The Department of Homeland Security (DHS) could soon issue a regulation with serious ramifications for taxpayers, drivers and government officials. The agency is considering requiring all driver’s licenses to be embedded with computer chips, which will be more costly and less secure than upgrading the existing technology for licenses.

Passed in May 2005, the Real ID Act for the first time set federal standards for authenticating and securing state-issued driver’s licenses. DHS, which has no previous experience in making ID cards on a massive scale, is charged with setting forth the regulations to implement the new requirements. While states technically are not forced to accept the federal standards, any refusal to comply could hinder their residents’ ability to get a job, receive Social Security or travel by plane. Real ID was tucked into a massive spending bill and passed without any congressional debate; however, it is clear that Congress intended DHS to base its regulations on the states’ existing best practices.

DHS has two options for licenses:magnetic stripes or two-dimensional bar codes; or contactless integrated circuits such as radio frequency identification (RFID) chips. Whichever alternative is used, the new system will place a heavy burden on state and local governments, especially departments of motor vehicles. States will now have to verify birth certificates, federal immigration documents and Social Security numbers with the appropriate federal departments, build a database to store and secure identification documents and train personnel to use the new system. Fees and taxes will have to be increased to cover whatever costs are not paid for by the federal government.

But computer chip technology would be the far more expensive of the two options. Citizens Against Government Waste examined the issue in its October 2005 report, Real ID: Big Brother Could Cost Big Money. The total cost of issuing new licenses with embedded computer chips to 196 million drivers could reach $17.4 billion, or $348 million per state. The average cost of a license would shoot from between $10 to $25 to more than $93. Computer chips could be even more expensive than estimated because the chips are brittle and licenses containing them would likely need to be replaced more frequently than non-chip licenses. In addition, the life expectancy of the rapidly-changing technology could require frequent and expensive infrastructure upgrades.

DHS must be mindful of lessons from past government attempts to build complex information systems that ended in complete failure. The most costly example in terms of dollars and security was the FBI’s Virtual Case File (VCF). The system was supposed to replace an antiquated file system that relied on hard copies with an electronic system instantly accessible to every field agent and office. In June 2001, the FBI budgeted $170 million for the building and implementing of VCF. Doubts were raised about the project as early as 2003, yet the FBI pressed on and authorized a $17 million testing program in 2004, even though it was clear by then that the system would never work. When VCF was scrapped in March 2005, the FBI had wasted $104 million.