After last summer’s disastrous rollout of Minnesota’s new vehicle title and registration system, the Dayton administration signed a no-bid, $26.25 million contract with a Colorado company to build a separate, “off-the-shelf” driver’s license system that would comply with the Real ID program mandated by federal law.

In doing so, it sought “emergency” approval Oct. 19 to avoid the bidding process required by Minnesota law, records show. As justification, the administration said that failure to act would threaten public health and welfare and jeopardize government functions. It stressed that time was running out, with the statutory deadline of Oct. 1, 2018, looming for Real ID, a federal measure designed to enhance identification security.

“Minnesota now has less than 12 months to implement,” the Dayton administration wrote.

Legislators now say they had been told that the state’s in-house computer experts, Minnesota IT Services (MNIT), would be able to meet the deadline and that no outside contractor was needed.

“I think that there was, unfortunately, misinformation about the status of what could be done in MNLARS,” Dana Bailey, director of the MNLARS project, said Friday.

MNIT took over development of the new Minnesota Licensing and Registration System (MNLARS) in 2014, when the state canceled a $41 million contract with Hewlett-Packard Co. for failing to meet deadlines. The Legislature and former Gov. Tim Pawlenty had barred the state from developing a Real ID driver’s license out of privacy concerns.

But in 2016, the Legislature passed a law allowing the state Department of Public Safety to prepare for Real ID. Last year, it gave the go-ahead at Gov. Mark Dayton’s urging.

The U.S. Department of Homeland Security had refused to give Minnesota any more extensions to meet the Real ID deadline. If the state failed to comply, Minnesotans wouldn’t be able to board domestic aircraft without a passport or an enhanced state ID (available since 2014) and wouldn’t be able to enter federal buildings and military bases without approved forms of ID.

MNIT had two teams of developers working separately on the driver’s license and motor vehicle portions of MNLARS. Its flawed motor vehicle system was released last summer, and complaints from consumers and registrars swamped the Legislature.

Rep. Paul Torkelson, chairman of the House Transportation Finance Committee, said Friday that lawmakers had asked last year if a consultant could be hired to develop the driver’s license system. “They told us they couldn’t possibly hire an outside vendor because it’s so integrated” with the vehicle registration database, he said.

On Oct. 19, MNIT and DPS sought permission from the Administration Department, which oversees contracts, to hire FAST Enterprises to build a separate driver’s license system. Justin Kaufman, assistant commissioner of MNIT, said the agency had decided a couple of weeks earlier that it needed outside help. The due diligence process took about a month, he said.

Rep. Rick Hansen, a DFLer on the House Select Committee on Technology and Responsive Government, said MNIT and DPS officials gave legislators no indication that the change was coming. “We were begging for information,” Hansen said.

DPS Commissioner Ramona Dohman wrote to Hansen and Rep. Jamie Becker-Finn, DFL-Roseville, on Oct. 27 saying that her agency was working with MNIT to develop and deliver Real ID licenses, but she said nothing about having sought approval to hire FAST.

Hansen and other lawmakers say they weren’t told about the outsourcing of the driver’s license system until Nov. 15 — a week before the state executed the contract.

Rep. Dave Baker, R-Willmar, said it was former MNIT Commissioner Tom Baden’s call.

“Because of that decision, we will now have a separate database to run the licensing system,” Baker said. “Minnesota now is burdened with maintaining two systems when there should have been one.”

Baden, who took early retirement citing health reasons, declined to comment.

‘Very serious questions’

The two-year contract with FAST is capped at $26.25 million. Optional maintenance fees are $950,000 for year three and $1 million for year four.

Torkelson said his committee members will have “some very serious questions” about the FAST contract when they meet next week. He said lawmakers were shocked on Feb. 1 when the Dayton administration asked for $43 million more to fix and complete the MNLARS project, the cost of which already had climbed to $107.6 million from $48 million since it began in 2009.

Torkelson and Baker wrote to MNIT and DPS on Feb. 7 with numerous questions about MNLARS, including several about FAST and the cost of maintaining two separate computer systems. Among other things, they asked if there’s any way to build a link between the vehicle registration and licensing systems to cut ongoing maintenance costs. MNIT responded to Torkelson on Friday evening, saying that they might be able to be merged, but that might not reduce the cost.

Baker said he has “guarded optimism” that FAST will be able to roll out the new driver’s license system in time to meet the Real ID deadlines. But he said the Legislature won’t sign off on any more money until what he called some “reassurances.”

“We want some oversight,” Baker said.