Gehrke: How a Provo tech company appears to be gouging taxpayers, with help from the Utah Legislature

Francisco Kjolseth | The Salt Lake Tribune The Salt Lake Tribune staff portraits. Robert Gehrke.

Provo-based Qualtrics announced in July that Utah had become the first state to adopt its customer feedback software, a move it said would save money and guarantee that the government responds to what citizens want.

Senate Majority Whip Stuart Adams hailed it as a “true team effort” between the Legislature, the governor’s office and the private sector.

In reality, the governor’s office never asked for the software. It was an idea hatched by the company and sold to lawmakers by the company’s well-connected lobbyists.

Legislators saw it as a low priority and it would not have survived were it not for Adams — a favorite to be the next Senate president — who used his clout to make sure the project got funded.

As a result, taxpayers are paying $1.4 million this year for software that other government agencies and universities throughout the nation get at a fraction of that price and that Qualtrics gave to the Utah Republican Party at no upfront cost.

The software Qualtrics sells piggybacks on a website and then asks visitors about their experience. It can also send out email surveys to gather feedback aimed at improving the customer experience. This company is unquestionably a leader in the industry and there is widespread speculation that Qualtrics may go public later this year.

It happens that Qualtrics made the software that Cambridge Analytica, a consulting firm with ties to Donald Trump’s 2016 campaign, used to exploit Facebook users' data, then used the data to influence voters.

The push to lockdown the Utah contract began last fall, when Qualtrics’ government relations officer Chase Winder and lobbyists Stan Lockhart, the husband of the late House Speaker Becky Lockhart, and Jeff Rogers, the son of former Sen. Paul Rogers, met with a state lawmaker, Woods Cross Republican Sen. Todd Weiler.

Weiler said he was approached because he knew Winder — who is currently a candidate for state Senate — and because he had used Qualtrics software for his campaign. Weiler’s son, Tyman, also works for Qualtrics.

Their pitch was that some state agencies were already using the software — the health department, for example, had contracts totaling about $30,000 a year — and it would be easier and more cost-effective to deploy it across all of the state’s websites.

But it wasn’t cheap.

“They were talking huge numbers and I was trying to say, ‘Hey, you might just want to start off with half a million,” Weiler said. “They were talking $2 million at first. I didn’t think that was likely to happen.”

Still, Weiler liked the idea and asked legislative attorneys to start working on legislation, the “Citizen Feedback Pilot Program.”

The bill, it turned out, was unnecessary. The company found a way to get its project without having to compete legislatively or with any other companies.

In about 1992, Utah joined what is now known as the ValuePoint contracting alliance, a part of the National Association of State Procurement Officials. That mouthful is an umbrella organization where states combine their purchasing power.

Weiler said he was told by Mike Hussey, director of the Department of Technology Services, that through this alliance the state could buy the Qualtrics software off the shelf without going through a procurement process. They’d use a company called SHI International. Now all they needed was Legislature to come up with the funding.

At that point, Weiler said, because of his son’s involvement in the company, he stepped aside and Adams took over.

“I think the state agencies brought it to us,” Adams said, even though the Department of Technology Services and the governor’s office say that is not the case.

“They actually suggested and supported the appropriation,” Adams said. They didn’t.

His pitch to a legislative subcommittee on Feb. 7 made it clear that Qualtrics was getting this contract. Adams opened by praising Qualtrics as “a great Utah company,” and talked about how the software would save the state money and improve customer satisfaction.

Sen. Wayne Harper, R-West Jordan, the chairman of the subcommittee, asked if the project would go through the normal bidding process. Adams dodged the question and Harper pressed him. “I just want to make sure we follow the procurement process,” Harper said.

Sen. Gregg Buxton, R-Roy, intervened.

“I don’t believe it’s a sole source. I think it’s probably something that would go out for bid,” Buxton said (although it never did), “because there are other softwares like this.”

The committee response was lukewarm. When they ranked their spending priorities, the Qualtrics project came in at 15 out of 19 requests.

By the time the Legislature finished its budget, Adams had succeeded in making sure the software purchase was one of seven committee projects that got funded, even though it had been whittled down from $2 million to $1.4 million.

In June, SHI International’s account manager provided a bid for the software. It came in at exactly $1.4 million.

Two of Qualtrics top competitors, InMoment and MaritzCX, are headquartered in Utah, but neither they, nor any other company got a chance to bid. Neither would say how much they would have charged for similar software, but Lisa Davis, vice president of communication for InMoment, said that $1.4 million “is an atypical price point for a pilot program in our industry.”

That is borne out by a review of contracts Qualtrics has signed with other public institutions.

Salt Lake County’s Office of Regional Development paid $20,000 for the Qualtrics software with a limited number of responses. The Utah State Board of Education pays $107,000 for unlimited responses. The Florida Department of Children and Families paid $34,000 in 2016 for Qualtrics software and up to 40,000 responses.

And any federal agency can buy the same Qualtrics CX5 software for anywhere from about $24,000 for 2,500 responses to as much as $750,000 for 1 million results. The Veterans Administration, for example, which has 9 million clients (three times the population of Utah) paid $51,000 to use the software.

A spokeswoman for the Department of Technology Services pointed out that the software would be available to all 29 state agencies and they will have access to unlimited responses, which is true.

But scalability is not really the issue. The University of Wisconsin system, for example, paid $127,000 last year to make Qualtrics software available so all of the 182,000 students and 39,000 faculty and staff can construct their own surveys.

And there are practical limits to how many responses one would ever realistically need — and proof of that is found by using the sample size calculator on Qualtrics’ own site.

Statistically, if one was interested in surveying all of the adults in Utah and wanted the same accuracy that most professional pollsters use, or all 55.8 million visitors to all of the state Web sites in the past year, one would only need about 600 survey responses.

Even if you wanted an iron-clad result — with 99 percent confidence and a margin of error of just 1 percentage point — the most responses one would need is about 16,572.

Perhaps most telling is the deal Qualtrics cut with the Utah Republican Party.

Utah GOP Chairman Rob Anderson said the party worked out a deal in January (it so happens, right as Qualtrics was preparing its legislative push) where the party paid nothing upfront for the software. Candidates who wanted to use the Qualtrics tools would then pay anywhere from a few hundred dollars to $2,000 for unlimited responses. The money is then paid to Qualtrics. Utah Democrats do not have a similar deal with the company and don’t use the software.

But perhaps the most telling figure about the value of the product is how much the Utah Republican Party paid for the Qualtrics software with unlimited users and unlimited response capability: Zero.

Utah GOP Chairman Rob Anderson said the party worked out a deal in January (it so happens, right as Qualtrics was preparing its legislative push) where the company would provide the software for free.

Republican candidates who want to use the party’s software would pay $2,000 each for unlimited use and the party, in turn, gives that money to Qualtrics, Anderson said. Utah Democrats do not have a similar deal with the company and don’t use the software.

I tried for several days to connect with anyone from Qualtrics to respond to what I found, but those efforts were unsuccessful.

Kristen Cox, the director of the Governor’s Office of Management and Budget, said that, while neither the governor’s office nor the state departments requested the Qualtrics funding, the one-year project will give the state a chance to see if the program works.

“We are constantly looking for opportunities to improve,” she said. “We will test out this new product to determine if it provides new insights and is cost effective. We are excited to see what value it can bring.”

This is not the way our system is supposed to work.

If agencies need a program, then they should get it approved, go get competitive bids and then pick the best, most economical provider.

It’s not supposed to be a matter of which greedy company can get its well-connected lobbyists to convince a powerful legislator to sidestep the bidding process and foist it on agencies that I’m told are now grappling with how or why they would even use this software.

The state, if it can, should get out of the Qualtrics contract. And the state auditor should review the deal, as well as the state’s relationship with ValuePoint — because if we’re not getting value, what’s the point?