San Diego County's Outsourcing Pickle

By Steve LeSueurStaff WriterSan Diego County is poised to begin a $1 billion competition to outsource its information technology work, but the union continues to oppose the plan to turn over local IT jobs to a private company.Employee representatives said last week the county has not examined seriously the benefits of investing in its approximately 500 IT employees as an effective way to improve technology services."We think that if they examine the real cost of what it would take for county workers to do the job, it will prove they are more cost-effective," said Mary Grillo, executive director of Service Employees International Local 2028.It is uncertain whether union opposition can alter or even slow the county's plan to outsource its information services. The county board voted 5-0 Nov. 10 to proceed with the request for proposals, set for release on Feb. 2. A contract award would follow July 1 with board approval.The San Diego project is regarded widely as a landmark procurement. Connecticut, the only state to propose outsourcing all of its IT services, plans to select a systems integrator this month for a contract worth about $300 million annually. Prolonged delays stemming from union opposition slowed Connecticut's project.Larry Prior, chief administrative officer for San Diego County, said he is required by law to issue a "finding of economy and efficiency" in which he examines the costs of investing in-house vs. the costs of outsourcing the work. But, he said, that cannot begin until April, when he receives the contractors' bids.Plans call for the county to award a contract for up to 10 years and potentially worth about $100 million annually. The systems integrators pursuing the San Diego project are the same ones that are vying for the Connecticut contract: Computer Sciences Corp., Electronic Data Systems and IBM Corp. Other companies that may seek a role on the San Diego project are Lockheed Martin, Lucent Technologies, Pacific Bell, Science Applications International Corp. and TRW Inc., officials said. While it is not uncommon for state and local governments to outsource portions of their IT services, San Diego would be the first county to contract out all of its IT services, including its telecommunications, data centers, network administration, desktop acquisition and applications, and systems maintenance and development. With nearly 18,000 employees and a budget of $2.2 billion, San Diego is the fourth largest county in the United States. Its $100 million annual budget for IT is larger than that of most states, industry officials said.San Diego County officials believe outsourcing will prove to be the most effective way to upgrade the county's IT services. They claim the county's IT capital and staff are several generations behind, and that the cost to make improvements and retrain staff would be immense."We're trying to make such an enormous leap in the architectural network that it's hard to do in-house," said Prior.The main problem, he said, is IT is not one of the county's core competencies. Consequently, its IT departments cannot provide the expertise and service of a world-class IT company."The pace of change in technology is so rapid today that if you're not focused on IT, you're not going to do it well," Prior said.Everyone is watching the San Diego and Connecticut projects to see if outsourcing shows benefits, said Rishi Sood, director of the state and local government group at G2R, a Mountain View, Calif., market research firm.Private businesses have been outsourcing their IT services for many years, as have foreign governments, and it appears to be gaining ground in the federal government, he said. Outsourcing should accelerate among state and local governments in the next year to 18 months, Sood said.Prior, the prime mover behind San Diego's outsourcing plan, is a former executive with TRW who has pushed to streamline county services and bring business discipline to government. One of the chief reasons he wants to outsource IT is so he can put more county services online. "We're wired here in San Diego, and I want to take advantage of that," he said. "People could get dog licenses [and] pay tax bills through ATM machines ... I can't overemphasize how important e-commerce is to government. It will have a dramatic impact on our customers."Prior said every effort would be made to find jobs for the county workers affected by the planned outsourcing. Earlier this week, he sent a proposed transition plan to the county board recommending that the new contractor be required to hire all county employees who desire work for at least 120 days. This will give the new company an opportunity to assess the workers' skills, and give the workers a chance to evaluate the company.However, Grillo said none of the workers she has talked to intend to work for the new contractor. When the county privatized other services in the past, the new contractors cut loose the county employees as soon as the required period ended, she said. "There is no trust or confidence among our workers that they will be retained," said Grillo, whose union formally represents only 150 of the affected IT employees but is working with other IT personnel.Andy Beauparlant, a computer systems analyst with the county for 27 years, said working for a private firm is not appealing. "I came to work for the county because I believe in public service," he said. "Many of us could have gone into the private sector years ago if we had wanted."The anger and resistance voiced by the county's IT workers is common in outsourcing arrangements, industry officials said."It's a traumatic experience," said Jack Winters, vice president, government/education industry in Bethesda, Md., for IBM Global Services, whose company is one of the world's leading outsourcers. But businesses can usually offer more opportunities for training and career development, he said."We can't be successful unless we have a substantial number of employees transition with us," he said. "We're in an industry where there are more jobs than people to fill them. For all the affected employees who want to come, we've been able to provide employment."The experience at EDS has been much the same, said Sharon O'Malley, vice president of enterprise outsourcing for the EDS Government Industry Group, Herndon, Va. "We have about 110,000 employees, and about 45 percent of them were transitioned through outsourcing into our company at one time or another," she said.In one instance, all 2,000 IT employees from United Kingdom Inland Revenue, the British tax collection agency, were transitioned into EDS as part of an outsourcing project."Our industry has gotten a lot smarter in recognizing that we need good people," she said.