State Treasurer John Chiang on Tuesday said California must build partnerships with the private sector to develop IT projects that are fair, efficient and effective.
“We can’t continue to have the same contracting process where the focus is on winning the bid and not staying focused on putting out an incredible product,” Chiang told Techwire in a wide-ranging phone interview to discuss his 2018 gubernatorial bid.
His comments came a day after the state reached a $59 million settlement with SAP Public Services Inc., ending lawsuits over the 21st-century statewide payroll modernization project known as MyCalPays.
As state controller in 2013, Chiang suspended the payroll project and terminated the $90 million contract with SAP after an unsuccessful pilot demonstration. He then sued the company.
Chiang said the settlement, which he described as a long and protracted effort continued by his successor Betty Yee, saves California taxpayers about $80 million. Specifically, SAP will pay the controller's office $59 million in cash and abandon roughly $23 million in claims against the controller's office.
“Unfortunately SAP failed to deliver what was promised,” Chiang said. “We wanted to make sure we held them accountable.”
The settlement is also a political win for Chiang, who last month announced he is running for governor in 2018. He and Lt. Gov. Gavin Newsom, who is also in the race, have called upon IT companies to be more forthright in their dealings with government.
Newsom has described IT consulting companies as “cartels” who fleece state government, a characterization Chiang didn’t disagree with when asked about Newsom’s comments. He described instances where IT companies have taken advantage of the state, such as coming in with a “low budget bid and pulling in change orders” to increase the overall project tab after they have secured the contract.
Chiang described the SAP lawsuit as a prime example of where “we’ve taken them on” and “we’re demonstrating things can be done.”
Lawmakers critical of such abuses and a string of high-profile IT project failures have demanded changes in the state procurement process. After the cancellation of the MyCalPays contract, Chiang and Gov. Jerry Brown created the Task Force on Reengineering IT Procurement for Success, which issued 21 recommendations intended to help the state identify how it can hire the right vendors, at the best value and hold them accountable for their performance. Chiang on Tuesday urged people to look at those recommendations for guidance.
Despite the tough talk, Chiang said he is looking for strong, collaborative partnerships with IT companies because the state doesn’t have the financial capacity or personnel to develop and maintain every single IT project.
If elected governor, Chiang said he would beef up state technology personnel so there are people in agencies and departments who understand technology and can work with the private sector to ensure successful projects. He also called for more flexibility and honesty in the contracting process.
“I want to build the partnerships,” Chiang said. “It can’t be the private sector working against government.”
