Lawmakers Seek to Reform California's IT Department

The California Department of Information Technology, already facing a sunset law that would close its doors next June without legislative action, is coming under heavy fire from the state auditor and state legislators for cost overruns and mismanagement of information technology projects. Although the legislature is expected to reauthorize the agency's charter, lawmakers likely will institute reforms aimed at improving the IT department's management and oversight responsibilities. Lawmakers also may increase their oversight of the department."The legislature needs to play a greater leadership role on this whole issue," said Manny Diaz, chairman of the Assembly Budget Committee on Information Technology and Transportation.California lawmakers were irate when they learned in August that the department negotiated a 10-year, $126 million database software contract with Oracle Corp. of Redwood Shores, Calif., without notifying the legislature before the deal was signed, which they claim is required by state law. Meanwhile, California State Auditor Elaine Howle told the department in June to take immediate steps to strengthen IT oversight and to provide greater assistance to other agencies, such as the California departments of Transportation and Health Services, which are experiencing significant cost overruns on complex IT projects.Elias Cortez, California's chief information officer, said in a June 13 letter to Howle that the state lost $500 million during the previous administration on failed IT projects.Cortez heads the Department of Information Technology, which oversees the state's IT investment and is scheduled to be shut down June 30, 2002. The law that established the department in 1995 included a sunset provision, popular at the time in California, to prevent the growth of government. The department's pending closure prompted Diaz to introduce Assembly Bill 1559 this year that would repeal the sunset date and amend the department's responsibilities. The auditor's report and other recent events, such as the Oracle contract, have prompted Diaz and his fellow lawmakers to call for hearings to re-evaluate the IT department's structure, ensure that the department can perform its oversight duties, and ensure that proper accounting procedures are in place. "I'm not convinced that the Department of Information Technology can get its job done with the current structure," said Diaz. "So long as [the structure] is murky, the department is going to have a problem."As for the sunset provisions, the legislature can either extend the department for more years or repeal the provisions entirely, Diaz said. Although the current version of the bill would repeal the provisions, Diaz is not sure which approach the legislature will take. Diaz has said that if the department were to be disbanded, it would be extremely hard to get and keep a talented IT work force in the California government.Arun Baheti, California's director of e-government, said the administration of Gov. Gray Davis believes the sunset provisions should be removed and the Department of Information Technology should become a permanent part of the state government."From our point of view, the department needs to exist, because it provides a necessary oversight function," he said. "We don't see where that function would go otherwise."Former California chief information officer John Flynn agreed. "It would be disappointing not to have an organization [in California] that is responsible for IT oversight," he said.For his part, Diaz said he disagrees with some legislators who have suggested the department should be disbanded. He said the legislature and administration should strengthen the department and make sure it follows proper accounting procedures, including notifying the legislature of any major IT spending. California spends more than $2 billion annually on information technology. About 235 of the state's 2,500 IT projects cost more than $1 million, according to the Bureau of the State Auditor.Howle found substantial shortcomings in the Department of Information Technology's oversight of IT. For example, the department has not sufficiently reviewed individual projects or agencies' strategic plans, and has not established key standards for IT projects. This has led to cost overruns on numerous projects, according to Howle. The cost of a Transportation Department toll collection system, for example, had grown from an original projection of $27.8 million to $56.1 million. A case management system for Children's Medical Services grew from $5.6 million to $10 million.The department's lack of progress on certain requirements and initiatives could lessen its credibility, Howle wrote in the report. She recommended the department update the statewide IT plan, re-engineer the oversight processes for agency IT efforts, and adopt an internal strategic plan to identify key priorities. The department also should maintain an inventory of IT projects and make the data available to the California legislature.California CIO Cortez responded to the report by stating there have been no major IT failures during the current administration, and that the administration's enterprise approach to IT management will address most, if not all, of the auditor's concerns. The absence of major failures may be connected to the reluctance by the state to tackle major, new IT projects, particularly those that were terminated by the previous administration, Flynn said. He also estimated the cost of terminated projects at $300 million, not $500 million as Cortez had told Howle. "They are very reluctant to go forward with large projects," he said. Department of Information Technology officials would not comment for this story. Baheti, whose office is separate from the department, said the Department of Information Technology agreed with the state auditor and was in the process of implementing some of the suggestions.Diaz said a major shortcoming of the state auditor's report was that it did not address the IT governance structure.On Aug. 23, the California legislature held a joint hearing to discuss the pending sunset of the Department of Information Technology and get a better understanding of IT management and oversight within the Davis administration. During the hearing, officials from the departments of Finance, General Services and Information Technology were asked how much the state is spending on IT, what the process is for spending this money and who is accountable for how it is spent.The lawmakers were disappointed that state officials could not answer many of these question, Diaz said. He said his committee will hold hearings this fall on the governance structure and IT procurement policy, and make recommendations to both houses of the legislature and to the administration.