Wednesday, October 3, 2018

The US elections technology oligopoly

Last week we learned from the Wall Street Journal that “Election machines used in more than half of U.S. states carry a flaw disclosed more than a decade ago that makes them vulnerable to a cyberattack”. A startling development, considering that the midterms are around the corner, and that China has allegedly joined the list of foreign powers trying to meddle in US elections.

Although the reason why a flaw of this magnitude is still present is manifold, recent studies point at the concentrated structure of the industry as one of the main causes for the poor state of the US election infrastructure.

In 2017, a Penn Wharton professor, Lorin Hitt, and a team of six students published a report titled “The Business of Voting”. According to their findings, “the industry is dominated by three firms that are moderate in size and neither publicly nor independently held, limiting the amount of information available in the public domain about their operations and financial performance. Meanwhile, the customer base is highly fragmented, with election technology decision-making dispersed across more than 10,000 county election officials.”

The three firms in question -Election Systems & Software (ES&S), Dominion Voting Systems, and Hart Intercivic- control approximately 92% of the voting machines used in the US. The existence of an oligopoly which controls US elections is undoubtedly a problem that needs to be addressed. 

As pointed out in the Wharton study, the lack of competitiveness leads to an inefficient market.  “First, the companies can exert their market power to lock-in clients”.  And second, “the industry’s high degree of concentration reduces investment in making voting machines more secure. The three incumbent companies can easily cooperate in carving up the existing market. And little outside competition, according to the authors of the report, means “limited incentives for innovation”.

The inefficiencies of this oligopoly have become evident in recent weeks.

On September 26, the city of Chicago awarded a 10-year contract for approximately $31 million to Dominion Voting Systems. The decision to purchase technology from the Canadian-based company was made months ago following a public bidding, yet the acquisition of technology is now being questioned. ES&S, the largest manufacturer in the country, filed a lawsuit against the county and the office of its chief procurement officer on September 25. According to ES&S, the “proposed voting system was not compliant with Illinois law, and likewise could not meet the requirements [of the request for proposals], because it had not been certified by the Illinois State Board of Elections.”

A similar episode is unfolding in Louisiana where ES&S is accusing state officials of favoring Dominion during the bidding process. In June, it was revealed that ES&S “had coaxed state and local elections officials —including South Carolina's election chief— to serve on an “advisory board” that gathers twice annually for company-sponsored conferences for at least nine years.”

Ethics experts have questioned this practice, labeling it as potentially corrupt. “This is a massive promotional opportunity for ES&S,” said Virginia Canter, chief ethics counsel for the Citizens for Responsibility and Ethics in Washington, D.C. “It’s highly inappropriate for any election official to be accepting anything of value from a primary contractor. It shocks the conscience … I think it compromises their integrity.”

To cope with the shortcomings of this inefficient market, the Penn Wharton study recommends:

• Buyer coalitions, which can give jurisdictions greater bargaining power for getting vendors to provide systems that are both better priced and more customized to their needs;
• Open source technology, which proponents believe may catalyze the development of new competitive markets in voting systems solutions;
• Modified certification processes, to support a move to modular voting systems built from less expensive commercial off

It is time to take action.