Taxpayers Won’t Let Government Go Soft on Software Deal
SACRAMENTO
There’s a lesson for private enterprise in the software scandal. It’s the same lesson taught by the energy rip-off: Don’t get too greedy dealing with state government. The deal later can blow up, even blacken your eye.
Business sharpies may bamboozle bureaucrats or grease political hacks, but if the gain is too gross, consumers and taxpayers won’t stand for it.
Even more than corporate culprits, the protesters--voters-- have important contacts at the Capitol, their elected representatives.
When one company cons another company, the victim may never again deal with the offender. But the victim probably will be too embarrassed to tell everybody it got taken. By contrast, a victimized government shouts its plight to the planet. That’s because while a business operates as a united team, a government is in a constant state of rebellion. One group is always attempting a hostile takeover.
State government is two adversarial branches (excluding courts, which are less influential on policy than the court of public opinion). More to the point, state government is composed of two political parties, each trying to capitalize on the other’s missteps, perpetually playing gotcha.
Add to that volatile mix in Sacramento a large Capitol press corps, ready to pounce on any whiff of scandal.
At every turn there are checks and balances. And unlike at a business, there also are megaphones.
So for Oracle Corp. and Logicon Inc., their fat deal with the Davis administration was literally too good to be true. It was a six-year, $95-million “volume discount” software buy that figures to cost the state $41 million more than if it had never happened. That’s according to state Auditor Elaine Howle.
Oracle and Logicon dispute the auditor’s numbers, but nobody’s listening. Not even Republicans, who ordinarily would be expected to hear out “the private sector.” In this case, Gov. Gray Davis is an irresistible, legitimate target.
“It’s fair to say, this was a bad deal for the state of California,” says Sen. Chuck Poochigian (R-Fresno), a member of the investigating Joint Legislative Audit Committee.
“You know there’s a problem when the principals involved [Oracle and Logicon] are saying they’re perfectly willing to undo the deal. It looks very, very bad.”
The world got wind of this deal’s stench because Oracle and Logicon dealt with state government. All the checks and balances worked, partly because the state must share records with the public.
The contract was signed last May 31, and by summer, the San Jose Mercury News ran an investigative story. A legislative committee then held a hearing.
Computer-savvy Sen. Debra Bowen (D-Marina del Rey) watched two administration officials-- department directors Elias Cortez of Information Technology and Barry Keene of General Services (recently bounced)-- enthusiastically defend the contract. “It made me mad,” she says. “It didn’t smell right.”
Bowen asked for an audit by Howle, who works for the Legislature. The audit--precise and written in plain English--was delivered April 16, sparking the furor and creating a steady stream of news stories.
The joint audit committee jumped on the scandal and is holding hearings, putting witnesses under oath.
The panel is chaired by an ambitious Democrat-- Assemblyman Dean Florez of Shafter--who’d like to make a name for himself. But that’s how it’s supposed to work. This is not a private corporation of toady VPs, after all. And it’s taxpayers’ money that’s being spent.
“We want to get our money back,” Florez says, “and come to some conclusion about how we got to this point.”
Says Assemblyman Rod Pacheco (R-Riverside), a former prosecutor: “The more questions we ask, the more rocks we uncover. And nothing good can be found under a rock.”
Dan Schnur, a Republican strategist, says this scandal has caught the public’s attention because “everybody’s frustrated by computers. They get mad when a computer crashes. They end up buying a whole bunch of stuff they don’t need because the salesman tells them it’s important. People can completely identify with what the state’s going through.”
Marty Wilson, who manages a corporate PR firm, says Oracle and Logicon “are wise to want to get out of this contract quickly. It hurts their ability to communicate a positive message. And who wants to have your employees dragged up before some investigative committee looking for scapegoats?”
Companies love government contracts because they’re long-term and lucrative. Governments also don’t do Chapter 11s.
But beware of the dream deals. They can become nightmares.
