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West Virginia overspent on a federally-funded project to expand broadband

February 7, 2013

Last May we covered a story coming out of West Virginia about how the State had bought thousands of high-end, high-capacity routers as part of a $160 million plan to create a statewide broadband network. (The large majority of the funds for the project – $126 million – came from federal taxpayers; the state filled out the rest.) The total cost of the routers was $24 million.

Federal lawmakers had suggested many of the communities that received the routers could have had their needs met with must less expensive options. And so lawmakers asked the U.S. Department of Commerce Inspector General (IG) to look into the issue, which they did.

The IG released its final report on Jan. 23. According to GIMBY, the report found the state could have saved between $500,000 and $1.2 million by purchasing the more affordable routers. GIMBY reports, “The IG said the state ordered costly, larger and more sophisticated routers for all institutions – police and schools alike – even though smaller routers would have been adequate in many instances.”

Why didn’t the state go with the smaller routers for smaller communities? According to the IG report, because the state did not bother to “perform a study to determine which size router would most effectively and efficiently meet” each individual community’s need. Instead, the Executive Office of the State of West Virginia (EOWV) went with a one-size-fits-all approach so it could get 100 free routers from the manufacturer. (While that attempt to save taxpayers money is laudable, the Inspector General notes that the state would have received free routers even if it had purchased lower-capacity routers.)

The communities that received some of the routers weren’t happy with added capacity. The IG report notes, one group of communities “stated that three routers currently designated for a smaller location could be better utilized by other, larger sites; another representative stated that the service to operate the new router was cost prohibitive.” As a result, the state has had to come up with a plan to remove routers from sites where they aren’t necessary and from places that simply no longer want to participate in the State’s project.

In addition to the overspending, the IG found the EOWV has had a difficult time keeping track of the 1,164 routers it purchased. GIMBY explains: “The IG also found that the state was negligent in how it stored and tracked the routers … and did not follow best practices to prevent fraud, waste and abuse. Furthermore, the state failed to coordinate its efforts with the institutions receiving the routers, including specifying how the routers should be used and disposed of …”

Finally, the IG report notes that three years after the grant was made, some of the routers are not even operational.

Rep. John Shimkus (R-IL) told the Charleston Gazette, whose reporting on the project led to the federal investigation, “[T]he fact that money was wasted and routers are unaccounted for is disturbing … This is an unfortunate example of how government does not keep track of how it spends taxpayer money.”

This story is not only unfortunate, it is one more example of how government broadband systems do not abide by the same standards private networks do. In the private sector, detailed studies – like the one the IG conducted in the aftermath of the purchase and that West Virginia should have done before purchase – are standard. If government wants to enter into the broadband market, it should be expected to abide by the same standards – for the sake of taxpayers, and consumers.