, promising the latest and greatest advances over its own old technology — and it won’t cost the state a dime.

Instead, residents and businesses using online government services will cover the bill.

Last fall, Pennsylvania entered a sole source contract with NIC USA, an “eGovernment” services firm. It will operate Pennsylvania’s entire online system, from page design to online transactions, and from customer support to hardware upgrades.

NIC, which calls itself “the people behind eGovernment,” creates and maintains online services for more than 3,500 governmental bodies, including 28 other states.

The state pays NIC nothing out of its own budget. Instead, the site work gets funded by adding “convenience fees” to certain online transactions residents or businesses might complete, like a license renewal.

This self-funded model spares the state from spending up front on expensive redesigns, system upgrades or app development. But the contract does not have a cap on what fees might be for users, meaning there’s no limit to how much could be assessed.

One of the first fees, on the Pennsylvania Department of Transportation website, is a $2 fee on a $5 charge of obtaining motor vehicle records online. Such records are often obtained by insurance companies researching policies.

At least one state lawmaker raised questions about the arrangement.

State Rep. Robert Matzie, D-Beaver, expressed his concerns about NIC in a letter to Attorney General Kathleen Kane and Auditor General Eugene DePasquale. He protested the fact it was a sole source contract, meaning there was no competitive bid process.

“It shouldn’t have been done without an RFP (request for proposals) to see what other companies could’ve provided,” Matzie said.

NIC provides all website design, development, services and maintenance, managed through a Harrisburg-based subsidiary called Pennsylvania Interactive, LLC. Because there is no other company that provides all these services under one umbrella, the state deemed a competitive bid process unnecessary, according to the contract summary.

But NIC’s own filings with the Securities and Exchange Commission seem to dispute that point, as they attest to “intense competition” in their industry.

The filing, from late February, says NIC faces competition from government-managed services, system integrators like CGI and Unisys and developers like Microsoft and Oracle.

Beyond the nature of the contract, Matzie is concerned the executive branch is overstepping its boundaries to set fees, especially without a maximum limit.

Matzie plans to sponsor a bill that would require any Internet fees to be approved by the General Assembly. He said lawmakers have not authorized the executive branch to place new fees on all web transactions, which has been done in the past for specific agencies.

“It’s still raising revenue from taxpayers,” he said, “whether it’s business-to-business or ends up being folks on the street.”

The NIC contract is good for five years, with a renewal option to extend through December 2022. NIC expects to earn up to $7.5 million in 2013 off of Pennsylvania, according to a investor call transcript.

Dan Egan, spokesman for the Office of Administration, said the NIC contract was precipitated by multiple issues with the current system. The state was faced with a need to upgrade its server by 2015.

Pennsylvania also pays more than $1 million annually to maintain software that will expire in 2017, when the state would have to find a new vendor.

And, the current portal is plagued with issues over search features and mobile viewing, Egan said. NIC provided a “very attractive” solution that does not involve turning to the tight state budget for funding, he said.

“No one company does everything that NIC does and can do in a way that isn’t going to cost us tens of millions of dollars,” Egan said.

Before the contract was signed, the state put the procurement on its website, and offered a 10-day comment period where no other vendors reached out to the state, Egan said. It was also approved by the Office of the Attorney General, like any other state contract.

The state researched NIC with an outside research firm and contacted other states who use its services.

“None of those states who’ve ever contracted with them have left,” Egan said. “It’s because they like the service and they like what they get from the company.”

Angela Skinner, director of communications for NIC, said NIC is “comfortable with the sole source procurement,” given the commonwealth’s research, legal justification and the public comment period.

More than 75 percent of the services that NIC has developed are business-to-government services. That includes transactions like filing reports, renewing licenses or requesting permits.

And a majority of the services, she said, are “free.” Any fees are set and approved by state officials.

Egan said the state expects to keep about two-thirds of transactions free, while a third may have some kind of “convenience charge.”

NIC fees typically range between $1 to 5 per transaction.

Right now, state agencies are still figuring out what transactions they might introduce to their websites, as NIC has thousands of existing applications to choose from. But the state hopes to “dramatically expand” the amount of services available online, Egan said.

“It’s how people expect to get things these days,” he said.

Egan compared the fee to what a consumer might pay for having express delivery to their home – the charge is there for the extra convenience.

“There will still be a choice,” he said. “If you still want to walk into a government office or lick a stamp or do what the old process was, it will remain available to you without the convenience charge. But if you want to get online, get it faster, get it more conveniently, that’s what it’s there for.”

Contact Melissa Daniels at melissa@paindependent.com

the truth April 08, 2013 at 05:06 PM
"And everyone wonders why I say gov't should be minimized - at all cost! Every time you hear that the gov't is going to get involved in anything - remember that the costs will always - ALWAYS - go up!" Im sure the Governors hand picked contractors unrestricted fees to access the Pa web site will be cheaper?.&%! Drink your koolaid and repeat after me "Its not a tax its a fee" bwhahahahahahahbwhahahahahahabwhahahahaha Hey mabee the new contractor is looking engineers. JKjr you should apply! but don't forget to tell them your willing to work for less money and benifits than those overpaid state workers. Let us know how it works out for you and your family.
James Kephart Jr. April 08, 2013 at 06:54 PM
You may have a point, but that does not make it okay to overpay other aholes. 2 wrongs make it even more wrong. Gov't is shiet - period. Take a look at the California gal that beefed up her salary to over 450K before she retired. Now she will get paid 80% for the rest of her life! If you think it is the job of government to directly supply "family sustaining jobs", maybe you ought to move to Venezuela. Let me know how that works out for you and your family. - then again, from your comments, you are probably one of the deadbeat government paid folks living the life of luxury off hard working taxpayers.
James Kephart Jr. April 09, 2013 at 02:54 PM
Truth, Misery loves company comes right out of the left wing playbook along with wanting your cake and wanting to eat it too! You probably think the answer is - like by grandmother use to say - "let's just give everyone a million dollars, then we will all be rich!" You are with the folks that think min wage should be $20 an hour because our productivity has gone up that much - yet the price to produce many of those goods needs to be down or - guess what? You won't sell those goods and your precious $20 per hour "living wage" will not exist and neither will the $13 wage that could have existed. Everyone does not deserve to have high speed internet, cable tv, a new car, fancy clothes, etc etc etc. You are a socialist - no problem - I just happen to disagree with that. And I do everything I can to keep good paying jobs in this country. Unfortunately, I have to deal with a lot of gov't BS in order to do that - along with higher wages and parts that actually cost more to buy in the US than if we were in Malaysia. Therefore, when some DEP official tells me that to capture and filter the water that runs onto our property from a CONTAMINATED GOVERNMENT PROPERTY (contaminated by the government) - water that today, is actually as clean or cleaner than the water coming out of your faucet before we filter it - most of the water runs around our property and goes directly into the creek with no filtration - I find it easier to just say: Take it to China.
the truth April 09, 2013 at 04:58 PM
"Everyone does not deserve to have high speed internet, cable tv, a new car, fancy clothes, etc etc etc." Agreed. However, I don't recall saying people should be overpaid for what they do. What I object to is the state contracting out quality jobs to corporations that pay workers less and themselves more . And the working people who support this race to the bottom. If defending livable wages for "American working families" past, present and future is socialism, then so be it. Honestly, what’s the alternative? welfare, people begging or dying in the street "I find it easier to just say: Take it to China " sounds like you have given up on America Good day And good bye
James Kephart Jr. April 09, 2013 at 07:59 PM
I have not given up yet...

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