Xerox IT Contract Approved Despite $11-Million Price Hike

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The Orange County Board of Supervisors Tuesday approved a $132.4-million computer contract with Xerox Corp., despite concerns about the company hiking its price by $11 million beyond the “final offer” that it had previously promised to honor.

The approval came on a 4-1 vote without any discussion, with Chairman Shawn Nelson voting no. Nelson has been vocal in his anger about the price boost, saying he has “zero” appetite for the kinds of after-the-fact cost jumps that have plagued county information technology or IT contracts for years.

Other supervisors, meanwhile, have said they’re comfortable with the increase, attributing it to a new amortization methodology for owning infrastructure or for renting space on local fiber optic systems.

Under the five-year deal, Xerox will run the networks for nearly all of the county’s 17,000 desktop computers and 17,125 land line phones and will update phones to the Voice Over Internet Protocol technology or VoIP.

Before the vote, union leaders and line-level IT workers told supervisors that part of the contract’s work could be handled with existing staff and warned of significant problems in the contract.

The Orange County Employees Association reviewed contract records, and “what we discovered was frankly horrifying,” said Jennifer Muir, the union’s assistant general manager.

“On just the initial review of the documents we discovered huge errors that could potentially cost taxpayers millions of dollars,” she added, referring to issues such as missing work sites that the union claims Xerox could use to seek future price increases.

Joe Quintanilla, an IT worker at the Health Care Agency, cited several locations he said were missing from the contract.

“Either these offices will not be part of the countywide coverage network … or more likely we’re looking at at least eight change orders for work on these buildings that the taxpayers will pay in the future,” said Quintanilla. “It’s horrifying to think what else could be missing in the contract.”

In response, county IT chief Mahesh Patel said that the locations were accurate as of April and that changes in inventory are part of the normal process in a large contract like this.

Patel also said the locations were updated to reflect the county’s current needs. “I have before you a contract that is clear in terms of what it provides,” as well as its costs and who provides the service, Patel told the supervisors.

Union officials also repeated their assertion that existing employees have already demonstrated they can handle the VoIP part of the contract.

“If you’re going to take a risk here, take a risk with the men and women who have served you” and haven’t threatened you, said OCEA General Manager Nick Berardino, referring to Xerox’s threat to stop running the county’s computer networks after its new contract was delayed in July.

Patel has said that the countywide VoIP work is too large and complex for county workers to manage, but Nelson asserted that county staff has successfully implemented VoIP at departments with 800 to 1,000 people.

Supervisor Todd Spitzer said after the meeting that he was comfortable with the price increases since Xerox’s $107-million “best and final offer” last November.

He said Xerox’s $11-million share of the increase was due to the county wanting to own infrastructure assets, which had to amortize a certain way.

“It was still a $36-million savings” over Verizon’s bid, Spitzer said. “This is a great contract for the taxpayers of Orange County.”

In public comments after the vote, Berardino said the process had been tainted by a wave of campaign contributions from the companies that bid on the project.

“Whether it’s LA County with Democrats or Orange County with Republicans … this is what the process has [disintegrated] to. It’s all about political contributions, it’s all about lobbying,” said Berardino, adding that “everybody does it,” including unions.

“That is the unfortunate part of what’s happened to politics in this country,” Berardino said.

Supervisors have vehemently disputed that contention, often insisting that they’re unaware of who gives them money and that their decisions are independent.

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

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