The antiquated computer mainframe that caused so many problems with unemployment insurance claims during the Covid-19 pandemic will need to stay in use several more years, even though the Department of Labor and Industrial Relations hoped to be finally rid of it last year.

Hawaii’s ongoing mainframe frustrations came up this week during the state House of Representative’s special hearings on how to best respond to the Lahaina wildfire. Lawmakers found that DLIR’s continued use of that fragile, Reagan-era technology hampered its response to the surge in UI claims that stemmed from the Aug. 8 catastrophe.

Maui saw UI claims dramatically spike in the aftermath of the wildfires – DLIR reported that the Valley Isle saw 18,338 claims between Aug. 12 and Nov. 11. The agency saw just 1,967 during the same period in 2022. 

Early in the pandemic, DLIR was swamped with nearly a quarter of a million UI claims. Many of those claimants endured painful delays and hardship waiting to receive their insurance payments.

The agency had awarded a contract in early 2021 that was supposed to help solve the problem by scrapping the mainframe and replacing it by the end of 2022 with a modern, cloud-based software system that could actually handle the state’s claim volume.

Contract Awarded, Then Canceled

However, the Idaho-based company hired for that work, Solid State Operations, struggled to manage that work and the project faced lengthy delays, according to a report from a third-party consultant hired by DLIR to monitor the contract.

Solid State Operations also became embroiled in a bitter legal dispute with its own subcontractor on the project, Netacent Inc., in which both parties wound up suing each other, online court records show. 

DLIR’s consultant recommended in May 2022 that the agency either pause the contract or cancel it entirely. The agency opted to cancel and start over, according to DLIR spokesman Bill Kunstman.

The agency then awarded a new contract for the work earlier this month – which went to Netacent. DLIR estimates it will take an additional three years to complete the modernization project.

“We have to build the car while we’re riding it. It’s not like we can just shut it down,” DLIR Director Jade Butay told members of the House’s Jobs and Business Working Group on Tuesday, explaining why the overhaul would take that long.

The agency still needs to process claims while replacing its system, he said.

Pandemic-Era Deja Vu

In a recent draft report, those House members recommended that DLIR quickly replace the mainframe with a modern system that could more efficiently manage those claims.

But calls to replace the mainframe date back several years to the onset of the pandemic, when DLIR was overwhelmed by nearly a quarter of a million UI claims but had to process them slowly and carefully so that its system would not crash.

The state’s mainframe quickly became notorious. Its technological issues caused widespread frustration and anxiety among thousands of Hawaii residents who suddenly had to navigate the state’s unemployment system, file claims and try to collect insurance payments during the pandemic.

DLIR created separate software that would intermittently interface, or connect, with the mainframe to avoid overloading it. Then, the agency announced the $3.7 million contract with Solid State Operations to completely scrap the 1980s-era system in February 2021. 

The new contract awarded this month to Solid State Operations’ former subcontractor, Netacent, is valued at $45 million. 

Netacent will also be paid some $12 million to operate the modern UI system for five years, according to Kunstman.

He said the new contract is so much more expensive because it will include features that the previous contract didn’t have. That includes full integration of the federal Disaster Unemployment Assistance program, fraud detection features, and identity validation features, he said.

The previous contract aimed to create a system that mainly focused on replacing the agency’s core “benefits, tax and appeals” functions, according to DLIR.

Kunstman said that the agency designed additional patches after the pandemic hit to further deal with the mainframe’s shortcomings but it still caused problems during the recent surge in claims from Maui. 

The ultimate solution, he said, remains replacing the mainframe.