Washington State Suspends $292 Million Workers’ Comp IT Upgrade

After ten years and an expenditure of over $30 million, the Washington State Department of Labor & Industries (L&I) has suspended its efforts to modernize the aging workers’ compensation system. The upgrade, projected at $292 million, has been halted due to “continued lack of progress and ability to execute,” as stated in a memo from WaTech, the state’s information technology oversight office.

The decision was announced on April 12, 2024, and it reflects ongoing issues within L&I, which has been attempting to enhance its outdated technology used for managing medical claims since 2015. Despite years of planning, the project has not advanced beyond preliminary stages. It was estimated that it would take another nine years and require at least $240 million to complete.

Critics, including employees and external experts, attribute the stagnation to indecisive management within L&I, a decline in staff morale, and high turnover rates. Since 2019, the agency has seen at least six project directors leave, complicating continuity and decision-making. Furthermore, a longstanding conflict between L&I and WaTech has exacerbated the situation, as both entities struggled to align on project goals.

State Representative Travis Couture, the ranking minority member on the budget-writing appropriations committee, expressed his frustration, stating, “We’ve been in this boondoggle for years… If that was my project at Lockheed Martin, I would have been fired 10 times by now.”

In response to the suspension, Governor Bob Ferguson asserted that his office would collaborate closely with WaTech and L&I to redirect the project. When asked about his confidence in L&I Director Joel Sacks and WaTech Director William Kehoe, Ferguson maintained that he supports all cabinet members in their efforts.

Despite the project’s suspension, L&I officials assured that the agency will continue processing over 100,000 new injury claims and managing approximately $2.6 billion in annual payments under the existing workers’ compensation program. L&I spokesperson Andrew Garber stated that the current technology, while functional, is becoming increasingly inefficient and risky as some components are over 40 years old.

The halt on the upgrade is the latest setback in Washington’s broader initiative to modernize numerous IT systems across various state operations. Presently, there are 56 ongoing IT projects spanning 24 agencies, with a cumulative estimated cost of $2.3 billion. Assessments by WaTech indicate that eight of these projects are at significant risk, demanding immediate attention.

Among these troubled projects is the upgrade of the state’s financial system at the Office of Financial Management. Initially projected to launch in 2022 for $144 million, the cost is now expected to escalate to $449 million, with a potential launch delayed until 2027.

The workers’ compensation modernization project has faced multiple challenges since its inception. In 2020, it was temporarily paused due to whistleblower complaints regarding lack of progress and rising consultant fees. Despite several resets and revisions, the project has consistently struggled to meet expectations, with ongoing reports highlighting serious issues in leadership and execution.

Employees have voiced concerns that WaTech’s attempts to micromanage the upgrade have hindered progress. A quality assurance report indicated that L&I leadership often focused more on demonstrating progress to meet legislative demands than on achieving tangible upgrade goals.

By last summer, concerns about mismanagement were vocalized in emails to the governor’s office, with anonymous L&I employees accusing both L&I and WaTech of financial mismanagement. The quality assurance contractor recommended another project reset to realign objectives and funding strategies.

Earlier this spring, the situation had appeared to stabilize; L&I hired a new project director, revised its strategy, and aimed to launch the initial components of the upgrade by mid-2027. However, the recent suspension suggests that underlying issues remain unresolved.

WaTech described the decision to suspend the project as a necessary step after observing insufficient measurable progress. Spokesperson Andrew Garber noted that despite ongoing collaboration with L&I, it became evident that the project could not demonstrate advancement towards planned milestones.

Looking ahead, the governor’s office has not clarified whether the decision to suspend the project originated within WaTech or was directed by Ferguson. In a recent statement, Ferguson emphasized the need for effective program operation and pledged to address any identified problems.

As discussions about moving forward intensify, WaTech has urged L&I’s leadership to convene with WaTech, the Office of Financial Management, and the governor’s office. L&I has committed to participating in these discussions, with Ferguson expressing a strong desire to get the project back on track. Yet, WaTech remains cautious, acknowledging the project’s troubled history and the challenges ahead in establishing criteria for its potential restart.