Pennsylvania’s efforts to modernize its system for handling unemployment compensation, tax programs, and numerous other unemployment services have been beset with failure, delays, waste, litigation, and false starts. Over 15 years, spanning three administrations, the promise of modernizing it and its services has already cost taxpayers at least $200 million.

The original mainframe was built by IBM in the 1960s, marking the start of the state’s long relationship with the tech company that ended with a dissolved contract in 2013, and a lawsuit filed in 2017 that is still pending.

IBM built on an old but powerful mainframe computer, with large iron boxes that process millions of data sets at once, and green-screen terminals.

Because of its processing power, many states, the federal government, banks, airlines, and more still rely on this hardware.

For decades, there have been ongoing pushes by the federal government to outsource technology so as not to compete with private industry, and to keep pace with innovation. This philosophy has persisted despite significant evidence that outsourcing technical capacity is costing public agencies more money and depleting internal expertise.

In the early 2000s, the state Department of Labor and Industry decided to overhaul its existing technology, saying it was outdated, relied on a patchwork of legacy programs that can take days to process simple issues, and operated with coding language skills that are finite.

So, in 2005, it inked a four-year, $109.9 million contract with IBM that spanned 6,500 pages and laid out 1,500 “explicit business requirements.” IBM would integrate all the unemployment compensation technology systems, calculate payments and tax information seamlessly, transfer data from the old system, and provide an easy-to-use, internet-based interface.

These are known as waterfall projects, Jaquith said, because they present an extensive, top-down list of requirements laid out by a government agency and handed off to a developer.

By 2013, few of the requests had materialized. The project was $60 million over budget, nearly four years behind schedule, and still unusable, according to legal documents.

Each time IBM failed to meet a deadline or deliver a project goal, Pennsylvania incrementally paid the company more.

Pennsylvania was not an outlier. As of 2016, roughly 77% of unemployment modernization projects nationwide had failed, were over budget and lacked critical requirements, or were still in progress, according to a recent report by the Century Foundation.

The state sued IBM in 2017, seeking to recoup the money and cost of maintaining the existing legacy system, accusing it of using the state as its “personal cash register,” according to the complaint.

The state wrote in 2017 that it “did not have the expertise or information to fully evaluate the project risks and perils of which IBM was aware.”

And part of that was because of the underinvestment in staff and technical resources over the years, said Gerald Rickabaugh, 63, who spent most of his career of more than 35 years working in IT for Labor and Industry before retiring in 2016. That year, the state laid off 32 IT staff, some with decades of experience.

Rickabaugh said IBM’s mainframe is more powerful and secure than the new, cloud-based GSI system.

“They love to blame everything on the mainframe system,” Rickabaugh said. “The mainframe is what held that place up. It worked fine.”

He said this included eight million claims processed during the Great Recession.

State officials said they have done extensive internal testing of the new system, but because of the pandemic, as of mid-May, only five members of the public, five employers, and five legislative staffers had participated in trial runs.

“This particular project has been tested unlike any other IT project has been tested within the commonwealth,” Berrier said Friday. “We are fairly comfortable with saying we are not expecting a major failure.”

She said the state has a “pull in case of emergency switch” but added, “The likelihood of that happening is very, very slim.”

Saralinda Bauer, a consultant on the project with CSG Government Solutions Inc., said the overall status of the project continues to be “red.”

“This is, overall, a high-risk project,” she said. “That does not mean we cannot continue to go forward with ‘go live.’”