By Roy Reynolds
If there’s one thing government’s proven it stinks at it’s automation — more technically, processes like requirements gathering, cost justification, make vs. buy decisions, systems development, software coding and test, training, project management and network security which computerize manual processes which reduce labor and increase service levels. On February 11th, the OC Register wrote of yet another failure by the County’s Information Technology group in Relic of a tax system still in place in O.C. Register veteran Andrew Galvin explains:
A contract with an outside firm writing software code for PTMS [a new property-tax management system] has expired with the code untested and millions of dollars unpaid. Anticipating possible litigation, county counsel advised [County Information Technology chief Mahesh] Patel not to mention PTMS in his quarterly update to the supervisors. In his prior update, in October, Patel had said that negotiations were under way to extend the contract with software vendor Tata Consultancy Services [TCS. which] expired Jan. 9 without an agreement on extending it, and county officials are now considering their options, Patel said…the software code that TCS developed for PTMS is “substantially done,” but largely untested. The county owns TCS’ work product, Patel said. The PTMS project, which was already 18 months behind schedule and $4 million over budget, is on hold, Patel said.
County Supervisor John Moorlach said in the Register story [CPA Moorlach is the OC’s former Treasurer-Tax Collector (TTC), the department that would run the system]:
TCS, part of India’s Tata group, “just didn’t step up to it here,” said County Supervisor John Moorlach. “They come in here and they smile and they send senior management, and they said ‘We’re going to get it done’ … and then they just don’t get it done. … How long do you put up with that?” TCS, meanwhile, has been paid just $4.9 million of the $10.3 million contemplated in its contract, which began in 2008.
Galvin covered this latest debacle in an OC Watchdog column last November when a number of property tax bills were tardy: Wondering why your property tax bill is late? In fact, this project was broken and covered by the Register two years ago: $46 million system won’t spit out revised tax bill.
Supervisor Moorlach addressed the issue just two weeks ago in his email update:
A year later, the prognosis is unchanged and the Board of Supervisors has concurred with management’s advice to discontinue utilizing the services of the vendor. The software conversion started under my watch as Treasurer-Tax Collector. There are no “off-the-shelf” packages in the marketplace for larger California counties. Having seen several other counties struggle in their efforts to improve their property tax management systems (PTMS), like Santa Clara, San Bernardino, and San Diego, Orange County decided to follow a more deliberative approach. The county utilized consultants to map out exactly what the PTMS was to do and then went out to bid for a firm that could write the code. It was that simple, yet it took the County some five years to get to the point of starting this last phase of the project. Some five years or so into writing the code, it has been disheartening that the vendor over-promised and under-delivered. All the more so when the project is so close to being concluded. But, there comes a point when you can no longer nurse a vendor along.
In the private sector, this level of performance makes for audits, firings, law suits and if egregious enough, earnings restatements. How hard could this be? Per the Orange County Treasurer-Tax Collector’s website, for FY2011-12, $4.76 billion was collected twice yearly via 838,344 bills that were rendered. In the grand scheme of things, these aren’t big numbers compared to the commercial banks and credit card operations I made my career in. At Bank of America where I spent a decade on both domestic and Asian assignments in Information Technology, the Treasurer-Tax Collector would be an ordinary client.
One of the more unfortunate aspects of this is the manner in which accountability is diluted among senior County managers — Chief Information Officer Mahesh Patel, an employee, gets to explain it, but can’t be touched by the voters. Treasurer-Tax Collector Shari Freidenrich doesn’t even make the news story when we’d think she is just as responsible for the delivery of this system as the vendor. In fact, its implementation is not even mentioned in her Department’s Strategic Goals. The TTC unit has a $14 million budget and 95 employees.
Tax collection seems a pretty simple process. The Auditor-Controller, and then the Assessor sends the tax roll to the Treasurer-Tax Collector. The Tax Collector renders the bill, mails it and collects twice per year (for residential parcels, we’re less familiar with commercial properties). Of course, the Treasurer-Tax Collector, and her 95 union employees, are bound to cry foul and complain that it’s more complicated than that — the input would be welcome, but remittance, as it’s known in the extremely automated banking business, isn’t hard to program and operate — especially now as it’s mostly paperless and simply an account to account transfer securely conducted over the Internet or via bank clearing houses. The TTC’s been collecting like this for years, and we’ll bet the handling of checks and over-the-counter transactions is minimal, and diminishing every year. We’ll also bet these efficiencies have not lowered staff counts which automation, like it or not Nick Berardino, reduces the costliest part of any backoffice operation — the staff needed to shuffle paper and open envelopes.
As we suggested a few months ago re. OUTSOURCING the Clerk-Recorder’s unit, all the same points apply here. There’s NO GOOD REASON why this operation needs to be a County Department. By California law, the TTC him/herself must be an elected or appointed position, but no law we can find says the function itself must also be handled internally to the County, and can’t be contracted out or privatized. I’d recently explained this to Supervisor Moorlach who said he’d run the legality of it by County Counsel, but I haven’t heard back.
We suspect if the County were to issue a simple Request for Proposal, they’d be overrun by banks and computer operations firms who do remittance and collections that would COVET this business. We’ll also even bet they’d conduct the business for less than it costs the County today, and still make a profit — private firms and corporations with stockholders are motivated to do that — governments are NOT.
In this bid scenario, the outsourcer assumes the risk — they’re responsible for the software, can choose to fix the County system’s presumed inadequacies or they’ll adapt their own operation to the system requirements. The taxpayer need not know the difference as the outsourcer can also man the counter and the phones with their choice of union or non-union staff.
Outsourcing this operation also creates a business opportunity in the private sector — a forward-looking vendor that succeeds at this would naturally pursue other business at other Counties and any public sector operation that collects taxes and fees. This creates jobs, and a taxable revenue stream which means part of those profits come back to the government as income taxes — in all, a “win-win”.
An outsourcer running this operation would be contractually ACCOUNTABLE for its success and maintenance of an agreed service level. Such accountability isn’t found in the County bureaucracy today as it’s been proven by this expensive software disaster that finger pointing is too easy and there’s no consequences for bad performance, the loss of money or just being plain wrong. Combine this with the foot dragging to be seen from the union and the lack of motivation from managers who’d be losing power that’s derived from overstaffing, and the Board of Supervisors has built-in reasons to maintain the status quo. However, rendering an RFP to competitively bid the TTC operation into the private sector does not obligate the County to hire the low-bidder, or any bidder if they so stipulate in the bid documents. But they will receive an itemized estimate of what the market believes it should cost to run this backoffice operation, and not what its union says it costs. And that information would need to be shared with the press and public.
There’s money to be saved here — and the Board of Supervisors ought to consider this reasonable, low-risk recommendation by offering this opportunity to the private sector that ultimately supports their government.
Here’s a recently collected, brief inventory of a number of media stories covering the adventures that state and local governments in California have had in computerization and systems development: