Concerns Remain as Big Xerox Contract Returns for Vote

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As the Orange County Board of Supervisors gears up for another decision Tuesday on a huge phone and data network contract with Xerox Corp., concerns remain about the proposed deal, among them Xerox hiking its price by $11 million after promising not to increase its final offer.

Xerox’s actions have at least one supervisor crying foul.

The price jump, which has been negotiated down from $12.1 million, doesn’t please board Chairman Shawn Nelson.

“I’m tired of that,” Nelson said at the July 30 meeting. “I just want some comfort that I’m not going to be chasing a vendor around, because my appetite for that is zero.”

Nelson said Friday that while part of the increase is understandable, he still takes issue with about $6 million of it.

“I meant what I said and said what I meant” at the meeting, said Nelson. “I’m struggling with the way this went down.”

The total contract now stands at $132.4 million over five years. If approved, Xerox would continue 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 contract also calls for upgrading phones to the newer Voice Over Internet Protocol or VoIP technology.

Other supervisors have wanted to move forward with approving the contract, with Supervisor Janet Nguyen saying at the last discussion that it’s important to get VoIP implemented quickly.

Supervisor Pat Bates said she was “60 percent there, maybe 70 percent” ready to approve but still was “not totally comfortable” with the cost increases.

Supervisor John Moorlach, meanwhile, pointed to Xerox as the most cost effective option.

Beyond the cost increase, the county’s main employees union is also raising questions about the proposed contract, including several data connections it declares are missing from the contract. That will allow Xerox to request even more price increases later on, according to the union.

In a letter to supervisors dated Aug. 21, Nick Berardino, general manager of the Orange County Employees Association’s or OCEA, claims there are at least eight facilities for the Health Care Agency alone that are missing from Xerox’s contract.

“We can anticipate that the work for these undisclosed locations will come before the board as very costly change orders,” Berardino wrote.

In response, county management wrote that the final contract reflects desired sites as of April. “Any modification to county locations over the life of the contract will be handled through the change management process,” wrote the county CEO’s information technology or IT division.

“We have to take an inventory at a point in time and price to that inventory,” explained county IT chief Mahesh Patel in an interview, adding that several previously-missing sites are now included in the contract.

Nelson said that while he’d prefer that the correct scope was achieved early on, the nature of contracts this big means that amendments are made right up into the last month.

The union also asserted that taxpayers could save millions by having existing staff handle the VoIP part of the contract. They point to past implementations at county Public Works, Community Resources and Health Care Agency.

“We have the expertise and the talent in-house to do [this], because we’ve done it already,” said Jennifer Muir, OCEA assistant general manager.

Nelson has said he largely agrees that many of the phone upgrades can be handled by county staff. “We know our staff can do Voice over IP, at least for departments with 800 to 1,000 people,” he said in July.

He added last week, however, that it would probably take county staff a long time to install VoIP for the whole county.

At the same time, Nelson also questioned whether the county needs all of the VoIP systems installed right away, given that in his experience the current phone systems work just fine.

“I’ve just never been convinced that I need all of it and I need all of it now,” Nelson said Friday.

Patel, meanwhile, said county workers can’t handle the large amount of work, including a “significant redesign,” to install VoIP across the entire county government.

“The scope of this is significantly different than implementing it at individual agencies,” said Patel.

Muir took issue with Patel’s conclusion about staff’s abilities.

“How would he know that? He hasn’t even talked to the county employees who actually do the work and have demonstrated they can do it,” said Muir. “It’s kind of horrifying to think they’re going to spend more than $100 million on a system when they may not be getting what they need and when they may be paying a lot more than they need.”

Patel said his position is based on an analysis by the management consulting firm Avasant. The union, meanwhile, insisted that Avasant’s study is “seriously flawed” and biased in favor of Xerox.

This debate follows a long history at the county of cost overruns on outsourced IT contracts, including allegations by the county itself that a vendor defrauded taxpayers by intentionally lowballing its bid and seeking cost increases later.

“We do get ourselves into these sole-source contracts with these IT firms that we end up being hostage to it,” Supervisor Janet Nguyen said earlier this year. “And we can’t get out of it, because we spend millions and millions and we don’t have a choice.”

Xerox also drew a sharp rebuke in July when Nelson said the company essentially tried to threaten the county into approving the higher price tag.

Soon after supervisors delayed voting on the new contract on July 23, the company withdrew its offer to continue running the county’s phone and computer networks.

Xerox then backtracked on July 24, acknowledging that its letter had “caused some concern.”

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

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