Let the spending begin

California established its new state technology services department last month with a mission: send a clear signal to agencies and industry that the state is serious about consolidating central IT services and functions and leveraging its buying power.California also announced in July the first of a series of consolidated purchasing initiatives that eventually might encompass servers, software licenses and maintenance agreements, said Clark Kelso, the state's chief information officer."Industry is going to see a more sophisticated buyer of IT goods and services," he said.The most visible sign that the state has turned over a new leaf was its creation of a new California Technology Services Department July 11. The move consolidates the Stephen P. Teale and Health and Human Services data centers with the General Services Department's Network Services Office. They will be under the jurisdiction of the California State and Consumer Services Agency.Bob Austin, chief deputy director and acting director of the Technology Services Department, said the new department will work closely with Kelso to develop the best strategy for delivering cost-effective IT support to agencies."We want this new department to be the foundation for supporting the infrastructure of California," Austin said.The consolidation of two large general purpose data centers with the organization responsible for telecommunications in California agencies will improve efficiency and eliminate duplication of services by gaining economies of scale and promoting shared services, Austin said.After the data center consolidation is completed, state officials will explore ways to consolidate other IT infrastructure that state agencies share, Kelso said. The new department will help California strengthen the viability of future projects and approach large-scale, statewide efforts in a much more efficient way than it has in the past, said Mike Keating, vice president for the U.S. West and state and local group at CGI-AMS, Fairfax, Va."Before, there was [some] doubt about whether these changes were coming and how they would affect potential future procurements. But now that the state has created DTS, I believe it can streamline the way procurements happen," Keating said.The department was created by a reorganization plan crafted by Gov. Arnold Schwarzenegger (R) and approved by the state legislature. The new technology department differs substantially from its predecessor, the California Information Technology Department, which the legislature abolished in 2002 following disclosure of questionable contracting processes by the department."We are going to try to instill in this new department a culture as a service provider," Kelso said. "DTS is not a control agency, but a service provider."The creation of DTS does not alter state purchasing policy for IT goods and services, Austin said. Still, the department plans to work with state agencies and the General Services Department to improve software purchasing."We are exploring [software purchasing] right now with specific companies, so that we buy as a state instead of each department purchasing separately," he said.The state CIO, a new Technology Services Board and the California Finance Department will share responsibility for the so-called control functions: the establishment of IT policy and strategy, Kelso said. The board comprises the CIO, the director of the Finance Department, the state controller and the secretaries of the major agencies.The Technology Services Board will approve the new department's annual budget and the rates it charges agencies for services. The board also will advise the department on its annual operating plan, Austin said.Both the Finance and General Services departments have been involved in IT governance, and they will play an important role in the new model, CGI-AMS' Keating said The new model should bring them into the process in a more collaborative fashion than before, he said."California is in the process of transition, and it is going to have to work through an effective governance model," Keating said. "But I would rather see them start now than not start. I don't think having all of those hands in the pot is necessarily a problem, because they were there before. It is just a matter of getting [the participants] all focused on the same thing now."Deputy Editor William Welsh can be reached at wwelsh@postnewsweektech.com.XXXSPLITXXX-California has awarded seven statewide contracts for computer hardware worth $117 million to an array of technology companies as part of a new strategic sourcing initiative.This is the first time the state has developed common configurations for computer equipment, California officials said. The competitively bid contracts were awarded under the California Strategic Sourcing Initiative undertaken last year by the state's General Services Department."The private sector will discover that we will be doing procurements in a different way," said Clark Kelso, California's chief information officer.Kelso described the hardware procurement as "very successful," and said the state plans to do more IT procurements with the new Technology Services Department.The two-year contracts are:The contracts are expected to save California about $40 million over two years, officials said. Average price reductions range from 15 percent on peripherals to more than 46 percent on printers.The open, competitive bidding process was run using a best-value approach, California officials said. Sixty percent of bidders' scores were based on price, and 40 percent were based on technical and administrative requirements, such as service levels and customer references.The goal was to make awards not just on price but also on a combination of factors."There were many fine proposals, but these represent the best of the best: contracts that offer the strongest combination of low prices, outstanding service and progress on our socioeconomic goals," said Ron Joseph, director of the state General Services Department.The department hired CGI-AMS of Fairfax, Va., a year ago to assist with the strategic-sourcing initiative. The company receives 10.5 percent of the savings on all procurements negotiated under its five-year contract with California, said Mike Keating, vice president of CGI-AMS' U.S. West and state and local group.Keating declined to say how much the company has been paid so far on the project. The long-term nature of the contract is necessary to allow sufficient time to collect procurement data and to roll out the initiative in waves, he said.The procurement data collected will let state officials "assess which categories of procurement reform would be the most appropriate and productive," Keating said.So far, California has identified several different procurement categories that will be strategically sourced, he said. Some procurements will be conducted in tandem; others will be done one at a time, depending on the size of the procurement.The procurement will include both IT and non-IT products and services, Keating said."Obviously, IT is very attractive, because it not only can create real business benefits, but also a pretty high level of savings," he said. "So IT has been a big focus out of the gate."