IT is being described as the largest county privatization contract of its kind anywhere. IT has the potential to transform the citizens' relationship with government. IT has attracted the attention of IBM, CSC, and EDS. IT has drawn the wrath of local union leaders. IT may be worth more than a billion dollars. But IT is not yet a done deal.
    IT is the County of San Diego’s Information Technology Privatization program, which was launched last fall by former county Chief Administrative Officer Larry Prior, who left his post in May to rejoin private enterprise. On Feb. 23 of this year, the Board of Supervisors authorized an RFP (request for proposals). This month, the county begins an evaluation of the contenders' proposals that will end in September with the award of a seven-year, $700 million contract, with three option years. To the winner, IT will be bigger than a whole team of bonus-baby quarterbacks.
    The county says it wants out of the information business simply because the industry is passing it by. According to a county-funded report by The Warner Group, the county spends nearly $100 million annually on technology-related activities for telecommunications and IT systems Warner says are "aging and unreliable." The current cost is split almost evenly between the county's telecom and IT contracts, and includes $35.5 million spent on technical staff. Some county employees do not even have e-mail.
    "We don’t feel we have a choice," says Supervisor Pam Slater. "At the rate technology is changing, we can’t afford to hire the people we need and we couldn’t afford to pay them if we did. There are segments of the county that don’t have any computers or they're using 386s or lower and a lot of the departments can’t speak to one another."
    Or to us. The county says its citizen customers recite a litany of complaints about service, from too much paper to down computers to lack of Internet access. And nobody wants to wait 45 minutes for their permits to be pulled. The county has adopted two rallying cries for its IT leap: "No wrong doors" and "Online instead of in line."
    The county's 21st century vision of communications includes online park reservations, animal adoptions and library systems. (Those without computers are being promised Internet access via kiosks that would be placed in high traffic areas.) The effect of IT privatization would be widespread, with law enforcement applications ranging from allowing the Probation Department to store 70,000 files online to digital mug shots and fingerprints in the Marshal's Department.

    Prevented from talking about the proprietary information in their proposals, the contenders talk about the strength of their teams and promote their ties to San Diego, each claiming "home team" turf.
    The Computer Sciences Corp. consortium has dubbed itself the "Pennant Alliance" and includes San Diego headquartered Science Applications International Corp. with more than 35,000 employees; Pacific Bell, a subsidiary of SBC Communications Inc., San Diego’s third largest employer with more than 5,500 local employees; and Lucent Technologies, a provider of voice, data, optical and wireless networking with eight locally-based offices and also a member of the IBM Team (see below). The Pennant Alliance says its members already employ more than 11,000 county residents with an annual payroll of $600 million.
    The EDS Partnership for San Diego County includes the local operation of Cox Communications, which provides nearly 500,000 county residents with cable television, high-speed Internet access, digital telephone and television products; Qualcomm, one of San Diego’s few locally-headquartered Fortune 500 companies; Gateway, another Fortune 500 member which last year moved its headquarters here from South Dakota and employs 19,000 globally; Microsoft, the world's largest software company; AMS, an international business and IT consulting firm; A.T. Kearney, an EDS consulting subsidiary; and Williams Communications Solutions, a provider of business communications equipment. EDS says its members employ 12,000 who live or work in the county.
    The third contender, the IBM Team, includes KPMG, a national provider of accounting, tax and consulting services that was earlier selected by San Diego County to combine five departments into a single Health and Human Services agency; Lockheed Martin, a worldwide provider of information management and payment systems whose San Diego projects include support for welfare to work programs; Sempra Energy, a Downtown-based Fortune 500 energy company employing 12,000; AT&T, touted by IBM as the operator of a "high speed backbone network" in San Diego; Lucent Technologies; San Diego State University's International Center for Communications, a nonprofit educational foundation created under the leadership of SDSU professor John Eger to better understand the link between community and communications technology; and Xerox Corp., inventor of the laser printer. Sometime this year, IBM is expected to install at UCSD one of the world's 10 fastest supercomputers. In addition, IBM will involve about 1,000 San Diego area cable subscribers in a pilot program to distribute full-length, CD quality albums over the Internet. IBM says an estimated 3,000 employees of its team members live and work in the county.
    Executives of the contending consortiums are eager to launch a new wave of online governments in San Diego. "The future is virtual government accessible around the clock," says Richard Jennings, vice president and general manager of the Western Region of CSC. Jennings says online government will not only provide better service for citizens, but will help the county manage its money. "IT can certainly help the management and tracking of investments with systems used by the Fortune 500, so the county has more information, more facts and its management can make better decisions."
    The outsourcing of information technology by business and government is a wave that has not yet crested. CSC's outsourcing clientele includes DuPont ($3.5 billion contract), British Aerospace ($2 billion) and Raytheon ($1.5 billion). IBM is handling companies like Boeing ($200 million), Eastman Kodak ($50 million) and Ameritech ($200 million); its partner Lockheed Martin has been successful in garnering federal IT outsourcing contracts, including the Department of Energy, the Environmental Protection Agency, and the Department of Housing and Urban Development, all valued at around $500 million or more.
    The San Diego County IT privatization is one of the largest such initiatives ever undertaken by a local government, says Bill Kumagai, partner of the Los Angeles-based Warner Group which has signed on as a county consultant in privatizing IT. Kumagai says IT privatization has been a success in Irvine, Anaheim, and Solana County and that Los Angeles County is "looking at it." Indeed, San Diego’s all-encompassing IT effort is garnering attention from government agencies throughout California and the nation.
    "It’s important to understand that many governmental telecommunications and data contracts are already outsourced by government, but it’s done piecemeal," says Kumagai. "It’s very difficult for a county to keep up with the pace of technology available to the private sector, or pay top dollar for a systems administrator."
    Kumagai says that as governments begin to treat policy initiatives as business decisions, they will look for ways to get out of chores that can be done more efficiently elsewhere. "So they ask what is our primary business, our core competency? Is it building roads, keeping up parks, public safety? If we had to start all over, would we do it in-house, and if not, why not do it outside?"
    "Government outsourcing is an evolving market," says John Crysler, executive program director of the EDS Partnership for San Diego County. "As I became familiar with the county's strategy of re-engineering government, the benefits begin to diminish unless you can build in a technical infrastructure to expand service in a cost-effective way. You need reliable communications in a geographically dispersed area like San Diego."
    Catching IBM's eye was the all-encompassing nature of the county's request.
    "IBM became interested when we understood the nature of the county's request to include not only telecommunications but pretty much all aspects of IT and communications," says Robert Payne, senior project executive of IBM Global Services. "We think it’s going to be a model for state and local governments across the nation." IBM already handles the IT needs of Maryland's health and human services agency and Michigan's financial systems. Payne is sympathetic to the county's need for IT talent. "There are 350,000 IT jobs open in the United States today," he says. "We invest $1 billion a year in educating our people and it’s hard for any business or government to keep pace in an industry evolving that rapidly."
    Not everyone is pleased by the county's feet-first leap into the 21st century. A newly formed coalition called Citizens for Quality Services recently called for a moratorium on county privatization projects, citing what it called "privatization failures" in child care payments and mental health services. Chaired by Charlie Williams of the California Congress of Seniors, the group contains labor leaders, academics and a city council member from National City, Ralph Inzunza.
    "We feel strongly it’s a mistake on the part of the county to outsource their entire IT on the scale they're talking about," says Mary Grillo, executive director of Service Employees International Union Local 2028. "The one area you really want to have control of is your IT. I think it’s going to blow up in their faces."
    Grillo's union represents about 60 employees expected to be affected by IT privatization. She has asked for an election to determine whether the remaining 240 county IT employees want to be represented by her union local. At press time, the election date had not been set.
    In response to the charges, Slater says, "She (Grillo) is just doing her job. If you think about the function of a labor union organizer, she's just opposed to the change we’re contemplating." The contending consortiums have agreed to provide a minimum of five months' salary and benefits for the county's 300 IT workers, and point out that thousands of employees have joined them as a result of other outsourcing contracts.
    Slater says the benefits of IT outsourcing will reach every county employee. "We look at it as a quality of life issue for our employees. We believe people who are involved in technology have an opportunity for better jobs and higher pay," she says.
    With so much at stake, county officials are intent on making sure the contracting process is, like Caesar's wife, above suspicion. In February, Supervisor Dianne Jacob recused herself from voting on the decision to issue an RFP because of her husband's investments in several member companies of the bidding teams.
    The only county employee allowed to communicate with both the county and the contenders is Weaver Simonson, contract division manager in the county Office of Purchasing and Contracting. "We have everyone's secrets now and we’re controlling that information very tightly," he says. "I have oversight responsibility over the entire procurement process. We want to ensure the reliability of information coming from the county."
    Simonson distinguished the IT procurement from the garden variety competitive bid contract entered into by the county. "In a construction contract, for example, we have drawn up detailed plans and specs. The contractors are licensed by the state, they submit a bid and we award to the lowest bid," he says.
    The county's IT contract is a "competitive negotiated procurement," says Simonson, meaning that the contract does not have to go to the lowest bidder, but to the bidder that provides the "best value" to the taxpayers. To qualify the IT contenders, the county established criteria of $1 billion in revenue for the past three years, and an existing $50 million per year contract. Five companies, including SAIC, CSC, EDS, IBM and Lockheed Martin, became initial qualifiers. SAIC teamed up with CSC, and Lockheed with IBM, resulting in the three finalists.
    "We do 80 or 90 negotiated contracts a year and we have procedures in place," says Simonson. "It’s not the first time we’ve done this; this one is just bigger than the others."
    Lana Willingham is chief deputy administrative officer for the county and heads up its IT Tiger Team, a core group of five charged with shepherding the project through the process and consulting with other county employees to assess how IT outsourcing affects various departments. "The intent of the project is to have people transact their business with the county from their homes; and when they do come in, to have a streamlined process without paper having to flow between county departments," she says.
    This month a nine-part evaluation begins on parts of the bidders' proposals, but not the entire packages. The work of the nine evaluation teams is being kept under wraps. The county also has hired attorneys Gordon Glickson, privatization contract specialists from Chicago, and Price Waterhouse, a Big Five accounting firm, to conduct a price analysis of the contenders' bids.
    Their work will be reported to an 11-member selection committee, whose identities also are under wraps. That group will report its selection decision to Walt Ekard, the county's new chief administrative officer. Ekard then will present his recommendation to county supervisors. The evaluation process is expected to be complete sometime in September.
    Whether IT will transform San Diego County government into a 21st Century model of efficiency remains to be seen, but there's little doubt IT is on the way.