IT Contract Cost Overruns Still Plague County Government

OC Supervisors 2013 - Wide Shot (p)

The Orange County Board of Supervisors. (Nick Gerda / Voice of OC)

Seven years after Orange County first launched a task force to bring “cost savings” and “transparency” to its numerous computer contracts, supervisors and others remain frustrated by numerous no-bid contracts, cost overruns and inefficiencies that could be costing taxpayers millions in unnecessary expenses.

“We do get ourselves into these sole-source contracts with these IT [information technology firms] that we end up being hostage to it,” Supervisor Janet Nguyen said at a board meeting last month. “And we can’t get out of it, because we spend millions and millions and we don’t have a choice.”

Over the past decade, if not longer, no-bid contracts and unexpected cost overruns — also known as “change orders” — have been commonplace in Orange County’s approach to technology services.

In the last three months alone, supervisors approved nine IT contract extensions and overruns totaling $26 million as well as four separate no-bid contracts, according to a Voice of OC review of staff reports and minutes of Board of Supervisors meetings.

The new sole-source deals found by the Voice of OC review included an $812,000 contract with IntelliTime Systems Corp.; a $243,000 contract with TriTech Software Systems; a $156,000 contract with EnergyCAP; and a $123,000 contract with GB Global.

The contract extensions included a $1.9-million increase to Brainsharp for an assessment tax system and $1.1 million to Randstad North America for Sheriff’s Department computer services.

More than half of the change orders were on no-bid contracts, according to the Voice of OC analysis.

Such no-bid deals and overruns have persuaded union leaders and supervisors that the county's computer contracting has been mismanaged. Two of Orange County’s top IT managers have been forced out in recent years, and another high-level manager was charged with seeking bribes from a subcontractor.

The problems were supposed to be addressed by a 2006 task force, the IT Working Group. But that panel waited years to begin reviewing the very problem that prompted the group's creation — the delivery of a $6-million mainframe system by the firm ACS before county supervisors had a chance to approve it.

In the ensuing years, supervisors and union leaders continued to question the numerous change orders.

“What it seems to us right now is that some of these IT contractors, they get a contract with the county, they have proprietary software, and then they kind of hold the county hostage,” Jennifer Muir of the Orange County Employees Association recently told supervisors.

Muir prompted the latest round of questions last month when she pointed to a $124-million contract extension for CalWIN, a welfare system used by many California counties. Orange County's share of the cost is $17.5 million.

While most of the cost increases appear to have been under the county’s control, staff said CalWIN’s was not.

Because the contract is part of a consortium, Orange County was stuck with having to approve the current year's $3.3-million increase and $17.5-million two-year extension, staff said.

The massive CalWIN change order demonstrated that the issue isn’t limited to Orange County. The $124-million increase affects 17 other California counties.

Muir described a general environment in government IT contracting where cost overruns are apparently approved automatically.

“You have to approve this change order because it’s the only company that has this software, and if you don’t, you’re not going to be able to provide service to the public any more, or moving to another company will cost even more,” said Muir.

That garnered a nod from Supervisor Nguyen, who said the union spokeswoman “actually just repeated what I’ve said in the last five years."

"I have not seen an IT contract being reduced, in terms of cost. It has always increased,” Nguyen said.

Supervisor Pat Bates echoed much of that sentiment, saying supervisors should be looking at more detailed records to ensure the county isn’t being overcharged. “Do we really have documentation that there’s an expanded scope or an expanded need versus perhaps the underbidding to begin with?” asked Bates.

She asked staff to bring back detailed information on cost overruns when budget discussions take place over the next two months. But understanding what standards the county should use in scrutinizing change orders is proving elusive.

The county’s IT chief, Mahesh Patel, said Monday that the county doesn’t have policies or guidelines for evaluating the change orders.

Patel said he’d like to see guidelines based on industry standards. Firms such as Forrester Research and Gartner Research have developed such standards, he said.

IT managers are still determining how many change orders have been awarded in recent years as well as their total value, according to Patel. “We do need to get some kind of clarification on whether it’s every one of them or if there’s a dollar threshold,” he said.

As management prepares for the budget discussions, it can be difficult for the public to keep track of which contracts have yet to be put out to bid. For example, the county staff report on the $1.1-million Randstad contract increase lists “N/A” for whether it is sole-source, and the staff report on its original approval in 2009 shows up blank when trying to access it on the county’s website.

As it turns out, the county awarded a no-bid contract for managing its online meeting agendas and staff reports. The system has been run by SouthTech Systems since 1998 and costs about $55,000 per year.

You can reach Nick Gerda at, and follow him on Twitter: @nicholasgerda.

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