1 UNEDITED 2 3 4 5 6 7 8 MEETING OF 9 GOVERNOR'S TASK FORCE ON 10 CONTRACTING AND PROCUREMENT REVIEW 11 12 MONDAY, JULY 8, 2002 13 1:00 P.M. 14 15 KENNETH HAHN HALL OF ADMINISTRATION 16 500 West Temple Street, Room 374A 17 Los Angeles, California 18 19 20 21 22 23 24 Reported by: LESLIE A. TODD, CSR 5129 and RPR 25 Job No.: 02-23639 1 1 2 3 TASK FORCE MEMBERS: 4 5 ANNETTE PORINI (Chair) 6 CLIFF ALLENBY 7 DAVID E. JANSSEN 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 I N D E X 2 3 4 ORAL PRESENTATION PAGE 5 6 BY GREGORY HOCHSTETTER 12 7 BY EVA MACIEL 19 8 BY BOB PRESTON 33 9 BY BRETT NELSON 41 10 BY CHRYS VARNES 49 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 LOS ANGELES, CALIFORNIA 2 MONDAY, JULY 8, 2002 3 1:00 P.M. 4 5 -o0o- 6 7 CHAIRWOMAN PORINI: Shall we go ahead and 8 call this meeting of the Governor's Task Force on 9 Contracting and Procurement Review to order. 10 I'll announce that this Task Force was 11 created by Executive Order 55-02 to review the State's 12 contracting procurement procedures and make 13 recommendations and any statutory, regulatory or 14 administrative changes necessary to ensure that open and 15 competitive bidding is utilized to the greatest extent 16 possible in awarding State contracts. 17 On my right, I have Cliff Allenby, who is 18 the director of the Department of Development Services, 19 and on my left I have David Janssen, who is the chief 20 administrative officer of Los Angeles County. I would 21 like to thank you, Mr. Janssen, for making the hearing 22 room available to us today. 23 MR. JANSSEN: You are welcome. 24 CHAIRWOMAN PORINI: So we have a quorum in 25 place. I don't know if members have any comments that 4 1 they want to make, or should we just move on to our -- 2 okay. We will just go ahead and we'll move on to our 3 presentation by the Department of General Services. 4 MR. CHANDLER: Thank you. Chairwoman Porini 5 and members. 6 My name is Ralph Chandler. I'm the Deputy 7 Director of the Procurement Division for the Department 8 of General Services, and to my left is Jeff Marschner, 9 Chief Counsel, Department of General Services, and we 10 will serve to answer any questions that may come up 11 during the remarks that we desire to receive today from 12 the public at large. 13 I do have a couple of housekeeping items I 14 would like to mention. As you know, we will be holding 15 our second public hearing later this week, on July 12th, 16 in Sacramento, and I believe it was noted at our last 17 meeting of the Task Force that there was a desire to 18 ensure that we were reaching out to the effective 19 agencies and departments -- State agencies and 20 departments, and I wanted to inform the Task Force that 21 we are convening two sessions Wednesday of this week at 22 DGS to receive input from all State departments or 23 agencies that wish to participate. Perhaps on a 24 housekeeping note, for those who choose not to 25 participate in the hearings by providing any verbal 5 1 testimony but would like to submit written comments, we 2 are asking that comments be received by this Friday, 3 July 12th, at which point we would like to begin 4 assembling the major recommendations, themes and 5 thoughts that come forward from not only the remarks 6 that come forward from today and Friday but those 7 written comments so that we can begin preparing the 8 beginnings of the staff draft report. 9 At your last meeting on June 20th, you did 10 ask for the department to provide this committee with 11 some additional background material, and I would like to 12 take a few minutes, if I could, to ask Pat Jones to come 13 forward and she'll provide copies of that material for 14 you -- and we have copies in the back of the room -- and 15 we can briefly go through that material. 16 There was a couple of items, as I recall, 17 that you did ask for. The first was a table of 18 non-competitive transactions that go from January of 19 1999 through March of '02, and the second area was a 20 kind of an abstract on the GS Smart financing program 21 with a listing of all the transactions historically 22 under that program. So Pat is making copies of those 23 two requested -- actually, there are a total of three 24 transactions listed there: The non-competitive bid 25 summary table, the abstract of the GS Smart program, and 6 1 the transactions listed themselves. 2 I realize you are just getting that 3 information now, but if you should at any point have 4 questions on those or need additional detail, just 5 simply let us know. 6 As you outlined in your opening remarks, the 7 purpose of today's meeting really is to hear from the 8 public, so unless you have some specific questions of 9 staff who are available or Counsel Marschner or myself, 10 I would be willing at this point to turn over the 11 hearing to start receiving public input. 12 CHAIRWOMAN PORINI: Let me ask one question 13 on our agenda. We have an item with regard to 14 legislation, and I know there is at least one piece of 15 legislation moving through the Bowen field. 16 Can you describe that or do we have a report 17 on specific legislation that impacts procurement? 18 I see Karen Newell coming forward. 19 MR. CHANDLER: I would like to ask if Karen 20 would like to briefly summarize the legislation, 21 although in doing so, Karen, there is one area in this 22 bill that I continue to be troubled by, and I would like 23 you to point out what I perceive to be an ongoing 24 inaccuracy, which was originally in the digest of that 25 piece of legislation and -- I think it is important that 7 1 the members be clarified on that. Other than that, I 2 will let you summarize to the extent you are familiar 3 with the bill its major provisions. 4 MS. NEWALL: Karen Newall, assistant 5 director and deputy director for legislation, Department 6 of General Services. 7 The bill that we are talking about is Senate 8 Bill 1467; the author is Senator Bowen, with some 9 co-authors. This bill, like Mr. Chandler said, has been 10 around a couple of years before. What this does -- the 11 body of law that deals with contracting is split in 12 certain boxes, one dealing with commodities, one dealing 13 with services, and one dealing with IT. Not all the 14 same provisions of law apply to all these bodies of 15 law. In the areas dealing with conflict of interest, 16 there were different provisions covering conflict of 17 interest for IT than there were for the other bodies of 18 law, so what this bill is trying to do is saying the 19 same provisions that cover conflicts of interest for 20 commodities and services will now also apply to the IT 21 arena, which had previously been exempt. There are two 22 areas of conflict of interest that they are dealing with 23 in this legislation, and one is dealing with the 24 circumstance of employees and former employees and what 25 the -- how they are regulated in terms of getting 8 1 involved with contracts once they leave -- while they 2 are working for the State and once they leave their 3 State employment. Previously, there had been no 4 provisions covering that other than those provisions 5 that were in the State administrative manual. Now those 6 provisions will also apply in the IT arena. 7 The second area deals with what is known as 8 follow-on contracts, which basically in the IT arena, 9 there are many times where you have an idea that is 10 being researched and explored by a company, and then you 11 go out for the bid later on. There were no provisions 12 to regulate whether the company that worked on the 13 consulting side, whether they could then also work on 14 the follow-on contract when the work was actually being 15 done. That now would apply, which would prevent those 16 kinds of conflicts of interest, so that would now apply 17 to the IT arena also. 18 The latest amendments of the bill also apply 19 similar conflict-of-interest provisions to the 20 California State University system and the University of 21 California system. It is my understanding the 22 University of California has some concerns with the bill 23 because of some of the special unique circumstances of 24 professors and their work, so they will be talking to 25 the author about some further amendments to this bill. 9 1 CHAIRWOMAN PORINI: Mr. Allenby? 2 MR. ALLENBY: Yes. On the UC provisions, 3 does that -- I assume they exclude Lawrence Livermore 4 and their facility in -- 5 MS. NEWALL: I believe right now the way the 6 bill is written, it has not been artfully crafted to 7 deal with these unique circumstances. 8 MR. ALLENBY: I can understand why they are 9 upset if that is included because those are major -- 10 MS. NEWALL: Right. And I put in a call to 11 the university system, and once they get their 12 amendments worked out, they are going to share them with 13 us, but they are in the process of working on them. 14 The provision that Mr. Chandler mentioned -- 15 which, again, we have a call in to the author to try to 16 communicate about this -- for some reason, in the 17 legislative intent language, there is a section that 18 says that the Department of General Services had 19 appealed the section of the State administrative 20 manual -- 21 MR. CHANDLER: You said appealed? 22 MS. NEWALL: Repealed -- I'm sorry. 23 -- repealed a section of the administrative 24 manual that dealt with conflict-of-interest provisions. 25 There has been no such repeal, and we have communicated 10 1 that as the bill has moved through the committee 2 process, but that's still language that is in the bill, 3 so, hopefully, you know, we'll politely tell the author 4 we don't know where that erroneous information came 5 from, but that is not an accurate statement of the 6 legislative intent. 7 CHAIRWOMAN PORINI: Okay. 8 MS. NEWALL: Let me just briefly mention 9 there are other pieces of legislation that have been 10 introduced dealing with the contracting process. Most 11 of it deals with when the Department of General Services 12 or the Department of Finance has to approve certain 13 contracts that were over a certain dollar threshold, so 14 there are bills like that moving through the legislature 15 too. 16 CHAIRWOMAN PORINI: Okay. Questions of 17 members? 18 All right. Thank you. 19 Then we will go ahead and -- Mr. Allenby? 20 MR. ALLENBY: On the non-competitively bid 21 transactions, the non IT services, I assume that that 22 does not include CalTrans for their engineering and 23 architectural services, because that's a separate 24 legislation. 25 MR. MARSCHNER: No. Specifically, A and E 11 1 contracts are exempt from the current provisions of 2 10365.5. 3 MR. ALLENBY: So it is not included in 4 here? 5 MR. MARSCHNER: Correct. 6 CHAIRWOMAN PORINI: Other questions before 7 we move on? 8 All right. Then I will go ahead and I'll 9 call folks in the order that I have speaking forms. 10 First I have Charles Steinmetz. If you 11 would like to come forward. 12 MR. STEINMETZ: No comment at this time. 13 CHAIRWOMAN PORINI: The next person is 14 Gregory Hochstetter. 15 THE WITNESS: Thank you, Madam Chair. 16 CHAIRWOMAN PORINI: State your name for the 17 record, please. 18 19 ORAL PRESENTATION BY GREGORY T. HOCHSTETTER 20 21 MR. HOCHSTETTER: I am Gregory Hochstetter, 22 and I'm with Cogent Systems. 23 Cogent Systems' interest in appearing before 24 the Task Force today stems from a 16-year history of 25 sole source contracts between the California Department 12 1 of Justice and NEC Corporation. We are presently 2 involved in a situation where Cal-DOJ has awarded a sole 3 source contract to NEC for an integrated AFIS/Palm 4 system -- and AFIS stands for Automated Fingerprint 5 Identification System. Cogent Systems pioneered the 6 delivery of integrated AFIS/Palm system with the world's 7 first delivery of such a system in 1996. Since then, 8 we've delivered systems around the world, including some 9 to California communities. NEC has no references for an 10 integrated AFIS and Palm systems, yet Cal-DOJ has 11 awarded this sole source contract without fair and open 12 competition. 13 Cogent Systems supports the role of this 14 Task Force. These hearings are needed. California 15 needs a procurement policy that ensures fair and open 16 competition so that the citizens of this State receive 17 advanced systems at the best value. Cogent Systems is 18 headquartered in Los Angeles County. We're a global 19 company, with customers around the world, with offices 20 in London, England; Vienna, Austria; Moscow and Taiwan. 21 Domestically we have offices in London, Ohio and in 22 Reston, Virginia, where we service our federal 23 customers. 24 We are one of four major companies that 25 routinely compete for AFIS work around the world. In 13 1 spite of the proceeding, Cal-DOJ's sole source policy is 2 precluding this California company from competing in 3 this important procurement. 4 We believe in fair and open competition. 5 Arguments that are based on proprietary systems are no 6 longer valid. Open competitions are requiring open 7 systems based on national and international standards. 8 Vendors who try to protect proprietary positions are 9 forced to change in competitive situations. 10 Additionally, the AFIS industry is dependent on the 11 processing speeds of the computer industry, and thus is 12 an area of dramatic change. Cogent Systems reinvests 13 30 percent of our annual income back into research and 14 development so that our systems take maximum advantage 15 of the advances in the computer industry. We believe 16 that we have the best -- the fastest and the most 17 accurate -- systems in the world. The validity of that 18 statement can be and is being tested in the 19 marketplace. It is in open competition, with fair and 20 objective benchmark testing, that customers can 21 determine the best solution for their needs. Even in 22 locations where Cogent Systems is the incumbent, as in 23 the United Kingdom, the completion of a contract is 24 followed by a fair and open competition for the next 25 contract. In open competition, customers see firsthand 14 1 the advances in the industry, new features and processes 2 that would allow them to attain greater productivity, 3 and thus be able to offer their citizens improved 4 service. 5 We have prepared a package of documents 6 regarding the California DOJ and the NEC relationship 7 for each member of the panel. In this testimony, I will 8 restrict my comments to more global concerns regarding 9 the procurement process rather than our particular 10 case. 11 Since we first became of Cal-DOJ's attempts 12 to seek approval for a sole source contract with the 13 Department of General Services, we have experienced and 14 note the following: 15 One, the Department of General Services is 16 not open to discussion. They were cordial upon our 17 first contact, but quickly indicated that the door was 18 closed. Our phone calls were not returned. Our e-mail 19 messages went unanswered. When we did get a response, 20 it was a very formal letter, via the postal service, 21 without the opportunity for interaction. 22 Two, in documentation we received through 23 public records requests, we know that neither DGS nor 24 DOJ took the time to validate prices or costs with the 25 industry. 15 1 Three, the State agencies seem swayed by 2 discounts offered by the vendor. Discounts on inflated 3 prices are not a bargain. 4 Four, the State agencies used looming 5 deadlines to motivate quick approval. In the recent 6 example, Cal-DOJ stated that if they do not get quick 7 approval they will lose federal funding. We noted the 8 same reasoning for a 1996 sole source request. 9 We also note that the work to be performed 10 by the vendor is not documented. There is no statement 11 of work, which is a typical document in open 12 competitions. We also note that there was no acceptance 13 criteria for the system to be delivered, so how does the 14 State know when the job is completed? More importantly, 15 how does the State know if the job was successful? 16 One final example of the result of sole 17 source versus open competition: Cal-DOJ is paying NEC 18 $5.5 million for a 150,000 record Palm system that is to 19 integrate with the existing AFIS. Marin County, 20 California has a contract with Cogent Systems for a new 21 integrated Palm and AFIS system for under a half a 22 million dollars. Why is Cal-DOJ paying ten times more 23 for a similar capability? 24 In summary, there are two salient issues. 25 First, that the proprietary nature of systems is 16 1 invalidated by internationally recognized standards. 2 Second, open competitions are the current norm in 3 procurement as seen in the United Kingdom and in the 4 United States by the Federal Bureau of Investigation, 5 who has currently or recently received proposals that 6 are currently under evaluation. Why does the Cal-DOJ 7 not subscribe to the procedures being followed by 8 agencies around the world? 9 Cogent Systems supports these public 10 hearings, and we urge the Task Force to open up the 11 public procurement process so that the citizens of 12 California can reap the benefits of free, fair and open 13 competition. 14 Thank you. 15 CHAIRWOMAN PORINI: Questions from members? 16 Mr. Janssen? 17 MR. JANSSEN: How did you become aware of 18 the last purchase? I'm curious not about the purchase 19 itself, but just the process of finding out what is 20 going on in the State. How did you obtain that 21 information? 22 MR. HOCHSTETTER: From employees of DOJ who 23 were visiting our headquarters to learn about Palm print 24 capability. 25 MR. JANSSEN: And when did all this happen? 17 1 MR. HOCHSTETTER: Starting in May. Our 2 first letter to general services was May 17th, and we 3 have been in contact since then. I can present these 4 to you, if you'd like. This is today's comments, as 5 well as some correspondence to DOJ and a position paper 6 we put together. 7 CHAIRWOMAN PORINI: Thank you. 8 MR. ALLENBY: Do you have General Services's 9 formal reply to you in this package? I thought you 10 indicated that they had sent you a letter. 11 MR. HOCHSTETTER: No, their letter to us is 12 not in the package. 13 MR. ALLENBY: Okay. Could you make that 14 available? 15 MR. HOCHSTETTER: Yes, I could. 16 MR. ALLENBY: Thank you. 17 CHAIRWOMAN PORINI: Are those all the 18 questions from the members? 19 Pat, did you want to provide information to 20 Mr. Hochstetter for where he can send that? 21 MS. JONES: Yes. 22 CHAIRWOMAN PORINI: Great. 23 MR. HOCHSTETTER: Thank you. 24 MR. ALLENBY: Thank you. 25 CHAIRWOMAN PORINI: We will move on to our 18 1 next speaker. 2 Eva Maciel. 3 4 ORAL PRESENTATION BY EVA MACIEL 5 6 MS. MACIEL: My name is Eva Maciel, and I 7 represent Robbins-Gioia. Robbins-Gioia is an 8 information technology project management consulting 9 firm, and we've been advising the public sector for 22 10 years. We are one of the world's largest specialized 11 companies in IT project management consulting, with 12 approximately 600 experts worldwide. 13 We provide services to some of the largest 14 and most complex federal government and DOD IT 15 projects. When we started business 22 years ago, 16 providing disciplined life-cycle management to IT 17 projects was considered a rather novel concept. In some 18 circles, it still is, but we've seen a tremendous amount 19 of improvement in the public sector, and although we 20 have a long track record with the DOD and the federal 21 government, we are fairly new in California. We've 22 maintained an office here for about two years, and we've 23 done business with the State for about a year and a 24 half. It's been our observation that the State's 25 policies and procedures on acquiring IT are not on par 19 1 with what we know to be the established public sector 2 best practices. 3 The federal government and the DOD don't 4 have perfect practices today, but there is a wealth of 5 lessons learned and practical process improvement that 6 California can benefit from. 7 One of the points made in the recent Bureau 8 of State Audit report was that the State's negotiating 9 team lacked specialized expertise, such as experience 10 with software contracts and the experience with the 11 vendor's business and contracting tactics. It's been 12 our observation that the State does not have a 13 well-defined professional development program for its 14 acquisition staff. 15 We also understand that there are interim 16 procurement guidelines and additional legislation that 17 will apply greater restrictions to the procurement 18 process. These greater restrictions will minimize 19 abuses to the procurement system, but they will not 20 provide policy, process and leadership framework 21 necessary for a State as large and as diverse as 22 California. 23 With the sunset of the State's Department of 24 Information Technology, the State's at a critical point 25 of transition, and it is our belief, again, based on our 20 1 22 years of experience in this area, that successful 2 public sector IT acquisition requires both well-defined 3 strategy and policy and an experienced, well-trained and 4 qualified acquisition work force. 5 There is a lot we believe the State can 6 learn from the federal acquisition model, as well as 7 from the Department of Defense. They implemented the 8 Defense Acquisition Workforce Improvement Act, known as 9 DAWIA, to deal with the challenge of acquiring complex 10 technology. And my remarks today will discuss the DOD 11 and federal models and some areas where we believe there 12 is potential applicability here in California. 13 The other issue we believe is that 14 California sees acquisition as procurement only, and 15 with the long life cycle of technology, procurement only 16 begins the process, and until you've delivered the 17 required product and services, that's when you complete 18 the life cycle. And we have observed that the State 19 does not manage acquisition as a life-cycle process. 20 There is not a well-defined acquisition management 21 career field. The State employees frequently don't have 22 the experience and training necessary to acquire complex 23 technology. 24 In the federal government and the DOD, as 25 improved as their processes are, they are still burdened 21 1 by extensive regulations, and there is a complex public 2 sector unique system, which is costly, time consuming 3 and cumbersome, and because it is time consuming, costly 4 and cumbersome, it doesn't lend itself to a strong 5 system of checks and balances. 6 These are some of the acquisition challenges 7 that we think California is facing today: 8 First and foremost in the initiation phase, 9 or what you would see as procurement, awarding a 10 contract to a vendor, we see that requirements planning 11 is not always done. The State staff frequently don't 12 have the experience, technical understanding or training 13 for complex acquisitions. In the absence of good 14 requirements, the State runs the risk of acquiring 15 inadequate or inappropriate products and services. 16 Another area is market research. There is 17 not a consistent process that we have seen for 18 identifying, analyzing and differentiating the 19 capabilities available in the marketplace. Without good 20 market research, the State runs the risk of selecting 21 inferior, obsolete or overpriced products and service. 22 Evaluation and selection criteria: If the 23 selection criteria are not well defined, even if you 24 have a fully competitive process, you may still end up 25 procuring products and services that are not well suited 22 1 to the State's long-term needs. 2 Feasibility studies: We've observed that 3 feasibility studies are frequently done by the 4 organization that implements the system. This is not a 5 direct conflict of interest, but it's a delicate issue. 6 We believe that without objective and robust feasibility 7 studies, the State may run the risk of making investment 8 decisions based on flawed information. 9 After a procurement is made, we see that the 10 life cycle tends to stop. There is not a good 11 transition toward the development stage of technology 12 projects. State managers often view themselves as 13 technology managers. They are, in fact, acquisition 14 managers. They are responsible for ensuring that 15 services acquired through a vendor are completed on 16 time, within budget and consistent with end-user 17 expectation. State managers frequently do not have 18 experience and training in acquisition management. Some 19 examples of that are project management, including 20 requirements, risk, cost and schedule from an 21 acquisition, not a development, perspective; vendor 22 management, including the use of pro-active and 23 predictive metrics on the information provided from the 24 vendors; escalation and review when projects fail to 25 meet their goals; decision support to terminate projects 23 1 that no longer meet their functional goals; end-user 2 assessments and actively implementing lessons learned. 3 We believe that without a strong project 4 acquisition capability, the State will invest in 5 projects that take too long to implement, cost more than 6 planned, and deliver less than promised. 7 In November 1990, the Department of Defense 8 signed into law the Defense Acquisition Workforce 9 Improvement Act. This was based on the realization that 10 legislation and regulation for procurement would not be 11 effective without a talented, skilled and experienced 12 work force. Some of the areas that we believe are 13 applicable to California include integrating all aspects 14 of the acquisition life cycle into a cross-functional 15 and multi-disciplinary team, including budget, finance 16 for the feasibility studies procurement and project and 17 technical management. 18 Another area we believe bears looking at is 19 implementing a professional development program for 20 State employees involved in acquisition, such as career 21 progression in specific acquisition fields, both in 22 procurement and non-procurement fields, specialized 23 training and experience requirements in certain complex 24 fields, such as information technology, and regular 25 update and skills refresh to maintain currency on both 24 1 business and commercial practices. 2 Another recommendation is the implementation 3 of a certification program, where a combination of 4 skills and experience would determine the promotional 5 opportunities available and would assign managers with 6 more -- assign managers with the highest degree of 7 experience and training to the State's most complex 8 projects, and those with less experience and training to 9 the more simpler projects. 10 Another area is educating the staff on 11 private sector practices, such as pricing, negotiating, 12 fiscal year and stock price concerns. The DOD includes 13 private sector participants in its advanced classes to 14 bring a real-world perspective to the classroom. 15 A lot of the -- or the majority of the 16 comments here have been focused on information 17 technology, and some people ask if information 18 technology is different. It is. It is much more 19 difficult to acquire successfully because while it 20 ultimately results in a product, the majority of the 21 life-cycle content and costs are services. Services, by 22 their very nature, are intangibles assets and are 23 difficult to define, differentiate and assess and 24 quantify. 25 The federal government implemented the 25 1 Clinger-Cohen Act, also known as the Information 2 Technology Management Reform Act, in 1996, recognizing 3 that information technology acquisition did require some 4 policies and practices. And I'll just briefly discuss 5 some of the elements of that. One of them is 6 architecture and assigning responsibility and 7 accountability for a common framework and 8 infrastructure. Another area is rigorous cost benefit 9 analysis. Through Clinger-Cohen, three alternatives are 10 required for each IT project. 11 California has a feasibility study process, 12 but it is not as robust as the federal model, and given 13 the size and complexity and budgetary impact of IT to 14 California, we believe that the State would benefit from 15 a more comprehensive process with a better framework, 16 tools and training. 17 Another area is investment review, and where 18 we feel this is more robust in California, this requires 19 the continuing investment review throughout the entire 20 life cycle, not just at project initiation. 21 Management processes and programs aren't 22 defined as "One Size Fits All," but rather commensurate 23 to the size, complexity and risk. And they are also 24 focused on the acquisition life cycle and not the 25 development life cycle. Clinger-Cohen also describes 26 1 the use of performance measures to evaluate the 2 continued merit of IT projects, including trend 3 analysis. Program reviews are also specified with 4 senior level participation in the ongoing project 5 reviews. We believe that many of the information 6 technology issues that the State faces can be avoided or 7 at least minimized if the State department executives 8 had timely, firsthand information on the status of 9 projects underway. 10 Another area is strategic planning, 11 including an analysis of how the IT project fits the 12 organization's mission. We've observed that not all 13 organizations inside California have strategic plans, 14 and few of those that do have strategic plans integrate 15 the realities of budget limitations to those strategic 16 plans. 17 And, finally, work process review. Through 18 work process review, the internal development versus 19 outstanding is analyzed on a case-by-case basis. With 20 this information, we have several recommendations that 21 we are proposing as part of the ongoing process, that we 22 believe are near-term actions that could benefit the 23 State. 24 The first of these is establishing a working 25 group of both industry, with federal and DOD experience, 27 1 to evaluate the applicability of DOD and government 2 practices. The second is to initiate an analysis or 3 inventory of State acquisition management experience, 4 and using this as a first step toward identifying the 5 training areas that need the most immediate attention. 6 The third is designing a pilot acquisition 7 management process with a life-cycle focus from 8 initiation to completion, and selecting a project to 9 pilot that process, with specific emphasis on 10 requirements development and market survey and 11 analysis. These processes will foster both improved 12 products and services and full and open competition, 13 because it will give more vendors the opportunity to 14 introduce their capabilities. 15 The fourth is defining better tools and more 16 technically rigorous processes for feasibility studies, 17 including additional independent feasibility studies for 18 the State's largest and most complex projects. We also 19 recommend creating a core team of experts, perhaps in 20 the Department of Finance, to improve the quality and 21 independence of feasibility studies. Further, for 22 long-term and complex acquisitions, we recommend having 23 regular updates to the feasibility study to make certain 24 IT acquisition stays on track. 25 Our fifth recommendation is a tailorable 28 1 training program for State managers primarily 2 responsible for acquisition management, along with 3 standards qualifying State employees for key positions 4 on the most complex acquisitions. 5 And the last is performing an assessment of 6 the staff work required on the part of the State to 7 comply with recently-introduced guidelines for 8 procurement, and including the impact of the additional 9 staff work prior to coming up with new regulations. 10 In summary -- and that's probably 11 everybody's favorite part -- we don't feel California 12 can acquire the necessary products and services at a 13 reasonable cost and in a timely fashion if 14 overly-restrictive and cumbersome legislation and 15 regulation are adopted. However, if California develops 16 a skilled acquisition management work force, working 17 within a solid framework of effective acquisition 18 policy, the State will have the tools and the capability 19 to deliver these services effectively. 20 Thank you. 21 CHAIRWOMAN PORINI: Mr. Allenby? 22 MR. ALLENBY: I get a, sense although you 23 didn't say it specifically, but as you went through 24 your discussion, that at least implied is that the 25 system would be more centralized than the current system 29 1 we have in California, which is really disbursed from 2 department to department. 3 Did I misread you? 4 MS. MACIEL: Well, I think from a policy 5 standpoint and an infrastructure standpoint, I do 6 believe more centralization would be appropriate. We 7 found a great deal of variation in the policy framework 8 and the acquisition framework from department to 9 department, at least from those we've spoken to. 10 MR. ALLENBY: All right. 11 MS. MACIEL: I think one of the advantages 12 of the Clinger-Cohen format is that it does provide that 13 overarching framework, and they are really solid 14 standards. 15 MR. ALLENBY: I would assume that DOD 16 basically is a centralized operation where they have -- 17 MS. MACIEL: Well, the Clinger-Cohen is 18 federal government and the DOD has a different set of 19 acquisition regulations, and I believe DAWIA specifies 20 their acquisition process, but it is very robust as 21 well. Not just -- the two are not dissimilar. What the 22 DOD we think does better is the Defense Acquisition 23 University that they put together as part of the DAWIA. 24 MR. ALLENBY: From your point of view, we 25 have a long way to go then. 30 1 MS. MACIEL: I believe so. I believe that 2 we have an interesting perspective since we've had 22 3 years of experience with the federal and DOD and just a 4 little bit of experience with California, and, again, we 5 don't feel California is on par with the best practices 6 in the public sector today, and there are great lessons 7 learned, and we get concerned when we see some of the 8 recommendations coming forward that may reinvent the 9 wheel. 10 CHAIRWOMAN PORINI: Have you seen the report 11 that was released by Clark Kelso, the interim director 12 for the Department of Information Technology? 13 MS. MACIEL: On the panel versus a CIO? 14 CHAIRWOMAN PORINI: Well, yes. That's part 15 of what was contained in his report. 16 Have you reviewed that at all? 17 MS. MACIEL: I've skimmed it, but, to be 18 honest, I haven't read it in detail. 19 CHAIRWOMAN PORINI: I'm from the Department 20 of Finance, and the Department of Finance is responsible 21 for the FSR, as you said, an independent FSR, do you 22 mean, by an outside entity? 23 MS. MACIEL: Well, for example, we have a 24 department and they are preparing the FSR, and they are 25 submitting it to the Department of Finance. That's not 31 1 a conflict of interest, but it can be delicate. 2 We've seen public sector organizations where 3 they have an independent group come in and do an 4 independent -- an independent public sector group do an 5 alternative cost benefit analysis, and that gives you a 6 good framework, a good comparison, between the two. 7 Because anyone that's done a cost benefit analysis knows 8 how sensitive they are to the assumptions that are put 9 together. 10 MR. ALLENBY: And in this case, then -- let 11 me give you a scenario. My department does an FSR, goes 12 to it to finance as a part of the system, and then under 13 your view, what the Department of Finance could do is to 14 come out, do an independent analysis, and then maybe 15 even up to saying your FSR is not cost beneficial, it 16 doesn't get it, and here is why it doesn't get it, and 17 here is what how you'll what you want -- 18 MS. MACIEL: Yes. I believe -- not for 19 every project, certainly, but the projects that are most 20 strategic to the State, most complex, longer term, 21 higher cost, it certainly brings a level of 22 independence. It helps everybody with their decision 23 making. 24 MR. ALLENBY: Okay. 25 MS. MACIEL: I do have copies of my -- 32 1 MR. ALLENBY: We would like those. 2 CHAIRWOMAN PORINI: Any other questions from 3 panel members? 4 Our next speaker is Bob Preston. 5 6 ORAL PRESENTATION BY BOB PRESTON 7 8 MR. PRESTON: Good afternoon. My name is 9 Bob Preston, and my company is The Document Management 10 Group. Basically, The Document Management Group 11 specializes in photocopying, document conversions, such 12 as scanning paper documents onto CDs or other instant 13 access or electric archiving systems. 14 The area of services that my company would 15 fall into under the DGS would be a classified as 16 document conversion. 17 The purpose of my appearance today is to ask 18 the Task Force to investigate the extension of the 19 current master agreements that fall into the category of 20 document conversions. These agreements have been -- 21 these current contracts have been active for the past 22 three years and were scheduled to expire this month. 23 The conversations that our company has been waiting for 24 with regards to competitive and open bidding process 25 where we could also obtain a master agreement will not 33 1 happen this year. One of the reasons we heard was 2 because the current office is understaffed and would not 3 have the time to open up the bidding process, which 4 again I feel would drastically hurt the State with its 5 lack of money due to the fact that the prices that were 6 listed in 1998 have not changed. By the DGS actually 7 renewing these agreements, it sort of defeats the whole 8 process of the open-ended and competitive bidding. 9 Computers are more efficient today than they were three 10 years ago, and with our current equipment, our prices 11 are 50 percent lower than they were three years ago. 12 The prices I'm looking at for document conversions under 13 the master agreements are dated 1998. 14 I would like to request that the Task Force 15 discuss this with DGS and have them reconsider their 16 automatic extension of the master agreement for document 17 conversion and open it up by accepting new bids. I'm 18 confident the State will save money. 19 Thank you. 20 CHAIRWOMAN PORINI: Questions for members? 21 MR. ALLENBY: Let me just make sure I 22 understand what document conversion really is. I mean, 23 this is taking documents and moving them from paper to 24 some other medium? 25 MR. PRESTON: Correct. Part of it is under 34 1 document conversion, you can scan a paper document and 2 put it on a C.D. or scan it straight into your computer, 3 but our company is also into photocopying, like Kinko's. 4 MR. ALLENBY: Right. When I was at General 5 Services in another life, we were looking at basically 6 converting all the plans that we have for the schools, 7 and we were talking about how that could be done, but 8 these are -- these are large -- I forgot what you call 9 them. 10 MR. PRESTON: Like blueprints? 11 MR. ALLENBY: Yes, exactly. They are 12 basically blueprints. Is that the kind of thing you are 13 capable of doing? 14 MR. PRESTON: Blueprint copying is exactly 15 what our company does. The machines are basically the 16 size of this table, four feet by eight feet long. 17 CHAIRWOMAN PORINI: So I have a question for 18 staff. 19 In a case like this, the existing contract 20 simply -- the existing master agreement simply stays in 21 place, or is the master agreement limited in the time 22 that it can apply? 23 MR. CHANDLER: I'm probably not the expert 24 on this to answer it specifically, but I do know that we 25 have these master agreements with terms, and I have been 35 1 made aware that at times we've extended the terms of 2 those master agreements. And not being familiar with 3 the particulars of this particular case, it sounds like 4 that's perhaps the decision that has been made at the 5 staff level to do just that. 6 MS. LaBONTE: I believe that we have 7 extended the document conversion contracts for the 8 additional year that is allowed for in the contract, and 9 when that one year is up, there will be competitive 10 bidding. 11 MR. JANSSEN: And are the prices fixed as of 12 1998, or is there some mechanism for taking advantage of 13 improvements in the industry over that time? 14 MS. LaBONTE: Well, if there is an ability 15 to improve the prices, we would be willing to talk to 16 the suppliers of these contracts. 17 MR. JANSSEN: They are not going to come and 18 volunteer to -- if they have -- I'm sure the master 19 agreement was a fixed price, and I'm sure they will not 20 come in and volunteer to lower the price, would they? 21 MS. LaBONTE: They might, but not 22 necessarily. They might. 23 MR. PRESTON: May I add something to that, 24 and, David, your point is well taken. There is an 25 individual contract that is open for bidding right now 36 1 and you have to submit your questions via e-mail and 2 then they are sort of all put on one sheet of paper and 3 then sent out to everyone, everyone gets the same 4 information, and one of the companies that is currently 5 under the master agreement for document conversion 6 simply asked, "Do we even have to bid on this?" which 7 defeats the entire purpose. 8 Basically, what has happened since 1998, is 9 that these companies that are not in that competitive 10 bidding are getting very happy. One company was very 11 proud to say that they received $1.3 million from bids 12 over the years, which is great. We all thank the State 13 for putting it out there, but to still see these 14 prices -- and I think we are all aware that you pull up 15 those price sheets, you are just going to say do it, and 16 that's really the attitude. 17 But DGS negotiated these prices and they 18 probably did a very good job in 1998, but since we are 19 now in 2002, and these prices will be extended again to 20 2003, I'm sure the State will be hurt by that. 21 CHAIRWOMAN PORINI: So your contention is 22 that, as I understand it, that perhaps the period that a 23 master service agreement exists is too long a period of 24 time, given the changes in technology? 25 MR. PRESTON: In some areas, yes. But also 37 1 in some areas, just for it to be automatically renewed, 2 it beats the competitive bidding. 3 CHAIRWOMAN PORINI: The one-year extension 4 is part of the length of time that a master agreement 5 can stay in place Mr. Marschner; is that correct? 6 MR. MARSCHNER: Yes. Sometimes the original 7 agreements will set a term of say two or three years, 8 and they will allow within the agreement an extension 9 for an additional year. And that appears to be what has 10 happened in this particular case. So everybody when 11 they bid knew what was going on. But we have an 12 anomalous situation here where perhaps prices in a given 13 industry appear to be going down rather than up, so the 14 benefits that you might lock in typically over a longer 15 term, you are not seeing them. 16 MR. CHANDLER: I would want to remind the 17 members, however, that under our interim guidelines, 18 departments are now required to get three quotes to 19 obtain -- to solicit and obtain three quotes, and they 20 are not necessarily quotes off of the master agreement, 21 so one would presume that if companies are competitive 22 in their pricing structure and schedules, then they 23 would be -- 24 MR. ALLENBY: But if I understand his 25 assertion, he is not -- since you have limited the 38 1 number of the current population of folks, he is unable 2 to enter in and make his bid because he is not under 3 CMAS; is that correct? 4 MR. PRESTON: Right, I do not have a current 5 master agreement, and I would be more than happy to 6 place a bid on that if competitive bidding would open 7 up. 8 MR. JANSSEN: I just thought you said you 9 didn't have to be on the list -- 10 MR. CHANDLER: What I understood his issue 11 is he is not under the master service agreement, not 12 CMAS. He is not on the preselected listing of -- I 13 don't know how many vendors for document conversion we 14 have on the MSA. Currently this gentleman's firm is not 15 listed. However, that -- if you are a State department 16 seeking the services of document conversation, you are 17 not limited to the master service schedule; you can also 18 look at other available vendors who may be listed in 19 other areas such as CMAS, so, again, I don't -- I 20 think -- 21 MR. JANSSEN: Do you have to be on some 22 State list? 23 MR. CHANDLER: Yes, you have to be on a 24 qualified listing of some prequalification schedule, but 25 I'm just suggesting that it's not limited to the master 39 1 service agreement. 2 Is that correct, Diane? 3 MS. LaBONTE: They could also perform a 4 competitive bid, as well, besides using either the CMAS 5 or the master agreement. If the agency wanted to do a 6 full open competition, they have that availability as 7 well. 8 MR. PRESTON: On your current Web site -- 9 CHAIRWOMAN PORINI: Mr. Preston? 10 MR. PRESTON: Thank you very much. 11 Under the current Web site, it boldly states 12 that the State has negotiated these great prices and 13 these wonderful opportunities for you; call up these 11 14 companies that are under the document conversion. So, 15 yes, I believe in 1998 you did negotiate great prices 16 and open it up to competitive areas, but we are back to 17 the fact that again these prices won't change for 18 another year, and that will not allow the opportunity 19 for companies like mine or others in the State to come 20 in with better bids, lower bids, for at least another 21 year. And how many thousands of millions of dollars 22 will the State lose by not opening it up? 23 CHAIRWOMAN PORINI: Okay. 24 MR. PRESTON: Thank you. 25 CHAIRWOMAN PORINI: Thank you. 40 1 The next person is Brett Nelson. 2 MR. NELSON: If you would like, I did bring 3 some -- I will give them to you in advance. 4 CHAIRWOMAN PORINI: Great. 5 6 ORAL PRESENTATION BY BRETT NELSON 7 8 MR. NELSON: My name is Brett Nelson, and my 9 associate George Callas is the owner of Harvest Farms, 10 Incorporated. We provide products to the State of 11 California correctional industry. I want to thank you 12 for hearing us today. We support the mission of the 13 Task Force and agree with open and fair competitive 14 bidding. 15 As a California certified small business, a 16 manufacturer, an employer, as well as a taxpayer, we 17 have some concerns and recommendations we would like to 18 advance for your consideration. 19 The California correctional facilities 20 should be mandated to use the lowest responsible bid, 21 budget crisis or not, especially when the products are 22 approved by the State of California. The problem occurs 23 during the misuse of the prime vendor contract and the 24 way it is set up. There are merits to the prime vendor 25 contract which are convenience and good and reliable 41 1 delivery, and convenience does have a value. We are not 2 here to comment on the merits of the prime vendor or 3 whether it should exist, but how to modify the way it is 4 being used and how to prevent from eliminating 5 competitive pricing in California small businesses. 6 The prime vendor, by design, eliminates 7 competitive bidding. If a product is available, 8 especially when the supplier is not only a California 9 small business, but a California certified small 10 business, and has the best prices for State-approved 11 product, the product should be purchased from the lowest 12 responsible bidder. 13 The prime vendor should be bound by DGS 14 purchasing guidelines and State purchasing statutes. 15 Right now, there appears to be a direct violation of the 16 spirit of the governor's Executive Orders D-55-02 and 17 D-37-01, and the buyers are exonerated by saying they 18 bought product from the prime vendor. Purchases through 19 the prime vendor should not mean disregarding the lowest 20 responsible bid, the California certified small business 21 or the California versus the out-of-state business, and 22 should not be allowed to be exempt from executive orders 23 for just plain good business practices. 24 The current contract does not require them 25 to look for competitive pricing, so it exploits the 42 1 natural tendencies of the buyers to do whatever is 2 easiest, and there appears to be no oversight entity in 3 place. There should be incentives for the buyers to 4 acquire the lowest pricing available. There should also 5 be incentives for the prime vendor to obtain the best 6 pricing. It appears that it is in their best interest 7 to buy from the higher priced supplier because it 8 increases their sales dollars from the State. Too much 9 control of what happens is in the hands of the local 10 salesperson to do what benefits them personally, their 11 bonus checks, higher sales, keeping their trucks full, 12 et cetera. The salesperson should never have the 13 authority to tell a particular facility that they refuse 14 to take a manufacturer's product because they don't want 15 to do the paperwork. The salesperson should not ever 16 have the authority to add or delete suppliers. Product 17 available to the facilities using the prime vendor 18 should have the option of delivery method, either direct 19 drop from the manufacturer and the savings that go with 20 it, or delivery through the prime vendor. The 21 salesperson should not insist that they, to keep their 22 trucks full, ship the product themselves. The State 23 should benefit from rebates, discounts, et cetera, and 24 the pricing should be based on cost plus, equaling in a 25 lower net price. 43 1 Being that they are a private industry, they 2 should not be exempt from following the governor's 3 Executive Orders. Purchasing authorization should be 4 coordinated through a specific person representing not 5 only the prime vendor but the DGS. 6 With only a few modifications, the system 7 can work. The buyers should be required to actively 8 seek out sources for the best pricing, and when they 9 become available, they should be required to let them 10 bid through the prime vendor, using the same process as 11 the DGS when purchasing, or let them become available 12 through delegated purchase. 13 When competitors are eliminated from being 14 able to participate and purchases go to companies 15 located out of the State, not only do our tax dollars 16 leave the State for good, but the employees who live 17 here and pay taxes here, lose their income, and since 18 many of them are unskilled labor, they are forced to go 19 right onto welfare and other government-assisted 20 programs. 21 If all purchases, especially high-impact 22 products, went to the lowest supplier, the savings would 23 be great. Using the delegated purchase procedure is a 24 must. 25 Purchases should never be made prior to 44 1 receiving competitive pricing. It is the current 2 practice of some facilities to make quarterly purchase 3 commitments well in advance of any prices being made 4 available. 5 If the interest is in keeping the money in 6 the State of California, then product, even not on the 7 master contract, should follow State guidelines. The 8 preferences should be given as well. The prime vendor 9 should be a service used to supply necessary product not 10 readily available elsewhere. If the product is 11 available, a delegated purchase should be made. With 12 proper records kept and reviewed, the delegated 13 purchaser would more likely purchase properly. 14 Accountability is the key. Tough questions need to be 15 asked and purchasers need to justify why certain 16 purchases were made. You can't expect if you don't 17 inspect. Currently no one is asking the tough 18 questions. There have been many purchases in the last 19 quarter alone that there is no excusable reasoning for 20 the methodology of why certain purchases were made. The 21 buyers should be required to follow the spirit of the 22 Executive Orders by the governor. Product should not 23 have to be on the master contract before the buyers buy 24 in accordance with those Orders. Common sense and sound 25 business practice should be the standard practice. 45 1 As taxpayers and stockholders, as well as a 2 supplier who happens to be a California certified small 3 business with the best pricing for State approved 4 product, we would enjoy the opportunity to have the 5 facilities held accountable for their actions and forced 6 to follow fair, competitive and open guidelines for 7 procurement. 8 When we do compete in the State master 9 contract process, we receive the same EZA and California 10 Small business credit as another California certified 11 small business that employs one person as opposed to the 12 60 to 100 people we employ. The State recognizes the 13 benefits for giving preferences to Enterprise Zone and 14 California certified small businesses, so the same 15 methodology should be used when using the prime vendor. 16 By eliminating competition and using the prime vendor in 17 its current form, the State will return to the pricing 18 of a few short years ago. Prior to our company becoming 19 a competitive player, the prices were 30 to 45 percent 20 higher than they are today. 21 The purchasing files need to be reviewed by 22 the DGS and/or an auditing firm to assure that the best 23 value is being achieved. The buyers need to be held 24 accountable for their purchase selections and how their 25 money is spent. As I mentioned, the prime vendor serves 46 1 a purpose, but it should not hurt small business as it 2 does now. It should not deter and discourage small 3 business from participating. It should not promote 4 laziness and poor purchasing practices, and if a product 5 is not on the master contract that is readily available 6 from another supplier, the facilities should have to 7 follow the delegated purchase process. 8 All these considerations are meant to level 9 the playing field, make all bids and attempts to supply 10 product fair and make sure the lowest price is paid for 11 product, saving the State money, and helping to 12 eliminate the potential for nepotism, collusion, bribery 13 and any other unethical business practices, all the 14 while keeping consistent with the governor's directive 15 to save money and use California certified small 16 businesses and keeping money in the State of California 17 when possible. 18 We would be happy to meet with your Task 19 Force in the future to go over our thoughts and ideas in 20 more detail at a time convenient to you, if it would be 21 helpful to you, and also the prime vendor contract ends 22 August 2003, and we would be happy to participate with 23 the agencies involved to help rewrite the contract so 24 that it irons out a few of these problems that we've 25 seen happen in the past. 47 1 MR. ALLENBY: On your comment, and I will 2 read what you said to make sure I understand: "When we 3 do compete in the State master contract process, we 4 receive the same credit . . .." You are basically 5 talking about competing with the broker in this sense, 6 correct? 7 MR. NELSON: Yes. 8 MR. ALLENBY: I just wanted to make sure I 9 picked up what you were saying. 10 MR. NELSON: Right. Which we have won many 11 of the State master contracts because they were done in 12 a fair manner, and we are not in -- we feel that's a 13 good process. 14 MR. ALLENBY: Okay. 15 MR. NELSON: It is working well for us. We 16 have had many of the State contracts for vegetables, 17 lunches, lunch meats, and we agree with that process 18 tremendously. 19 We would like to see that same process put 20 in place pertaining to the master contract. 21 CHAIRWOMAN PORINI: Any other questions? 22 MR. NELSON: Thank you. 23 CHAIRWOMAN PORINI: Thank you. That takes 24 us to our next speaker, Brad Davis. 25 UNIDENTIFIED VOICE IN AUDIENCE: He is not 48 1 here right now. 2 CHAIRWOMAN PORINI: Then we will move on 3 right now. Pierre Pendergrass? 4 MR. PENDERGRASS: No comment. 5 CHAIRWOMAN PORINI: Okay. Chrys Varnes? 6 And as Chrys is coming up, I would like to 7 comment that there are several people who walked in the 8 room after we began. If you wish to speak, could you 9 please fill out a speaker card at the table and send 10 them on up. 11 Okay. Chrys? 12 MS. VARNES: Thank you. 13 14 ORAL PRESENTATION BY CHRYS VARNES 15 16 MS. VARNES: My name is Chrys Varnes, and 17 I work for a company called Governet. We have clients 18 in the public sector and private sector in California, 19 Nevada, Arizona. We do business with the federal 20 government, as well as higher education. 21 I've spent personally over 20 years sitting 22 on the other side of the table as a chief purchasing 23 officer for large governmental agencies. 24 For the past four years, I've worked for 25 large and small information technology companies, and I 49 1 might add I've never responded to an RFP or done 2 business with anybody I ever worked for. However, this 3 has given me the opportunity to really study the best 4 practices, both in the public and private sector, having 5 worked with companies like 3M, General Motors, and many 6 others, as well as the federal government. So I think I 7 have a unique perspective from both sides of the table. 8 I feel the State of California has made some 9 major strides over the last few years in increasing its 10 efficiency through delegation and use of technology. 11 I know earlier, Mr. Allenby, you brought up 12 the centralization/decentralization issue. 13 MR. ALLENBY: It goes both ways. It depends 14 on where you are. 15 MS. VARNES: Yes, it can be very 16 controversial at times, which is the best way to go. 17 I do feel, though, however, with the 18 technology tools that we have today, centralization or 19 decentralization shouldn't necessarily be the issue 20 because you can have collaborative processes whereby 21 people still have the authority to be able to go ahead 22 and make the acquisitions that are needed and to ensure 23 that they are in compliance with all the policies and 24 procedures. 25 An example of a system that our company 50 1 Governet built for the San Diego -- in conjunction with 2 the San Diego Community College District is a process 3 for the development and management of curriculum. Not 4 coming from a higher education background, when we first 5 started working on this, I thought that this has to be a 6 pretty simple process; nothing is as complicated as you 7 have in purchasing and contracting, but I was amazed at 8 all the necessary coordinating there is to bring 9 everything together and still comply with all the 10 articulation agreements among educational institutions. 11 Using similar technology tools to what was supplied in 12 that project, I feel purchasing and contracting could 13 have a better oversight of what was occurring. There 14 could be use of knowledge-based systems to verify cost 15 competitiveness -- cost competitiveness not just with 16 State contracts, as one of the previous speakers was 17 talking about, but with document management, imaging 18 type contracts. There could be verifications as to what 19 is a good market rate for that. There are also systems 20 out there that will help you to track the performance, 21 to track a project as it is moving along, to make sure 22 it is in compliance with the contract that was issued, 23 and that goes along with some of the comments that were 24 made also by the project management firm. 25 I know our time is limited today, but I do 51 1 feel as though the DGS has been on the right track. 2 They do need some support, I think, with greater 3 technology and some review and collaborative processes. 4 And with that, I thank you very much for the 5 opportunity of addressing you. 6 CHAIRWOMAN PORINI: All right. Questions 7 for members? 8 Thank you very much. Members, should we 9 take a five-minute break and come back? 10 MR. JANSSEN: Sure. 11 (Recess.) 12 CHAIRWOMAN PORINI: All right. Brad Davis 13 is gone for the day. He is the final individual who put 14 in a speaking card. If there is anyone else who did not 15 fill out a card who wants to come forward and make 16 statements, please do. 17 Then this concludes this section of our 18 agenda. 19 We will move on to the Task Force. Any 20 closing remarks from any member of the Task Force? 21 Mr. Allenby? 22 MR. ALLENBY: You and I shouldn't have, but 23 we talked on the plane since we had to be there 24 waiting. I would like to get a sense of the process. 25 We are going to meet Friday where we'll hear more 52 1 testimony. I'm trying to figure out when we have our 2 interplay where we discuss what we are going to do to 3 try to make this thing hopefully not worse than it is, 4 but hopefully better than it is by making some 5 recommendation for change. 6 CHAIRWOMAN PORINI: Well, I think we looked 7 at everyone's calendar to schedule a fourth meeting for 8 the presentation of a draft report, and the tentative 9 date -- and I say tentative because we have not yet 10 conferred with Mr. Chandler here and Clothilde Hewlett, 11 who is the director of general services and is away from 12 her office right now -- is the 9th of August. That 13 gives us a very short period of time to make changes, 14 but I don't know if the General Services staff have 15 looked at the timetable, and if you can make any 16 comments on that. 17 MR. CHANDLER: I would hope that by the 18 conclusion of this week or shortly thereafter that we 19 could have an outline of where we begin a pretty 20 detailed outline, where we begin to lay out various 21 reforms, both statutory and administrative, and touching 22 upon some of the themes that we have begun to hear and 23 in written correspondence of the integration of legal 24 oversight and enhanced requirements to our delegation 25 program and this whole issue of accountability and 53 1 specifically perhaps at the approval authority level and 2 within that perhaps some very specific areas of reforms 3 that need to be addressed. I would hope that we could 4 have that outlined within a week, and I would like to 5 meet perhaps with your offices just to get a first blush 6 at whether we are headed in the right direction. 7 Certainly, the August 9th date gives us plenty of time 8 to take what we've heard and what will be hearing this 9 week and our thinking today and develop a staff draft 10 report for your consideration and discussion in the 11 public setting on August 9th, so that date would work 12 well, speaking again for staff. 13 CHAIRWOMAN PORINI: All right. And for 14 members of the public who are here, any draft report 15 that we have will be posted both on the Department of 16 General Services's Web site and on the Department of 17 Finance's Web site, so folks would be able to see that 18 document well in advance of that meeting, so that you 19 would be prepared to make comments about the specifics 20 of the report. 21 And then I believe because we are a 22 three-person Task Force, once we have finalized that -- 23 the draft, we are going to have to have another public 24 meeting to have final sign-off on it before it moves 25 forward, but we don't have a date yet for that. 54 1 MR. CHANDLER: That's correct. 2 CHAIRWOMAN PORINI: Any other questions. 3 Mr. Janssen? 4 MR. JANSSEN: You might check -- and, Jeff, 5 I don't know if you know whether you can do it -- on a 6 public meeting over the phone. I think as long as you 7 notice it and the location, I think you can do it that 8 way. 9 MR. MARSCHNER: Yes, you can. I think there 10 has to be a place where the public can listen to the 11 phone call. 12 MR. JANSSEN: Right, but it may make it 13 easier for me on a date to be there. 14 CHAIRWOMAN PORINI: (Inaudible) does allow 15 for that. I have had the benefit of having that kind of 16 meeting. You do have to have a place where the public 17 can attend on speaker phones, but they do work well. 18 MR. ALLENBY: Yes, they do. 19 CHAIRWOMAN PORINI: Any further comments? 20 I will announce that our next meeting will 21 be in Sacramento on the 12th, and it will be held in the 22 auditorium of the Ziggurat building at 707 West Third. 23 If some of you aren't familiar with the Ziggurat 24 building, that is the building that houses the 25 Department of General Services. 55 1 And with that, we are adjourned. 2 Thank you. 3 -o0o- 4 (Whereupon, the meeting was 5 adjourned at 2:30 p.m.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 56 1 REPORTER'S CERTIFICATE 2 3 I, LESLIE A. TODD, a Certified Shorthand 4 Reporter and Registered Professional Reporter, do hereby 5 certify: 6 That the aforementioned Governor's Task Force on 7 Contracting and Procurement Review meeting was held at 8 the time and place heretofore mentioned and was taken 9 down by me in shorthand and thereafter reduced to 10 computerized transcription under my direction and 11 supervision, and I hereby certify that the foregoing 12 transcript is a full, true and correct transcription of 13 my shorthand notes so taken. 14 IN WITNESS WHEREOF, I have hereunto subscribed 15 my name this 8th day of July 2002. 16 17 __________________________________ LESLIE A. TODD, 18 CSR 5129 and RPR 19 20 21 22 23 24 25 57