Logicon May Have Kept State in Dark

E-mails and testimony released Tuesday in a legislative hearing on the state’s $95-million Oracle software contract show that the salesmen involved limited what they told state officials on the assumption that “giving too much information can only be a bad thing.”

In a third day of Joint Legislative Audit Committee hearings on the matter, lawmakers reviewed internal e-mails of Logicon Corp., the Virginia-based company that pitched the Oracle contract to the state and stood to earn $28 million from the deal.

The e-mails reinforce the state auditor’s conclusion that the Oracle contract was approved by several state department heads and Gov. Gray Davis’ Cabinet secretary without independent testing of Logicon’s claim that it would save the state more than $100 million over the next decade.

Instead, according to a sharply critical audit released last month, the Oracle contract could cost the state $41 million more than it would have spent otherwise. The contract was intended to license hundreds of thousands of state workers to use various kinds of Oracle computer software.

Oracle and Logicon have volunteered to rescind the deal, and talks to do so are underway.

In testimony slowed Tuesday by Democratic concerns that the bipartisan committee is overreaching its authority, lawmakers heard Kim Heartley-Humphrey, a Department of Information Technology deputy director, describe her concern about Logicon’s proposal from the first time it was pitched to state officials in March 2001.

Among the concerns, Heartley-Humphrey said, was that Logicon wanted to do a contract through a state purchasing program that avoided competitive bidding and typically involved computer-related contracts of no more than $500,000.

She said she also worried that Logicon’s claims of massive savings had not been validated by the state.

On May 28, 2001, three days before the state signed the contract, Logicon employee Greg Loos described Heartley-Humphrey as “challenging” in an e-mail sent to Logicon co-worker Rajan Mittu.

“What exactly did she ask you for with this analysis?” continues the e-mail. “Tim is concerned about giving her too much detail unless she specifically asks for it, because Kim historically has a habit of complicating things.”

“It’s best to keep things at a ‘summary’ level with her--unless she has specifically asked for this much detail,” states the e-mail.

Another internal Logicon e-mail from earlier that day states, “We plan on giving Kim the least amount of data possible. At this point, giving too much information can only be a bad thing.”

Committee chairman Dean Florez (D-Shafter) asked Heartley-Humphrey whether Logicon was “intending to keep you in the dark?”

“I really can’t speak to that,” said Heartley-Humphrey. “They knew from the beginning that I had major concerns with it.”

The auditor found Logicon’s projection of how much the state would save on future Oracle software license purchases and maintenance “seriously flawed.” The company based its numbers on state purchase orders for Oracle software from 1997 through 2000, but included many products not covered by the $95-million licensing agreement. Logicon also inflated the savings by counting some costs twice, according to the auditor.

Northrop Grumman, the parent company of Logicon, said in a brief written statement Tuesday that because its cost savings data were complicated, the company decided that giving it to the Department of Information Technology “would not be helpful at that late stage.”

The company repeated its assertion that the Oracle contract “provides substantial savings” to California.

From its first hearing April 18, the work of the Joint Legislative Audit Committee has been politically fragile and wide-ranging, including an unusual and extensive request made Monday for copies of communications from the governor’s office.

Sen. Steve Peace (D-El Cajon) warned Tuesday that the committee risks overstepping its authority and possibly tainting any prospective criminal investigation. Federal Bureau of Investigation spokesman Nick Rossi said his agency is working with the U.S. attorney’s office to determine whether a criminal investigation of the contract is warranted. The state attorney general has also opened an investigation.

The committee defeated a Peace motion to limit the questioning of each witness by the committee chairman to 15 minutes.

“I think limiting the discussion limits the search for the truth,” said Sen. Ray Haynes (R-Riverside).

More hearings are scheduled for Tuesday and June 4.