The Oracle Debacle Coulda, Shoulda Been Prevented
SACRAMENTO
Coulda, shoulda: If Gov. Gray Davis’ Cabinet minions had heeded his incessant lecturing, they would have avoided the state’s embarrassing software scandal.
Davis’ lecture goes like this: When somebody says you must act now, that’s when you freeze.
Beware. Be skeptical.
Or, as Cabinet Secretary Susan Kennedy puts it: “If somebody comes to you and says, ‘I need something and it has to be right now,’ the answer is ‘No.’
“Where I failed was, I broke the cardinal rule.”
Kennedy added the final, crucial signature on a “governor’s action request” (GAR) that gave the green light for the apparently overpriced software contract with Oracle Corp.
Also signing the go-ahead document were the secretary of the Consumer Services Agency and the directors of Planning and Research, Finance, General Services and Information Technology.
The GAR was presented to Kennedy last May 31. The other officials already had signed, all that day. The first paragraph should have set off alarm bells for any Davis appointee. It read:
“The opportunity described below expires May 31, 2001. The offer is contingent upon receipt of an order prior to Oracle’s May 31 fiscal year-end. Oracle must report fiscal year profits to shareholders ... and is therefore motivated for a very limited time to offer the aggressive pricing . . . which would save the state an estimated $111million conservatively over the next 10 years.”
The three-page memo concluded with the same tone of urgency, emphasizing “the short window of opportunity.”
Act now, this offer expires at midnight.
The state fell for it and immediately signed the six-year, $95-million contract. Kennedy says she assumed all the advertised benefits had been checked out--or would be--by the other GAR signatories. They weren’t.
Moreover, it turns out, Logicon Inc. helped write the GAR memo. The company is a reseller of Oracle software--packaging it in computer systems--and worked both sides on this deal. Maybe illegally, says state Atty. Gen. Bill Lockyer, who is investigating. “Seems on its face to be a conflict of interest.”
Logicon was hired by the state as a consultant on software purchases and wound up pitching the Oracle contract. Later, the state learned Logicon stood to make $28million on the deal because of a side agreement with Oracle.
In recent days, Oracle and Logicon have offered to tear up the state contract. Davis has asked Lockyer to work out details. That might let taxpayers off the hook, but not Davis entirely. He’s still tarnished by his underlings’ screw-up.
Based on volume-discount buying, Oracle-Logicon projected six-year savings of $16 million for the state; $111 million if it bought an optional four-year extension. Not even close, contends state Auditor Elaine M. Howle. She pegged state losses at $41 million for six years and $6 million for 10.
The seller’s rosy projections don’t hold up, Howle says, because there’s very little market in the bureaucracy for new software. The Department of Information Technology, which promoted the deal, couldn’t find much interest. But DOIT Director Elias Cortez apparently hid this fact from other Davis decision-makers. The state overbought and overpaid.
In her report ripping the contract last month, Howle asserted that the state’s naive negotiators were no match for Oracle’s “high pressure sales tactics.” They didn’t understand, she said, that Oracle is well-known for just this pitch: “Prices are going up; it’s the fourth quarter and we are ready to deal.”
Coulda, shoulda--did: The governor has rolled heads in the last 10 days.
He suspended Director Cortez after suspicious shredding was reported at DOIT. He sacked General Services Director Barry Keene, the overseer of state contracts.
He dumped eGovernment Director Arun Baheti after learning that the former Democratic operative had delivered a $25,000 campaign check from Oracle around the time of the contract signing. That violated Davis’ rule against state employees dabbling in his fund-raising.
So Davis gets points for moving quickly after this stink bomb exploded, but his overall image still takes another beating.
Shoulda--didn’t: What happened to the nagging nit-picker, the micro-manager, the governor who wouldn’t delegate?
“I micro-manage what’s on my plate,” Davis replied Friday. “There are transactions every day....They don’t require my personal knowledge.”
But what good is a nit-picking governor if a $95-million, no-bid contract isn’t even on his plate? Gray Davis could have avoided this scandal by being more like, well, Gray Davis.
