09 May 2002 | Liz Simpson in San Francisco
California's state procurement agency is set to be shut down after auditors reported that its purchase of computer software could cost taxpayers $41 million more than necessary.
All 69 staff at the Department of Information Technology (DOIT), created in 1995 to oversee the state's IT policy and purchases, could lose their jobs.
State funding is likely to end on 1 July after the audit revealed that, almost a year since the contract with Oracle had been signed, no state employees were using the software.
Legislators are furious that officials signed a deal said to have been based on figures that overestimated likely savings.
One estimate - that California spent $3.6 million on database software maintenance a year - was $3.2 million higher than the actual figure.
The contract to provide database software for 270,000 state staff was the first big attempt by Gray Davis, California's governor, to save money and buy products for all agencies at the same time.
Despite surveying state offices last February and finding limited demand for the proposed Oracle software, the DOIT went ahead with the purchase, locking the state into a six-year contract that could end up costing as much as $120 million.
Yet Logicon, the Oracle partner that proposed what turned out to be a single-source "no bid" deal with the state, stands to reap $28 million for its services.
Manny Diaz, assemblyman for San Jose, said the audit showed the DOIT had failed to live up to its mission and he was not prepared to reauthorise funding.
"Its blatant lack of oversight in the Oracle contract proves to me that the DOIT has failed in its primary responsibility of protecting taxpayers' money for major IT investments," he said.
Debra Bowen, state senator and a frequent critic of the department, said: "The DOIT was set up to try to steer the state clear of contracting disasters. Instead, it's got its hand on the stirring spoon of one of the biggest cauldrons of all."
Oracle, which is said to have rushed the contract through to boost its reported earnings at the end of the fiscal year, disputes the auditors' findings.
Jim Finn, a company spokesman, said: "Oracle believes the value proposition of this deal is extremely compelling, although you wouldn't know that as this audit contains numerous misrepresentations, inaccuracies and incorrect statements.
"We welcome a review of this deal and you will see us participating in the political process in the coming weeks."
Kevin Terpstra, spokesman for the DOIT, said every effort would be made to find the 69 staff other jobs with state agencies.