Supervisors OK Changes to Troubled Xerox Contract

Months after declaring that Xerox Corp. was at fault for costly delays in its work for the county, the Board of Supervisors on Monday approved a contract change aimed at getting the company back on track.

But even as supervisors signed off on the revisions during a special early morning meeting, it was clear officials are dubious about the company’s ability to abide by its promises.

The contract now calls for Xerox to commit to a one-year timeline to meet specific milestones, as well as submit to a mediator to ensure compliance with the timeline and help resolve “certain outstanding financial issues.”

If the company does not comply with the new deadlines, county officials can impose financial penalties and cancel the contract without a termination fee.

Monday’s approval, which came on a 3-0 vote (supervisors Andrew Do and Michelle Steele were absent), also includes having the county pay Xerox about $1 million less than the $12.5 million the company sought in a series of invoices from last July through this March.

One supervisor openly doubted that Xerox, whose IT outsourcing business will soon be absorbed into the French corporation Atos SE, will meet the conditions in the amended contract.

Supervisor Shawn Nelson said that with everything he’s seen so far, “there is no way on God’s green earth” that Xerox will follow through on its new commitments.

The county is probably in store for “a long year of arbitrations,” Nelson added.

But at the same time, he said, “even if they continue to fail, we are better off with this agreement than with the current situation.”

Nelson was the only supervisor who spoke about the contract.

The county government’s largest employees union, meanwhile, says the ongoing failures by Xerox show the risks of large-scale privatization of county work without full transparency.

“It’s disasters like this contract, disasters like what we’ve seen outlined in the staff report for this contract, that really demonstrate the need for transparency in public contracting,” said Jennifer Muir, assistant general manager of the Orange County Employees Association.

County executives’ frustrations with Xerox date back to at least last fall, when county IT director Christina Koslosky issued a report saying the contractor gave incorrect information on power demands from its new equipment, causing a four-month delay in installing new networks.  Maintenance contracts for existing equipment have had to be extended to accommodate the delays.

Additionally, county workers have had to step in to do critical work when Xerox employees don’t show up, according to Muir.

And earlier this month, county agencies were affected by major computer and phone network problems  – including some phone systems going offline – which were attributed to Xerox.

Some of Xerox’s problems are spelled out in county documents, like the failure of 9-1-1 to work on county phones, but others “aren’t so clear” because they’re listed as “ticket numbers” without further descriptions, Muir said.

“What we do know is that if our members” failed to perform in this way, “they would have been fired,” Muir said.

County IT executives are openly agreeing with the union chief, which is a rare occurrence.

“Xerox’s performance has been and continues to be below County expectations and the contractual requirements” in its service agreement, states Monday’s staff report by county IT chief Christina Koslosky and IT finance director Ian Rudge.

Muir urged supervisors to scale back Xerox’s work and shift it to county employees, saying “I think now is the time to begin to restore the county’s control over” these critical services.

That idea didn’t gain traction among the supervisors, with Nelson saying that canceling the contract could spark expensive legal costs for the county. “This is a big contract, and this is a big vendor, and it’s just the way the world works.  We don’t want to spend millions of dollars in litigation” and Xerox probably doesn’t either, he said.

County officials had significant leverage over Xerox in the recent negotiations because county approval was needed before the contract could be handled by Atos, which is purchasing Xerox’s IT outsourcing business.

The myriad problems with Xerox have also related to the phone and internet blackouts in multiple county work areas earlier this month, according to officials.

At the clerk-recorder’s office, county staff were cut off completely from their computer systems for an entire work day.

Under the new agreement, a mediator, Alsbridge, Inc., would review documents, “assess fault, and act as a hearing officer that can render decisions” if the issues move into mediation or arbitration.  The cost of this dispute resolution process would be split evenly between Atos and the county, which expects to pay up to $200,000 for its share.

(Click here to read what was approved Monday.)

As for IT services overall, several county departments now say they want to be left out of upcoming plans to centralize much of the county’s major technology services.

A memo sent they sent earlier this month to county CEO Frank Kim and the Board of Supervisors cites “serious concerns” with the effort.

“As elected officials, we would like to exercise our right to opt out of the proposed IT Shared Services model,” wrote Assessor Claude Parrish, Auditor-Controller Eric Woolery, Clerk-Recorder Hugh Nguyen and Treasurer-Tax Collector Shari Freidenrich.

Parrish has previously said he is “not a Xerox fan” and resisted pressure to join the Xerox contract, in large part due to concerns about it making his agency’s systems more vulnerable to going down.

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