Supervisors Set to Award Massive IT Contract to Xerox

Orange County’s massive computer network contract with Xerox has run years beyond its scheduled end and racked up millions of dollars in unexpected costs to the county.

Today, the firm is poised to win the mother of all county computer contracts, a $134-million deal to run voice and data networks for the next five years.

Even before a contract is approved, a county staff report noted that Xerox’s costs have already increased $26.8-million since its final proposal, though a detailed breakdown of those costs wasn’t readily available.

County supervisors are set to vote Tuesday on the giant contract with Xerox State & Local Solutions, along with an $8.9-million extension of the firm’s current contract and an extra $243,000 to another computer vendor, SAIC.

Today’s vote comes after Xerox and its lobbyists steered considerable sums to all five county supervisors, often times in a less-than-obvious way.

A quick survey of campaign finance data found more than $12,000 in contributions between mid-2010 and mid-2012, though much of the funding is obscured through intermediaries.

For example, $5,100 of the supervisor contributions came from the Committee for Improved Public Policy, which at first glance appears to be an independent good-government advocacy group.

In fact, the committee is run by Lyle Overby, a longtime lobbyist (and Voice of OC Community Editorial Board member) who represents Xerox.

The county’s top computer official, meanwhile, said he’s absolutely confident that the contracting process has been handled appropriately.

“Our focus was with negotiations,” Chief Information Officer Mahesh Patel said of the county staff’s approach. “People are going to advocate how they please, but our job is to bring the best possible contract to the board.”

The new Xerox contract comes after a highly contentious bidding process, with intense interest from lobbyists and closed-door meetings attended by all five supervisors’ staffers to shape the contract process.

Those secret meetings even prompted open-government expert Terry Francke to declare that the county apparently violated California’s open meetings law.

It’s often challenging for elected officials to navigate an information technology world fraught with technical jargon and a lack of accountability.

One of the latest examples is a lawsuit by the county claiming that a vendor it paid millions to upgrade property tax software intentionally defrauded taxpayers.

Tata Consultancy Services made “a series of false promises and intentional misrepresentations” during the bidding process and “made promises to complete the project on a budget and according to a timeline with which they had no intention of complying,” county lawyers allege in the suit.

“The county has suffered millions of dollars of damages as a result of defendants' wrongful conduct, and it will continue to suffer damages for the years it will take to develop a replacement for the failed project,” they added.

Another frustration has been over the tens of millions of dollars in cost overruns, also known as change orders.

The feeling was summed up by Supervisor Janet Nguyen in April when she said: “We do get ourselves into these sole-source contracts with these IT [firms] that we end up being hostage to it. And we can’t get out of it, because we spend millions and millions and we don’t have a choice.”

When it comes to unforeseen increases to the new Xerox contract, Patel said county staff did their best to build all of expenses into the deal. “We’ve done our best to identify as many of the costs as we can,” said Patel.

Xerox’s current deal was originally to expire in June 2011 but is now set to be extended to January 2014. Patel said the extensions were “in response to concerns and criticisms that we don’t do the due diligence.”

The new Xerox contract would have the firm running the data network for nearly all of the county’s 17,000 desktop computers as well as the county’s land line phone system.

The phone system for the county’s 17,125 handsets was installed in the early 1990s and is antiquated, Patel said.

Part of Xerox’s job would be to overhaul the phones, replacing the old network with voice-over-IP handsets that run on the computer data network.

“The objective here is to converge those networks, and run both voice and data” on one network, said Patel.

The work would involve reducing the number of circuits where data travels as well as replacing switches and routers, he added.

Xerox would operate every county phone system other than those at Public Works and Community Resources, because they already have VoIP infrastructure, Patel said.

Those two departments would eventually be handled by Xerox once their infrastructure ages, he added.

As for bandwidth, the county’s internal network isn’t fast enough to fully support video conferencing, but Patel said the county is working toward adding extra bandwidth to enable it.

The new Xerox contract would run five years with an option for two one-year extensions.

The staff report notes that Xerox’s costs have increased $26.8 million since its final proposal.

A half-page explanation of the changes attributes $12.1 million of it to “vendor-added costs” and $14.8 million to “county-driven changes in scope.”

The “vendor-added costs” are listed as “governance, extended transition schedule, responsibility for all transformed circuits, performance of subcontractors” without further explanation.

The county-driven changes are listed as “changes in physical locations, asset management, cabling, modifications for Law and Justice Agencies, increase in remote access requirements.”

The final bids, before the county negotiated with Xerox, were $106.7 million for Xerox and $171 million for Verizon.

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

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