Hawaii’s needy wait as benefits system overhaul runs late, busts budget

A project to speed state benefits to Hawaii’s poor for food, clothing and shelter while detecting fraud and errors has been mired in delays and cost overruns for seven years.

So far, the technology upgrade known as the Benefits Eligibility Solution has not helped anyone, a Civil Beat investigation found, even as the cost of the contract to develop it and maintain a related system has ballooned from $69 million to $124 million — and counting.

The Department of Human Services has long touted the new eligibility system as the answer to an antiquated system, one in place for four decades. It would automate tasks now done manually, allow the state’s many welfare programs to “talk” by sharing data and give Hawaiʻi residents an online self-service portal to apply for benefits.

Snags have bedeviled the project almost from the start – changes in the larger tech world, pandemic vacancies at DHS and the contractor, coding defects, stricter federal security requirements and expansions of the populations served by the project.

Delays mean the state must keep relying on the rickety old system.

Audits have found DHS workers failing to document eligibility for welfare or making mistakes in entering financial information from case files. The department in each instance pointed to the new platform as the solution, just around the corner.

In 2020, for instance, a financial auditor found that DHS wasn’t doing enough to flag welfare recipients delinquent on child support payments. DHS responded that the new eligibility platform would fix the problem by 2022.

That date passed with no new system in place. Then several more came and went. And an audit three years later found the same problem.

Now the expected completion date is October 2026.

Official Who Launched Project Now Heads State Contractor

Despite the setbacks, state officials are sanguine that they’re on the right track and that the latest target date will be hit.

“I definitely feel we have a viable product at this point,” DHS Deputy Director Joseph Campos told Civil Beat.

If so, the project will have come full circle – its success is now in the hands of a former DHS director who signed the contract in the first place.

Pankaj Bhanot, who ran DHS from 2016 to 2020, approved the contract for the eligibility system with the multinational IT company Unisys in 2018.

He is now the CEO of eWorld Enterprise Solutions, a subcontractor in the early days of the project that moved to the driver’s seat in September 2022 when the state decided Unisys was not getting the job done. Bhanot was appointed eWorld’s CEO that same month but DHS says it had been considering shifting most of the work to eWorld several months before.

eWorld has run into problems of its own. Testing that was supposed to lead to a statewide rollout last fall was plagued with mistakes, and the project had to be rebooted yet again.

The state has started to face fiscal consequences beyond the cost overruns for failing to get the job done.

Without the new eligibility system, the state’s error rate in the Supplemental Nutrition Assistance Program went over 20% for two years in a row, far above the 6% the U.S. Department of Agriculture considers acceptable.

It also failed to meet deadlines for processing SNAP applications in 25% of cases, compared to the federal benchmark of 5% – meaning many recipients had to wait inordinate times to get the help they needed buying food.

In June, the USDA fined the state $10.9 million for its high error rate.

“People should not lose access to food because States are unable to review their applications in a timely fashion,” then-USDA Secretary Thomas Vilsack wrote. “States must deliver benefits in the right amounts, to the right individuals, and in the required periods of time.”

Hawaiʻi could opt to use half that amount to improve its performance, and thereby be forgiven having to pay the other half. So DHS is asking the Legislature to plow the money back into the new eligibility system, whose earlier completion likely would have prevented the fine in the first place.

But even that’s not enough. DHS is asking for another $10 million in the state capital improvement budget for the eligibility system.

Only with that extra $15.4 million, DHS says, can the project get done. Only then can workers stop using manual forms during applicant interviews and have access to software that will automatically warn them when inputs don’t comply with regulations or federal policies, among many other features.

The alternative, the department says, is more fines from the feds.

As the state limps along with the old system, legislators get frequent calls from constituents, particularly about snafus with SNAP.

“People call in because their SNAP benefits haven’t been processed or haven’t been approved, and they’re worried about food for their kids,” said Rep. Lisa Marten, the Democratic chair of the House Human Services and Homelessness Committee whose district includes Waimānalo and a part of Kailua. “So it’s really important to have a better system.”

Rep. Diamond Garcia, a Republican representing ʻEwa and Kapolei who’s also on the committee, recalled the case of a grandmother told by DHS that she had been overpaid $13,000 in benefits. The grandmother was afraid that she would not be able to support her two grandchildren.

“She had to fight and fight them hard,” Garcia said. Line workers brushed her off, Garcia said. But when she appealed to higher levels, DHS admitted that there had been a mistake about the mistake and she owed nothing.

“It’s an archaic system and there’s bad communication,” Garcia said.

‘Transformation Of The Way The Department Does Business’

Planning for the new eligibility platform goes back to the early 2010s when it became obvious the department had to do something to replace its 40-year-old Hawaiʻi Automated Welfare Information system.

The new system is supposed to determine eligibility and manage cases for some of the most disadvantaged Hawaiʻi residents.

Among the programs it will support is Temporary Assistance for Needy Families, which provides cash benefits for food, clothing and shelter. Another is General Assistance, which does the same for those who are temporarily disabled and don’t qualify for Social Security.

Aid to the Aged, Blind and Disabled, meanwhile, is for those 65 and older who meet the definition of disabled or blind but in most cases don’t qualify for Social Security.

The new eligibility platform would handle the Hawaiʻi Home Energy Assistance Program, which helps households cover utility costs. And it would run SNAP, which helps more than 130,000 people buy food at any given time.

When former Gov. David Ige appointed Bhanot to run DHS in 2016, the need for the new system was top of mind.

Bhanot, after getting law degrees in India and the U.S., got his first job in Hawaiʻi working for a Kauaʻi social services agency. He went to work for DHS in 1999. Ige touted Bhanot’s experience in large IT and human services projects and cited the new eligibility system whose planning was already underway.

With a newly appointed deputy director, Bhanot would “implement the DHS integrated information system for the entire state, a move that will accelerate the transformation of the way the department does business,” Ige was quoted as saying in the press release.

Two years later, in 2018, Bhanot signed the contract with Unisys. The contract stated that “time is an essential factor.” The state would suffer material losses from any delays and could seek damages from the company.

Not long after the contract commenced, Unisys brought on eWorld as a subcontractor to handle much of the work, such as how applicants’ financial information would be processed. The company, based in Hawaiʻi, first worked for the state during the Y2K computer crisis just before the turn of the millennium.

Bhanot left the department in August 2020, about two years into the project, citing health and family issues. Ige replaced him with Cathy Betts, an attorney who had been executive director of the Hawaiʻi State Commission on the Status of Women before serving as Bhanot’s deputy.

By that time, the contract had already been amended three times to give Unisys almost $7 million more to make various changes. The largest was to modify the fundamental approach because of tech changes after the project was first envisioned in the early 2010s. The “go live” date had been pushed out to the second quarter of 2022.

The need for the project became clear in a 2020 financial audit of the department, which found that DHS was not properly documenting eligibility determinations for all TANF recipients.

The auditor looked at files for 60 participants and found that six lacked the right supporting documentation. A “fleeing felon,” for instance, apparently had been paid $763 in error.

The department responded that the new eligibility system, expected to be done two years later in 2022, “will automate most of these processes and alerts.”

The auditor also found that DHS wasn’t always flagging TANF recipients who had failed to make their child support payments. Again, the department responded that the fix was coming soon in the form of the new eligibility system.

But trouble was already brewing.

‘I Knew That Pankaj Would Not Let This Fail’

The project was running into more delays and cost overruns, according to reports by Public Consulting Group, hired when the contract was signed in 2018 to make sure it was staying on track – a process called independent verification and validation, or IV&V.

In 2022, in the midst of the pandemic, the IV&V’s monthly progress reports warned of the lack of a schedule and vacant positions at both DHS and Unisys. Unisys had no plan to address the delays. The company declined a Civil Beat request to discuss its role in the project.

The state demanded a corrective action plan in July 2022. When Unisys produced what the state saw as an inadequate response by the August deadline and failed to deliver a new timeline, DHS in September called a halt to the project for 60 days so that it could be reassigned to eWorld. Unisys would retain a small part of the contract having to do with Medicaid eligibility.

The state could have tried to recover money from Unisys. The contract said that if the contractor failed to meet the planned start date, it would be liable for the state’s costs in continuing with the old eligibility system, as well as any federal penalties.

But DHS decided not to.

“Had we pursued liquidated damages, they would have come after us and it would have been a real mess of a legal situation,” Campos told Civil Beat.

Campos said he had been working on a contingency plan in which eWorld would take over the contract since the previous December at the behest of then-DHS director Betts, who would leave the post in 2024. Campos said he began having discussions with Bhanu Vellanki, then the CEO of eWorld, about what would happen if Unisys failed to perform.

“We wanted to be sure that, should it not work, we would immediately be able to move to the next stage,” Campos said.

Campos said he was pleasantly surprised when eWorld announced on Sept. 16, 2022 — just as it was taking over the DHS contract — that Bhanot would be its new CEO.

“I already had confidence that eWorld was the right choice, and that’s why I pursued this line of discussion with them from December of 2021,” Campos said.

With Bhanot on board, “My confidence level just went through the roof, because I knew that Pankaj would not let this fail.”

Bhanot had been away from state service for almost exactly two years by then. In an interview, he said that the state ethics commission informed him that two years was the length of time the state was barred from doing business with him. A law says the state can’t enter into a contract with a business represented by a person who worked for the state and dealt with the contract’s subject matter in the previous two years.

Bhanot said eWorld approached him in August. At first, he said, he was not sure he was the right person for the job, but came to see that his experience in government processes would be valuable to the company. He said his former department knew nothing about the move until he reached out to Ige and Betts to inform them after he accepted the job in September.

This new contract with eWorld, signed in December 2022, included a change favorable to the company. Unisys had been paid based on reaching certain benchmarks – no performance, no pay. But eWorld would get monthly payments to cover its time and materials.

DHS said this was to give the company the money to work on a shorter timeline than Unisys had. And the project would not be bogged down while the state made sure a task had been completed to its specs.

Campos said part of eWorld’s payment will still be held back until the project is done – 5% of the $20 million the company was initially paid to take over the contract, or $1 million.

For eWorld, the contract reassignment turned out to be part of a trend: a dramatically increased revenue stream flowing from the state.

Since Bhanot took over, the company has done business not just with DHS, but with the departments of Transportation and Education and the Attorney General. In the two and a half years before he took over, eWorld won $27.8 million in state contracts. In the same period since, it’s received $71.3 million – 2.5 times as much.

Bhanot attributes this not to his own contacts in government but to the sudden pressure on state services during the pandemic. Understaffed and overwhelmed, agencies turned to eWorld, which had been successfully contracting with the state for two decades.

“To be honest with you, I’m not the rainmaker or the magic man,” he said.

And while he does have an expansive network of contacts from 21 years in state service, he said he does not reach out to former colleagues or try to influence them.

“It’s not worth it,” he said. “I cannot lose my credibility.”

One of eWorld’s other contracts is to run a help desk that does initial triage of applicants for SNAP and other benefits. The state hired eWorld during the pandemic to deal with a spike of applications by taking initial calls from those seeking help.

The company’s leadership has been politically active, too. Bhanot contributed $4,000 to Gov. Josh Green’s election campaign in 2022. Three other eWorld execs also gave $4,000 and one contributed $2,000.

Green appointed Bhanot to serve on the Hawaiʻi Salary Commission in October.

The Solution Always On The Horizon

The switch to eWorld turned out to be no panacea. Soon the company was having problems of its own.

In January 2023, almost five years into the project, the parties started talking about postponing some of the required elements until after the project went live. The independent progress reports by the IV&V consultant called a new draft schedule “aggressive.”

Four months later, eWorld reported delays in developing some software code and worked with DHS to prevent further setbacks.

Another DHS financial and compliance audit came out in June 2023, again underscoring the urgency of getting the new eligibility system in place.

The auditor looked at 60 files of people receiving SNAP benefits. It found six cases where the income and/or deduction amounts, entered manually by workers, did not match what was in the case files.

As a result, the auditor said, people in the SNAP program didn’t get the full amount they had coming to them.

Another finding focused on TANF participants who were not paying child support. Those payments should have been deducted from the benefits or the recipients should have been cut off altogether, according to federal regulations. It was the same problem cited in the audit three years earlier.

In this instance, DHS explained that because of changes it had made in how benefits were processed, workers no longer got alerts right away when a recipient failed to pay child support, delaying any response by as much as a year.

The department said it couldn’t fix the problem in the legacy computer system because it would soon be replaced by the new eligibility solution. In the meantime, it came up with a workaround by putting the child support alerts into a shared folder that workers could check when working on a recipient’s case.

In both cases, DHS cited the arrival of the new benefit system as the fix. It would be up and running in October 2024, DHS said.

But that was not looking good.

Going From Yellow To Red

A month after the audit came out, the monthly progress report cited issues that seemed to indicate that the project was “veering off track.”

“Continuing the same path could put the overall project success at risk,” it said.

The project had already been delayed at least six times since eWorld took over. The following month saw an eight-week delay in the pilot and statewide implementation.

Then things started to snowball.

In January 2024, the monthly progress report moved its assessment of the project’s management in a color-coded chart from yellow to red, and eWorld started developing a plan to address the root causes of the problems.

Delays started to be counted in months, not weeks, and eWorld added experienced staff to address quality issues such as code defects.

A contract amendment in April gave eWorld an additional $19.5 million in state funds. It cited changes in technology after the project began, the length of time it had taken and security measures required by federal entities such as the Internal Revenue Service.

In September, the pilot and statewide go-live dates were postponed again because of high error rates in testing. In October, instead of going live, the monthly progress report found that the project team was at risk of low morale and burnout.

Finally, on Nov. 15, the user-acceptance testing was halted altogether in light of almost 300 unresolved defects. It made no sense to continue adding functionality to a system with so many bugs.

In February, DHS approved a new schedule with the target statewide implementation now set for Oct. 19, 2026. eWorld submitted an improvement plan.

But the monthly progress report by the IV&V consultant noted that an initial review of the revised schedule had found inaccurate estimates, raising concerns “on the overall stability of the schedule.” It also lacked detail, “which may obscure delays in tasks.”

The report flagged delays in fixing security vulnerabilities and said eWorld was struggling to show which contract provisions had been met and which still hadn’t.

The independent consultant continued to rate project management red – high risk.

In an interview, DHS officials said the U.S. Department of Agriculture, which oversees the SNAP program run by the state, recommended that the state pause testing to give it time to understand the causes. The rapid pace may have contributed to the defects, the USDA said.

Other policy changes led to the need for expanded functionality, DHS says. Federal law called for SNAP to be expanded to include residents of the Pacific nations who have treaties, called the Compacts of Free Association, with the United States and who were living in Hawaiʻi.

And Gov. Green removed household net income limits for SNAP per a recommendation from the University of Hawaiʻi Economic Research Organization.

Together, these moves expanded the population that could qualify for SNAP, requiring the writing of new code.

Bhanot said he accepts responsibility for the coding errors made by eWorld, and that the company has focused on improving quality. But he said his former department also bears part of the blame because it did not document all the requirements it expected from the new system.

Circumstances and demands on the system changed. Technology envisioned in the initial planning became obsolete. Covid hit just as the project pivoted to a different fundamental approach.

“You can attribute fault all over the place,,” Bhanot said. But in the end, “it’s going to last, and hopefully it’s going to be a very efficient and functional system.”

Marten, the state representative, is also optimistic. It’s important for as many functions as possible to be automated, she said, because the department, with a vacancy rate of 25%, constantly struggles to attract and retain workers for the pay it offers.

Rep. Garcia is more skeptical. “I guarantee they’re going to come back to the Legislature and say ‘Costs are up’ and it’s time to ask for more money from us,” he said.

Garcia called the project “a complete failure.”

“When there’s a massive mistake like this, people need to be fired,” he said.

When eWorld took over the project in 2018, it got $20 million, consisting of the remaining contract balance and an additional $8.2 million. DHS has since paid the company an additional $27.2 million, not counting the $15.8 million now being considered by the Legislature.

On top of that, DHS is asking the Legislature for $2 million a year for “maintenance and operation” of the project – items such as cloud storage subscriptions.

Despite the challenges, DHS is confident that the project will get done.

“The former vendor was never anywhere close to where we are now,” Campos said, avoiding using the Unisys name. “I’m actually quite pleased with the progress.”

And if it doesn’t work out by 2026?

“If eWorld was ever in the same position,” he said, “they would be held to the same standards.”

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.