County Computer Contractor Assailed

County officials will decide today whether to take $25 million, which could be used to aid impoverished families, and spend it instead to assist a corporation struggling to deal with its losses on a computer contract.

If the Board of Supervisors does not agree to a change in its contract with Pennsylvania-based computer giant Unisys, the company will stop its work on the county’s new welfare computer system, which would cost taxpayers millions of dollars more and throw a wrench into welfare reform.

It’s a Hobson’s choice for the supervisors, the majority of whom have railed at both Unisys and county staff who were charged with monitoring the project.

“It’s blackmail, that’s all it is,” Supervisor Zev Yaroslavsky said.

A Unisys vice president said she did not want to discuss the issue in detail before today’s board meeting. But the company’s advocates argue that Unisys has made a good-faith effort to build the county’s new welfare computer system and that the revised contract remains a good deal for the county.

Indeed, some county officials argue that however unpalatable it may be to pay Unisys more money, it is the right decision.

“This is the best deal for taxpayers at this point in time,” said Lynn Bayer, director of the county’s welfare office, “though I think it grinds on everybody.”

It has irked supervisors still haunted by past computer fiascoes. After all, in the county’s Hall of Administration the arcane word “IBAX”--the name of a failed health department computer system that cost more than $84 million--is still spoken with phobic dread.

“Every time I check on computer systems . . . we always seem to lose out,” Supervisor Gloria Molina said. “I’m not prepared to cover anyone’s losses. Contracts are a two-way street.”

The situation provides a window into the complex dance between government and corporations that tap into millions of dollars of public funds to build massive projects ranging from subway tunnels to databases.

In 1995, computer companies lined up to acquire the contract for the county welfare office’s new computer system, which would be largely funded by the state and federal governments to facilitate welfare reform.

By law, the contract goes to the company offering the lowest bid. That was Unisys, whose eye-catchingly low tender of $86 million was well below TRW’s runner-up bid of $147 million.

“The difference was so substantial it looked bizarre,” Yaroslavsky recalled.

But, he said, the company lobbied heavily and assured the board it could bring the project in on budget. On that basis, the Board of Supervisors unanimously agreed to give Unisys the contract.

At the time of the bid, said John Fullinwider, the county’s chief information officer, it was understood that the actual price would increase later because programming would have to be redone to adjust for new welfare reform laws.

Last January, Fullinwider said, the county and Unisys began negotiating what would ultimately be a $27-million price tag for the welfare reform changes.

But in June, Fullinwider said, Unisys dropped a bombshell--that it had significantly underestimated the costs of the project and would need additional money from the county to cover its losses.

With the help of county-hired attorneys, Fullinwider and Bayer’s staff negotiated the second increase with Unisys. The sum: $25 million, which they and Unisys said would only begin to cover some of the $6-billion company’s losses.

Fullinwider said Unisys is effectively working without a contract and has acted in good faith. “They want to see this project succeed,” he said. “They would like to see the county succeed.”

The company also is in the stronger negotiating position.

“Right now they’re in the driver’s seat,” Bayer said, alluding to analyses showing that if Unisys walks away from the contract, the county would have to spend $97 million and wait 14 months to continue the crucial project.

It was only in September, supervisors said, that they became aware of the situation. Molina and other supervisors pushed staff into renegotiating the contract to prevent Unisys from jacking up the price again.

Still, when the contract came back to the board last week, it was poorly received.

“I feel betrayed,” Supervisor Don Knabe said to an audience largely composed of Unisys lobbyists. Though a Unisys executive initially insisted that the contract needed to be approved Tuesday night, the company later relented and allowed the supervisors an extra week to discuss the matter. It will be considered again at today’s meeting.

Complicating matters is a second Unisys project for the county health department. The much smaller project--a $6-million computer system to manage transfers of medical supplies--has failed, according to county documents. Still, Unisys may seek legal action if it is not fully paid.

But if the county agrees to the increase in the welfare contract, the company may not take legal action to recover what it says it is owed for the health system, Fullinwider wrote board members.

“That’s not a good business relationship,” Molina said of the threats of legal action.

Bayer and Fullinwider say they believe that the welfare computer system will work. But supervisors have criticized the two as being too accepting of Unisys’ demands.

“I was very disturbed and disappointed to see our own people behaving like lobbyists for Unisys,” Yaroslavsky said.

Bayer and Fullinwider bristle at that assertion, each saying they drove a hard bargain for the county. “Trust me, they [Unisys] started out much higher,” Bayer said.

Acknowledging that Unisys “has us over a barrel,” Molina said it is no surprise that the new contract has sparked such furor from supervisors.

“This is not a $29 off-the-shelf thing you take home and say, ‘Oh, gee, it doesn’t do what the package said it would,’ ” Molina said. “People get angry at that, and this is considerably more money.”