Connecticut's IT Face-Off

On Feb. 24, a 2-year-old Connecticut girl, Raegan McBride, died of a severe head fracture while in the care of a state-licensed home day-care service. This tragedy has led to recriminations in the state's child welfare community, whose oversight agencies failed to share complaints against the provider that date back to 1991. And it has a become a potent symbol of disconnected government.

"The case has exposed the fact that there are times when state and private agencies may not know what each other is doing, and part of that is that we have different computer systems," said David Dearborn, a spokesman for Connecticut's Department of Children and Families, which places children in state-licensed foster care.

It is also a case that Connecticut Gov. John Rowland is using to beat the drum for an audacious plan to outsource computer and telecommunications operations for the state's executive branch. "We're good at building bridges and running prisons," said Rowland, at 39 the country's youngest governor. "But we're not in the business of [information technology]. We're in the business of government."

Armed with a consultant's report and visions of electronic government, Rowland wants to set up a state Department of Information and Technology, appoint a state chief information officer and outsource executive branch computer systems wholesale. In the process, he says, the state would save $50 million by the second year of the contract and finally integrate its agency systems.

More than 30 companies-a roll call of the computer industry-are lined up to bid on the contract, which could be worth more than $1 billion when finally awarded in the fall. It includes IBM Corp., Unisys Corp., Computer Sciences Corp., Electronic Data Systems Corp., Computer Associates Inc., Lucent Technologies Inc., AT& T, General Electric, Intel Corp., Lockheed Martin Corp., Science Applications International Corp., Andersen Consulting, Deloitte&Touche Consulting Group and Xerox.

"Every snout is going to be in this trough," said Rick Melita, political education coordinator for the Connecticut State Employees Association, which itself is wiggling to bid, at least for now, as is KPMG Peat Marwick, the state's computer consultant.

Managing the project will mean marshaling expert-even brute-political force. "The hard part is the political dimension," Rowland said. It is an understatement; the plan is being challenged by some in the Democrat-controlled General Assembly who advocate internal fixes first, insiders who dispute its projections and the group with perhaps the most political whiplash: state information systems (IS) employees whose jobs are at stake.

"The potential of displacing local people from local jobs can be a political nightmare," said Linda Cohen, research director with The Gartner Group, Cambridge, Mass.

But not acting because of such fear can lead to paralysis. "People need to understand this is not about getting rid of their jobs. Most companies that perform this service will hire a lot of these employees," Rowland said.

That has not been worked out yet; for now, the plan calls for the winning vendor to hire displaced employees. "We'd like to see [the contractor] retain jobs and grow their business in Connecticut," said Gregg "Rock" Regan, Rowland's project manager on the computer project. "The state's intent is to make sure that everyone affected is offered a position."

"The goal is not to displace workers but to improve service and allow greater electronic commerce between citizens, businesses and government," said Peter Gioia, an economist for the Connecticut Business&Industry Association (CBIA). "EDS and IBM people don't see government workers as a problem but as a resource."

'Lipstick on a Pig'

To the union, of course, such guarantees are a joke. "They're going to put lipstick on a pig and try to sell it as the wave of the future," Melita said.

Even so, most everybody agrees the system's needs are more than cosmetic. Describing Connecticut as "a $10 billion corporation," Rowland said the state is saddled with "no real centralized effort, communications or coordination" in its information systems and in the procurement channels. Last year it purchased some 15,000 PCs, complaints about which are "somewhat legendary," he said.

Even the current operators and overseers say the system is in trouble. Rep. Shawn Johnston (D), chairman of the General Government Appropriations Subcommittee, said, "There is a general consensus that there are problems systemwide." And Frances Moffett, director of information services for the state's Department of Revenue Services, said, "Information exchange can be a problem; the system is working, but we have a lot of old legacy systems."

The consultant's report is much more blunt. Peat Marwick, hired by Rowland to analyze-some say excoriate-Connecticut's management information systems, found the state currently spends $329 million annually on systems for which little financial accountability or performance measures exist.

According to the consultant, there is no tie-in between the budget process and any of 61 technology plans on file with the state. "No one maintains financial data for IT per se," a Peat Marwick consultant said. Also, the state's two existing service delivery and oversight agencies have skirted leadership roles; no one is looking out for data-sharing opportunities; there is no standard technology architecture; and no application life-cycle process exists.

The report has drawn fire in some quarters. "It fails to mention any successes in state government," said Gil Santavenere, the data proc-

essing manager for the state's Department of Veterans Affairs, who cited the Department of Social Services' eligibility verification system. "The real success came out of the agency's own people. Typically, it's the state professionals that carry a project through to success."

Santavenere is also chairman of the Information Technology Managers Association, an advisory group of agency IS managers that has withdrawn its own letter of intent to bid on the project "because it could compromise our role as an advisory board," he said. ITMA is recommending the state consolidate, but not privatize, IT.

Of course, third-party analysis is all but required for a project of this scale. "The state went about the process in the right way, quantifying the cost-benefit of existing operations," said Meghan Cotter, public-sector practice leader with G2 Research, Mountain View, Calif. "They asked, 'How much are we spending, and what are we getting?'"

Assembly Face-Off

Placing itself in the line of fire, Peat Marwick has said it also will bid on the deal, prompting some to say they will ask the attorney general to explore a conflict of interest. And giving ammunition to the critics: "A little sunshine is the best disinfectant around," chimed Melita, who called the project "ideological, not business-oriented" and said the union will "fight this in the legislature."

They will not have to look hard for a hearing. "We need strong centralization before we can intelligently consider whether data proc-essing ought to be privatized," said Rep. Susan Bysiewicz (D), chairwoman of the House Government, Administration and Elections Committee, which is to take up the IT bill this month. The panel wants to "establish a set of criteria" to help judge and approve outsourcing proposals valued at more than $5 million.

Connecticut policy-makers have been here before. "Three governors tried to get a handle on IT using the current structure, and they haven't had much luck," CBIA's Gioia said. "Most have suggested outsourcing certain areas. IT has always come up because of the amount of money we spend a year and the inadequate service we get," Rowland added. Most recently, a bipartisan team from the previous administration recommended taking an "evolutionary" approach to computer integration after looking at other states that tried expensive "big-bang" solutions.

Of course, the bang will be in the bucks. Rowland's plan projects savings of $50 million in the second year of the contract. But on the inside, at least, doubters are everywhere. "The costs of data processing services are going to skyrocket," ITMA's Santavenere warned. At his agency, staffers are paid a $1 per hour premium for being on call seven days a week, a value he doubts could be delivered by the private sector. "I know my costs would go up immediately," he said.

Meanwhile, the budgeteers are being cautious, if not skeptical. "It won't fly unless it's detailed much better," said Johnston, who allowed there might be "some savings" realized. "It's going to be budget-driven. If the budget-writing committee does not agree, then the governor will be constrained," Bysiewicz said.

The truth is, nobody knows how much savings will materialize. Much will depend on the leadership applied, protections for the state and business partners, and how aggressively both pursue a return on the investment. For now, it's all jockeying and positioning.

"Competition for the contract" will force bidders to come up with savings," Rowland said. "They know they aren't going to get the bid otherwise." As Connecticut is likely to be the first of a succession of states exiting the IT business, the governor says the winner "could almost use us as a loss-leader." If they can get the business, "it becomes a marketing home run for them."

Regan, the project manager, said the state is looking for a "nontraditional relationship" in which the contractor "will have a great degree of say" about programs. But the "ultimate decision" resides with the state, he stressed. "I think it has to be like that so they don't run amok over us."

"To me, [partnership] means that vendors will get more out of it than just providing services in Connecticut," Gartner's Cohen said. The concept suggests that "there is something in [the deal] for both sides." But governments need to be very careful about the risks they incur, she added. And states should give contractors "as little as humanly possible."

For lawmakers, "a major fear" is that the move may prove irreversible, a "leap of faith," Johnston said. If the initiative should fail, "what do you fall back upon?" In fact, the request for proposals addresses these concerns in unusually strong language. "Bidding will be limited to providers with substantial financial resources," CBIA's Gioia said, giving the state the option of "going after" them.

Creative Relationships

Of course, such talk makes the vendors nervous. "What you have to watch out for is what limitations or hurdles may be placed legislatively in the way of implementing it as it's been proposed," said Jay Malcynsky, managing partner with Gaffney, Bennet&Associates, a New Britain, Conn., firm representing IBM. Given the "extremely" political nature of the situation, Malcynsky expects "this will be something that's rattling around for a while."

"I think they're looking for vendors to come up with a creative relationship," said John Kost, senior vice president for the State and Local Services Group of McLean, Va.-based consultant Federal Sources Inc. "They want a partner to provide solutions to how government works," such as "how to administer the tax system, how to provide welfare services."

Based on the Raegan McBride case, a stronger welfare services partnership might help. To date, the state has taken steps to fix the information breakdown that might have prevented the child's death, including legislation to ease the sharing of information between child-care agencies and a requirement that agencies sharing responsibility for cases keep one another informed. 2

Charlotte Adams is a free-lance writer based in Arlington, Va. She can be reached at cadams@nmaa.org.

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