County: Xerox Problems Trigger a $120,000 Bill for Taxpayers

Orange County taxpayers are continuing to rack up unplanned costs from Xerox Corp.’s mishandling of a massive technology outsourcing project, officials say, with the latest being a $121,000 extension of maintenance work for older equipment.

As part of Xerox’s $132-million contract with the county government, the firm is responsible for upgrading and running nearly all of the county’s phone and computer networks.

But, county officials say, the company has caused months of delays that are forcing the county to keep maintaining equipment that was supposed to be phased out.

Among those costs is a hardware maintenance contract with Glass Box Technology, which on Tuesday was extended by a year for $121,000.

Xerox’s “delayed performance is requiring the County to purchase hardware maintenance services for a longer period of time,” county IT director Christina Koslosky wrote in her report recommending the extension to county supervisors.

County managers say Xerox gave incorrect information on power demands for its new equipment, leading to months of delays in upgrades and contributing to a high risk of going more than $13 million over budget.

Xerox’s failures are also leading to county employees stepping in to do some of the company’s work for it, according to union officials.

For months, the Orange County Employees Association has said Xerox has been failing to provide enough workers for the project, causing county employees to step in to do Xerox’s work when critical systems, including at jails, are at risk.

“They have the county hostage and they know they have the county hostage” because control of county systems was handed over to Xerox, said Jennifer Muir, the union’s assistant general manager, in comments to county supervisors on Tuesday.

The union asked in September for a full accounting of how much the delays are costing taxpayers.  That information still hasn’t been provided, according to Muir.

“Is the county trying to hide something? I can’t imagine it’s legitimately taking more than six months to get our arms around” these costs, Muir said. “It’s absolutely stunning.”

In a brief response to Muir, County Supervisors’ Chairman Todd Spitzer said he and Supervisor Lisa Bartlett were closely tracking the union’s concerns.

“Rest assured, we have met and we are asking a lot of questions” and hope to be reporting back soon, said Spitzer.

“I’m very confident that our meetings” have been fruitful and that supervisors will be pursuing some of issues the union raised, Spitzer added.

Spitzer, who was the only county supervisor to speak about Xerox on Tuesday, didn’t explain why the cost breakdown hadn’t been provided.

Xerox, meanwhile, has yet to comment publicly on their alleged mishandling of the project.  Its information technology outsourcing division was recently sold to a French firm, in a deal that’s expected to close in the coming months.

The Orange County allegations are among several cases of governments alleging that Xerox mishandled technology work.

In September, Alaska’s health and social services department accused Xerox of delivering an extremely faulty Medicaid payment system that was years behind schedule, the Alaska Dispatch News reported.

Xerox’s software was paying some health providers too much, while others were paid either too little or nothing at all, according to the state’s health and social services commissioner.

The commissioner, William Streur, called the problems his “greatest challenge in over 40 years of working in health care.”

Alaska officials wanted $47 million from Xerox in damages.

And in 2013, food stamp debit cards went offline in California and 16 other states after a glitch in a system run by Xerox.

Muir said Orange County should have its own employees take care of the work Xerox was hired for, “instead of allowing this outside corporation to have total control over sensitive information.”

“Please let us help,” Muir said, adding that it would cost less money for taxpayers.

Under their five-year agreement, Xerox is tasked with running the networks for nearly all of the county government’s 17,000 desktop computers and over 17,000 landline phones, as well as updating phones to voice-over-IP technology.

The networks are critical to the effective functioning of the county, which is responsible for significant law enforcement, public health and infrastructure services for the 3.1 million residents of Orange County.

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

“On just the initial review of the documents we discovered huge errors that could potentially cost taxpayers millions of dollars,” Muir said just before the approval in September 2013.

Union officials said the voice-over-IP systems could be implemented by existing county employees, thus saving taxpayers tens of millions of dollars.

“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 at the time.  He was referring to Xerox’s threat to stop running the county’s computer networks after the contract approval was delayed.

The county’s then-technology director said that the countywide voice-over-IP work is too large and complex for county workers to manage.

But county Supervisor Shawn Nelson said county staff have successfully implemented the technology at departments with 800 to 1,000 people.

The contract was ultimately approved by supervisors on a 4-1 vote, with Nelson being the sole opponent.

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

  • JoyBear

    So many change orders, delays, crashes! The Board of Supervisors sold this “cost savings” idea to centralize IT to taxpayers. Most of those BOS have left (2 became senators … with the help of Xerox donations!). We, the taxpayers, are now holding the bill for all this money going down the drain. Now that Atos owns this branch of Xerox, do they care about the contract?

  • the714

    The Xerox folks installed my team’s VOIP phones yesterday. Which promptly crashed all our network and Internet connections for 24 hours. When the Xerox folks seemed unable to fix it, our Dept. regular IT guy (a County employee) got me reconnected in a short time.

  • astar2b

    How did a copier company get this contract?

  • threelockbox

    follow the money…who set up this ridiculous contract and how big was the bonus?

  • Gary Truesdale

    A project like this is an opportunity to do great IT and uplift everything at the County. The technology improves so quickly that everything naturally gets faster, easier, and cheaper. VOIP is a fully developed, straightforward technology, everyone uses it, its easy to roll out and support. The County technology director is gone, the services firm the County selected has been sold, the project is late and over budget. And no plan to get on track. The Union concerns are valid.