Scandal-plagued DMV computer revamp to continue despite funding loss

The Nevada DMV will continue its scandal-plagued computer modernization program despite the state Supreme Court striking down a key funding source.

The court unanimously ruled Thursday in favor of Republican lawmakers who argued that legislation extending a $1 DMV transaction fee and a business tax were unconstitutional because lawmakers didn’t pass the bills by a two-thirds majority. The state Constitution, under a 1994 voter-approved amendment, requires taxes to be approved by such a supermajority, but Democrats argued that those votes just extended an existing fee and tax.

The surcharge on DMV transactions went to modernize the agency’s 20-year-old computer system — a contract that has been a failure and the focus of corruption allegations for years.

“The project, now known as DMV Transformation, will proceed as planned,” wrote DMV spokesman Kevin Malone in an email exchange. “The 2021 Nevada Legislature has approved funding for it that made a contingency plan for the potential loss of the Technology Fee. The Department will be seeking highway fund appropriations to cover the loss of this revenue.”

The Legislature appropriated $59.6 million over the 2022 and 2023 fiscal years to complete the project. Most of it will come from the highway fund, but losing the fee creates a nearly $14 million gap that lawmakers will need to determine how to fill.

In 2017, state auditors found the project had been mismanaged, and the contractor, Tech Mahindra, was fired the following year.

The state used an “unproven” technology with no history of successful implementation, and had “nonexistent” project management controls at the DMV, according to a report from a contractor, Gartner, that the state hired to determine what went wrong.

State officials selected a low-performing vendor that produced low-quality deliverables, provided employees that lacked core skills and had low team morale and poor communication, the Gartner study concluded.

The Review-Journal broke exclusive stories in 2019 showing the retired head of the DMV, Troy Dillard, went to work for Tech Mahindra right as the company was awarded the $75 million contract. The paper also successfully unsealed a lawsuit filed by a company executive, Brian Coffey, that charged that DMV employees sabotaged the modernization when their demands for millions in bribes were not met.

As much as $25 million was spent on equipment and technology that wasn’t usable.

No one was charged in case, and the DMV employees who worked on the contract remain on the state payroll, Malone said. Tech Mahindra and the state agreed to go their separate ways and the tech company was not required to pay back any of the money in a settlement designed to avoid litigation.

A Tech Mahindra spokesman and Tech Mahindra’s court filings in the Coffey case previously said that no corruption was involved in the contract.

The DMV is still collecting the technology fee, which brings in about $7 million a year, despite the ruling because computer programmers need time to remove the charge from the agency’s computer system, according to a DMV news release.

The agency is also determining how it will refund the fees that were unconstitutionally collected.