Divided Board Votes to Extend Data Contract : Government: Move adds three years to agreement with Lockheed Martin. Critics say county should have sought bids.

Ignoring the advice of an outside consultant, a divided Board of Supervisors voted Tuesday to extend a multimillion-dollar contract with Lockheed Martin Corp. for data processing services without seeking competitive bids.

The issue split the board 3 to 2, with Supervisors Marian Bergeson and Jim Silva voting against the three-year contract extension and Supervisors William G. Steiner, Roger R. Stanton and Don Saltarelli accepting a staff recommendation to approve it.

Silva and Bergeson argued that opening the bid process on the lucrative contract--worth more than $92 million to Lockheed Martin over its nine-year life--would ensure that the county and its taxpayers received the best, least expensive data processing services.

“The bottom line is this is a $92-million contract,” Bergeson said. “I think these items should be put out to bid. Lockheed may well be the best for this project, but I think an open bidding process would assure that.”

Silva said he was disappointed at the decision. “I don’t want to say it’s business as usual, but I do think this was an opportunity where we could have looked at another approach,” he said.

Vendors who had hoped to bid on the contract expressed a mixture of disappointment and anger.

“These guys pulled the ultimate insider move on the taxpayers,” said Mike Winder, the president of SMS, a Santa-Ana based technology company. “It’s the same old business they’ve always done. Nothing has changed.”

The board majority, however, said that Lockheed Martin, which had two years remaining on its contract even before the extension, has done an excellent job of running the county’s data processing services. Switching operators now, especially in light of the county’s financial crisis, could endanger the smooth operation of the county’s data processing center, they said.

“Our very strong recommendation to the board was that this was not the right time to be making a change in data system vendors,” said General Services Agency Director Robert A. Griffith. “We have done that in the past, and it has been painful, difficult and troublesome. Given the tremendous trauma the county has undergone in the last year, our recommendation was that we not add to that.”

The board’s decision followed the recommendation of County Chief Executive Officer Jan Mittermeier and rejected many of the findings of the consulting firm, Arthur Andersen and Co., which studied the data processing system and recommended that the county seek requests for proposals in an open bid process.

The report, which cost the county $126,000, also recommended that the county try to lease a portion of the data processing facility to other vendors and said the cost of running the operation could be reduced.

Those recommendations were accepted, Griffith said, although the suggestion to open the bid process was not.

Under terms of the renegotiated contract, the county will save about $1 million in fees to Lockheed Martin in the first year and a projected $7.91 million during the next five years. The firm will lower the costs to the county by reducing its staff at the center and taking a variety of other measures, Griffith said.

In other action, the board announced the county is on the verge of reaching a settlement with yet another party to the county bankruptcy case and will not move forward with litigation against it.

Board members and county attorneys declined to name the party involved or discuss the potential out-of-court settlement.

But sources close to the negotiations said the expected agreement, which is not likely to be finalized this week, involves a brokerage firm that withheld proceeds owed to the county from sales of collateral the county had posted to obtain loans.

After investment losses pushed the county into bankruptcy last December, nervous Wall Street investment firms rushed to unload more than $9 billion worth of U. S. government securities that the county had pledged as collateral.

Last Friday, the county announced an agreement with Smith Barney Inc., in which the firm agreed to pay back about $25 million the firm made when it dumped securities it held for the county. Attorneys for the county said the Smith Barney settlement was expected to be the first of several such agreements in coming weeks.