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Cybersecurity concerns lead Kentucky to rebid contract

Kentucky State Capitol Building
Posted at 5:27 PM, Jul 14, 2021

FRANKFORT, Ky. (AP) — Concerns about cybersecurity have led the state of Kentucky to extend its search for a company to modernize its pandemic-stressed unemployment insurance system, Gov. Andy Beshear’s administration said Wednesday.

The need for additional safeguards against hackers means the state will go through a rebidding process, said Jill Midkiff, a spokeswoman for the state Finance and Administration Cabinet.

In doing so, the state will request enhanced security measures to protect the personal and financial information of jobless claimants, she said.

The state is seeking a contract partner to overhaul its outdated technology for processing jobless claims. That search began about 16 months ago, and lawmakers were told last month that the state was in the “latter stages” of selecting a company to revamp the claims-processing system.

But the need to provide enhanced cybersecurity forced the state to cancel the prior solicitation and rebid the contract, Midkiff said Wednesday.

“The procurement was out for bid when Kentucky and most other states were targeted by one of the most sophisticated cyberattacks on our unemployment insurance system in history, which meant that significant additional elements needed to be added to ensure people’s bank accounts, and other information, could not be accessed,” Midkiff said in an email.

Midkiff said at least one bidder withdrew because of “the multi-million dollar cost increase” it claimed would be needed to meet the enhanced security.

“To ensure fairness and (to) find the most qualified bidder to build a secure, modern system,” she added, “rebidding is necessary.”

The state will issue its revised request for bids as soon as possible, Midkiff said. The new round of bidding “is not anticipated to cause a material delay” in launching the new system, she said. The Lexington Herald-Leader first reported the state’s rebidding decision.

In April, Kentucky temporarily shut down its unemployment system for a few days to bolster security protections. State officials said they suspected that individuals or criminal enterprises attempted to hack into the system’s customer data.

Problems with the antiquated system have become a recurring political headache for Beshear.

Like other states, Kentucky was overwhelmed by record waves of claims for jobless assistance caused by the coronavirus. Tens of thousands of Kentuckians found themselves in limbo for months as they waited for their jobless claims to be processed. The state has paid out more than $6 billion in unemployment benefits to Kentuckians since March 2020, Beshear’s administration said.

Last year, the administration hired an outside company to help work through Kentucky’s claims backlog. That outside work cost the state about $14.5 million.

For the past year, Republicans have criticized the Democratic governor for the unemployment system’s problems. Beshear has pointed to budget and staffing cuts that hobbled the system well before he took office just months before the COVID-19 pandemic hit.

Republican House Speaker David Osborne on Wednesday derided the Beshear administration’s “mishandling” of the unemployment insurance program as “a case study in government failure.”

Since the pandemic hit, the program “has been through two cabinets, three cabinet secretaries, multiple administrators, millions with an independent contractor, hundreds of millions in federal loans, and now a failed attempt at their main priority,” Osborne said in a statement.

Last month, then- state Labor Secretary Larry Robertstold a legislative panel that the state was in the “latter stages” of selecting a contractor to take on the task of “reworking and rebuilding” the jobless claims-processing system. But he cautioned that overhauling the system — at an expected cost of about $40 million — could take up to three years. Roberts retired as labor secretary at the end of June and was replaced by veteran state official Jamie Link.