23 May 2002
What appeared at first to be a massive one-off bungle is turning into a major political scandal in California - affecting not just the jobs of all 69 employees of the state’s IT procurement body but also the future of Gray Davis, the high-profile state governor.
The “no bid” contract between state purchasers and database software giant Oracle hit the headlines when auditors said California’s taxpayers had paid $41 million too much for a new IT system for 270,000 staff.
They said no state employees were using the software a year after it was installed and that claimed savings had been hugely overestimated.
So far, three senior state employees have quit and the Department of Information Technology (DOIT), set up in 1995 to oversee the state’s IT policies and purchasing, is set to be abolished at the end of June.
Oracle claims the $120 million deal was good value for money but has also offered to repay its fees to the state.
Now the facts of the case are in dispute amid mounting claim and counter-claim by the parties.
According to the DOIT, the auditors got it wrong when they said no state employees were using the software.
Oracle also rejects the auditors’ claims, saying that more than 50 state and local agencies have already taken advantage of the discounts offered by the new contract and that it will save the state up to $163 million over 10 years.
Meanwhile, Davis has returned a $25,000 campaign contribution handed over in a bar by Oracle executives to the state’s former e-government director five days after the 10-year agreement was signed.
But observers are claiming the debacle is a cynical attempt by Davis’s political enemies to scupper his chances of re-election.
The scandal has helped to lift the lid on potential abuses by insiders to a non-traditional method of procurement known as California’s “multiple award schedule”, or CMAS.
A 1993 bill allows the state to create a list of pre-screened vendors that state agencies could approach without having to go through the usual time-consuming and unwieldy competitive bidding process.
But it has emerged that the son of the Los Angeles senator who wrote the bill works for Oracle.
One independent consultant claimed that the CMAS fuelled a “good old boy network” where favouritism and manipulation were common.