Plan to Extend Deal Faces Queries

The state’s top information technology officials Wednesday defended their controversial proposal to extend a $300-million-a-year telecommunications contract as a well-intentioned effort to save Californians money during a time of fiscal crisis.

But under sharp questioning at a Senate hearing, the officials acknowledged that they hadn’t examined whether taxpayers might benefit more from the seeking of competitive bids for the contract jointly held by SBC and MCI. The Schwarzenegger administration is reviewing the matter and must decide whether to approve an extension before the contract expires in 2005.

The Davis administration approached SBC and MCI earlier this year about reducing the cost of various telecommunication services the firms provide to state offices and hundreds of local governments under the contract. SBC and MCI agreed to immediately cut prices by 8% to 10% if the state would agree to exercise three one-year options written into the “CALNET” contract by former Republican Gov. Pete Wilson in 1998.

State Department of General Services officials estimate the contract extension could save state and local governments about $141 million over the next 4 1/2 years. But last summer a top official at the department questioned the financial wisdom of extending the contract and argued that the state should be able to save even more.

That official, Ralph Chandler, deputy director of the Department of General Services procurement division, was placed on administrative leave on Nov. 21, the same day the Orange County Register first reported his critical e-mails. Calls to Chandler’s office were referred to Robb Deignan, Department of General Services spokesman.

Deignan said he couldn’t comment on the action taken against Chandler.

At the request of state Sen. Dean Florez (D-Shafter), chairman of the Senate Banking, Commerce and International Trade Committee and a critic of the proposed contract extension, Atty. Gen. Bill Lockyer sent a letter last week warning the Department of General Services to preserve any documents related to the SBC-MCI contract, said Nathan Barankin, spokesman for Lockyer.

Schwarzenegger’s office has separately asked the attorney general to review the matter, Barankin said.

During Wednesday’s hearing, Florez and Sen. Debra Bowen (D-Marina del Rey), head of the Senate Energy, Utilities and Communications Committee, questioned whether the Department of General Services had done everything possible to cut the state’s telecommunications costs.

They criticized the department’s decision to focus on negotiating an extension of the SBC-MCI contract without seeking proposals from competitors of the firms.

“You don’t know whether the state could do better than a 10% reduction?” Bowen pressed Barry Hemphill, deputy director of the Department of General Services Telecommunications Division, who approved the extension in August.

“I would be intellectually bankrupt if I said this was the absolute best price,” replied Hemphill. “I couldn’t say that.”

After the hearing, Hemphill insisted the proposed contract extension had been “thoroughly vetted by professional staff within DGS.”

Gartner Inc., a leading consultant hired by the Department of General Services, is scheduled to deliver a report Friday analyzing the projected savings of the contract extension.