After repeated delays, more than $30 million spent and little to show for it, a decadelong effort to upgrade the state’s antiquated workers' compensation system has been put on hold.

On Friday, WaTech, the state’s information technology oversight office, suspended “all project activities and expenditures” for the $292 million upgrade due to a “continued lack of progress and ability to execute” by the state Department of Labor & Industries, according to a WaTech memo on the state IT dashboard.

Since 2015, Labor & Industries has worked to modernize the aging technology used to manage medical claims by workers injured on the job.

A decade later, the upgrade hasn't left the planning stages, and was still another nine years and at least $240 million from being done, according to state reports in April.

Critics, including employees and third-party experts, blame that lack of progress in part on L&I's indecisive management, sagging morale and unusually high turnover – including at least six project directors since 2019, according to employees and third-party expert assessments.

Another factor: a longstanding dispute between Labor & Industries and WaTech, which oversees many state IT projects, according several L&I employees and outside experts familiar with the project.

With the upgrade officially on hold," and the state facing a budget shortfall, some critics think it shouldn't be restarted without a complete rethink and, possibly, new leadership.

“We’ve been in this boondoggle for years and years, spending tens of millions of dollars and landing absolutely nowhere,” said state Rep. Travis Couture, R-Allyn, ranking minority member on the budget-writing appropriations committee and a former project manager at Lockheed Martin.

"If that was my project at Lockheed Martin ... I would have been fired 10 times by now," Couture said.

In a statement Tuesday, Gov. Bob Ferguson his office “will work closely with WaTech and L&I to get this project on track.”

Asked whether he still backed Labor & Industries Director Joel Sacks and WaTech Director William Kehoe, Ferguson said through a spokesperson that "[e]very member of my cabinet is working hard and has my full support."

In the meantime, L&I officials say the suspension won’t affect the agency's ability to process the more than 100,000 new injury claims and $2.6 billion in payments it handles each year under the workers’ compensation program.

"Our current workers’ compensation technology is functional," said spokesperson Andrew Garber by email Tuesday.

As recently as April, the department said continued reliance on existing technology, some more than 40 years old, “is inefficient, expensive, and risky.”

'A persistent pattern'

The suspension is the latest setback for Washington’s efforts to modernize the hundreds of IT systems that handle running everything from state finances and university operations to unemployment checks to driver’s license renewals.

The state’s IT dashboard currently lists 56 ongoing IT projects at 24 agencies, with a total estimated cost of $2.3 billion.

But that effort, which began more than a decade ago, has yielded mixed results.

Of those current projects, eight, representing 37% of the total expected cost, are considered to be at significant risk and in need of “immediate attention,” according to assessments by WaTech.

At the top of the troubled list is the planned upgrade of the state’s financial system at the Office of Financial Management. The project's first phase, which was initially expected to launch in 2022 at a cost of $144 million, will now cost $449 million and could launch as late as 2027.

But the Workers’ Compensation Systems Modernization could be a runner-up for most troubled project.

In 2020, five years after initial planning started, state officials temporarily halted the project in part due to whistleblower complaints over lack of progress and soaring costs, including heavy fees for consultants.

Despite several such “resets” for the workers' comp upgrade, state officials and the project’s own “quality assurance” contractor continued to observe serious problems and little progress.

Those reports found agency leaders to be unmotivated and unable to agree on a single strategy for the complicated task of replacing older technologies without interrupting critical services for workers and others.

Some employees also complained that WaTech, which oversees state IT systems, was adding to problems by trying to micromanage the upgrade. They said WaTech frequently changed the guidance and directives it gave L&I about how to get the upgrade back on track, and often seemed to be trying to control L&I's large IT operation and budget.

A quality assurance report from May seemed to capture that friction by noting that L&I's leadership often seemed less focused on hitting specific upgrade goals "than by a desire to show progress in addressing legislative and oversight concerns."

By last summer, the upgrade's problems had broken out into the open.

In emails to the governor's office and to media outlets, anonymous L&I employees accused leadership at both L&I and WaTech of “gross mismanagement of state funds.”

The project's quality assurance contractor urged yet another "project reset." There were disputes over how much additional funding, if any, L&I should receive for the project, and under what conditions. Ultimately, the state approved around half of what L&I original requested for the two-year budget.

For a brief moment this spring, the upgrade seemed to have stabilized.

L&I had hired another project director. It had revised some of its strategy, cut the overall cost estimate to $292 million and claimed to be on track to launch the first two pieces of the upgrade by mid-2027.

In April, a spokesperson said WaTech “supports the path L&I is currently on.” Key lawmakers also seemed moderately supportive. Sen. Derek Stanford, D-Bothell, vice chair on the Senate Ways and Means Committee, said he believed the upgrade “got off to a bad start” but was back on track.

'Unable to show measurable progress'

Exactly how things went so quickly back off the rails isn't clear.

WaTech gave only a general explanation of what led to the decision.

Despite "working closely with L&I to provide project guidance and oversight...it became clear in recent months that the project was unable to show measurable progress against planned milestones," said WaTech spokesperson Andrew Garber in an email Tuesday.

L&I, for its part, has "long recognized there are challenges with the implementation of this new technology," said L&I spokesperson Matt Ross. "WaTech plays an important oversight role, and clearly we need to ensure a common understanding of the progress and challenges facing the project."

The governor's office didn't respond when asked if the decision to suspend the project originated with WaTech or came directly from Ferguson.

In a statement earlier on Tuesday, Ferguson said, “We need to make sure that our programs are operating effectively. Where we find problems, we will do what needs to be done to address them."

Still, what's needed to address these problems hasn't yet been shared.

In Friday's memo, WaTech urged L&I's leadership to meet with WaTech, the Office of Financial Management and the governor's office to discuss how move the project forward.

L&I said it "absolutely" intends to join those discussions, and Ferguson on Tuesday stated his desire to "get this project back on track."

But WaTech also seems to be managing expectations for a project that has been singularly difficult to manage.

After urging L&I to "initiate meetings" over the project's future, WaTech director Bill Kehoe went on to note that, "[c]onsidering the project's history and the several opportunities it has had to reset and show progress, establishing the criteria to restart the project will be challenging.

©2025 The Seattle Times. Visit seattletimes.com. Distributed by Tribune Content Agency, LLC.