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Hasty tech deals and questionable payments assailed

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Auditors say the state misspent $1.7 million of taxpayer money to buy software before justifying the need, and as a result, it will likely never be used.

In addition, in the legislative auditor general's findings presented Monday to lawmakers, the report revealed questionable technology payments of $1.1 million to a vendor that employs the son of the state's chief technical architect.

The total payments to the vendor jumped from a yearly average of $415,000 over two fiscal years to $1.4 million in fiscal year 2001 — hastily crafted purchases that were the result of inadequate analysis and weren't properly bid.

However, that same employee had raised concerns about one of the eventually unused software purchases because of the high price tag and the excessive amount of time necessary for implementation.

Before the purchase had been made, he wrote these concerns to then-chief information officer Phil Windley in an e-mail.

"Right now these guys are a solution looking for any kind of problem, and even though I view some of their applications as world class . . . the price is equally large. In a budget deficit environment it is hard for me to understand why we are spending so much time with them."

Windley replied: "Well, right now they're looking at moving some operations to Utah, so look at it as business development."

The audit said other information technology employees believed there was no reason to replace the existing software.

Aside from the lack of analysis on the three purchases in early 2002, the audit said all were obtained in a "non-competitive" fashion, even though the state has well-spelled-out procurement policies.

The audit found in the instance of an electronic forms contract ultimately valued at $1.2 million, the company responded to the bid two months after it was closed.

Its cost proposal was "very aggressive" and included significant discounts, the audit said, coming in after the other bids had been reviewed by a selection committee. That chain of events led auditors to question how fair the competitive playing field was in this instance because there was no guarantee the vendor wasn't made aware of his competitors' proposals.

Ultimately, the vendor's master licensing agreement with the state was amended to accommodate the $1.2 million purchase, even though the former director of the technology division did not believe it would meet the needs of the state.

Despite pressure from Windley to pay the contract, the director refused to pay the $1.2 million, and eventually the amount was negotiated down to $134,000 to cover the costs of the licenses.

The director has since retired, and the new director, Steve Fulling, scrapped the entire project.

The audit overwhelmingly raises questions about fairness and playing by the rules — echoing two complaints that surfaced last year in an audit probing hiring practices.

That audit, which probed contracts that circumvented bidding procedures and hiring processes that spoke of favoritism, created such a furor that Windley resigned in December.

Now the attention has shifted to the state's chief technical architect, who denied having any involvement in the purchase decisions that were made to the vendor where his son is employed.

Auditors found the purchases of storage tape drives were made without a thorough cost analysis and curiously happened when two IT managers over storage were at an out-of-state conference.

Those employees were surprised at the product choice, since the state had been moving away from "tape" storage in favor of putting information on disc.

In addition, auditors could not find a sufficient paperwork trail to determine how the decision had been made, and by whom.

Although an alternative solution to go to software had been favored by key players, the vendor of the tape drives was chosen, but auditors could never identify who made the vendor selection.

Department of Administrative Services executive director Camille Anthony, appointed to the post after the purchases had been made, agreed with the audit's recommendations about tightening spending controls and the need for more in-depth reviews before purchases are made. Some of the recommendations have already been implemented in steps taken after an internal audit was performed last November, Anthony said.

E-MAIL: amyjoi@desnews.com