Out of Control Policy Blog

Two Firms Drop From Georgia IT Modernization Bidding

Gov. Sonny Perdue's state technology privatization initiative in Georgia (reported on here) has hit a bump in the road:

When Gov. Sonny Perdue took office in 2003, one of his first acts was scrapping an ambitious $1.8 billion plan to outsource the state's computer networking and telecommunications.

The plan, inherited from Gov. Roy Barnes, bothered Perdue because only one company ended up bidding. Now, after years and millions of dollars in consulting fees to try again, he faces a similar problem.

In December, Perdue announced the Georgia Technology Authority was seeking two contracts worth a total of $1.2 billion to $1.4 billion and lasting five to seven years. [. . .]

Initially, it seemed to work, with three large companies expressing interest: IBM, Northrop Grumman and EDS.

In recent months, two companies have withdrawn, leaving the state with just one bidder, just like in 2003.

Several months ago, Northrop Grumman dropped out, and late last month, EDS notified the authority it was dropping out.

With only one bidder for the two enormous contracts, the authority now is put in that familiar awkward position: The state can either start contract talks with IBM, dramatically reducing its negotiating power, or it can scrap the deal.

If Perdue withdraws the contracts, the authority must continue running computer networks for major state departments with what Perdue has described as "inefficient and ineffective technology."

The authority assumed it would get several bids, and it already has reduced its staff in anticipation of the outsourcing."

Absent further information, all I can say at this point is that these types of large-scale integration initiatives are inherently complex, as we learned from Florida. It's always worth taking a read back through the lessons learned from three of Florida's large, controversial state outsourcing projects—MyFloridaMarketPlace, People First and Project Aspire—which arose out of the state's plan to upgrade and modernize its core operational software and IT infrastructure, specifically its accounting, cash management, procurement and human resources functions. Different from Georgia in scope, yes, but similar system modernization efforts in terms of scale and complexity.

All three Florida programs required significant modifications along the way, and all have had significant development, implementation and performance-related issues (though to be fair, things have certainly improved). The state's Council on Efficient Government issued a detailed report earlier this year examining the troubled initiatives, covered in Reason's Annual Privatization Report 2008 here. It's a must-read for any policymaker or official embarking on similar efforts. Florida's experience moving from procurement to implementation can provide useful lessons to Georgia as it moves towards contract development.

» Reason's Annual Privatization Report 2008
» Reason's Privatization Research and Commentary

Leonard Gilroy is Director of Government Reform


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