County Scraps $60-Million Software Deal

The Los Angeles County Board of Supervisors terminated negotiations Tuesday on a $60-million contract with PeopleSoft Inc. and another company, abruptly suspending the county’s four-year search for a sorely needed business management software system.

After deciding in March to negotiate with PeopleSoft and the management consulting firm Accenture, county officials said the about-face was necessary because of continued budget concerns and PeopleSoft’s uncertain future.

The software that the county was negotiating to buy would have been used to automate payroll, accounting, procurement and inventory, and to manage bidding on county projects with a Web-based system, said Jon Fullinwider, the county’s chief information officer.

Fullinwider said the county had already spent “a couple or 3 million dollars” evaluating the system, and would spend the next 30 days “assessing strategy, reviewing and revamping the requirements we had identified” before recommending a next course of action.

Pleasanton-based PeopleSoft, which has been trying to stave off a hostile takeover attempt by the software giant Oracle Corp., was offering the county a software package that would have cost about $8 million. Under the proposed deal, Accenture would have been paid an additional $52 million to $54 million to install and maintain the software and to train county employees in its use.

But a county study found that implementing the entire software system would have cost as much as $100 million.

Further complicating the deal, county officials said, were statements by Oracle that it would discontinue the product being offered to the county if its takeover bid succeeded.

County Chief Administrative Officer David Janssen said Tuesday that a task force convened to evaluate and select any new software system decided that the risks of moving ahead were too great. “This project is too large, too important and too expensive to move forward just because we’ve been at it for a few years,” Janssen said.

Jim McGlothlin, a regional vice president for PeopleSoft, questioned the decision after a motion by Supervisor Don Knabe to delay negotiations for 90 days failed for lack of a second.

“It’s not every day that you have four years worth of work wiped out in a few minutes,” McGlothlin said. “Why go through a four-year competitive process if, in the end, the county’s not going to live up to its word?”

The decision is the latest setback for PeopleSoft, which the county selected for the valuable contract weeks after the company was harshly criticized in a state audit of a software package being built for the California State University system.

Although other major clients, including Cleveland State University and the San Francisco school district, had publicly complained about software glitches, Los Angeles County officials at the time backed PeopleSoft’s system, saying it had been evaluated by a task force of as many as 150 employees from every county department.

That same task force reversed its position and voted to terminate the negotiations, officials said, largely because of Oracle’s takeover bid.

“We felt that it put the county at great risk to continue negotiations with this vendor when at the end, we may not have a vendor who has a system like the one we reviewed,” said county Auditor-Controller J. Tyler McCauley.

With an already precarious financial outlook darkening by $2 million a day due to the loss of vehicle licensing fees from the state, Janssen said, the county should hold off on spending $20 million set aside for the project.

“I can’t reasonably say that this is a good investment,” Janssen said. “We ought to keep that money in reserve for the potential impact of state budget reductions.”

Knabe criticized the board’s decision.

“The tail end of this process was despicable,” Knabe said. “No one needs to be treated like that.”