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$5 billion IT related budget Cuts/Efficiencies – TLTV Action Items: beats State Auditor & LHC to the Punch

March 4th, 2011 by admin Categories: Blogs Tags: , , , , , , , , ,

I criticized Governor Brown last time on our TechLeader.TV (TLTV) Webcast for only identifying a paltry $200 million in budget savings through government efficiencies in a $100+ billion state budget. However, he formally asked the Bureau of State Audits and the Little Hoover Commission to provide a list of “Top 10 Actions” California can take to cut government waste and increase efficiency.

In response, TLTV kicked off a campaign to identify a billion dollars of IT related savings each business day, one billion each day,  for five days, that’s $5 billion leading up to the March 4th deadline.

Today is the 5th day and here are our $5 billion, probably more like $6 billion in IT savings, a combination of major cuts, consolidations and even terminations of non-performing and poorly planned IT projects, and the application of new cutting-edge technology, unique data and advanced scoring analytics which could vastly reduce the state’s improper payouts for benefit programs, tax refunds, and other programs.

Eliminate $1.8 billion Financial Information System for California (FI$Cal) Project.

There is no greater, nor longer-standing proponent of a new, robust financial system for the State of California than I, ever since I walked into the State Capitol in 1995. If you can’t measure it, you can’t reform it. And it took more than a dozen years before the Department of Finance’s luddites left and the new leadership got the message.

The nearly $2 billion FI$CAL Project as it now stands is an over-planned, over-scheduled, over-budgeted monstrosity of a computer projected which by the FI$CAL team’s own estimates will take another decade to fully implement. I can attest that this project schedule alone is an absolute formula for failure, and I dare anyone outside the FI$CAL team to contradict me.

In addition, a three year or so postponement will cause little indigestion except within the vendor community. Then, in just a few years, the project could be resurrected with a more rational, abbreviated, rapidly deployable cloud-based alternative for one-quarter the cost.

Terminate California Court Case Management System (CCMS) Immediately – Savings: $1.5 billion

The full cost of the project when, and if, deployed by 2016 will reach nearly $2 billion, by some estimates $2.5 billion.

I am confident that the State Auditor Elaine Howle will concur with this termination given the highlights from her report last month which stated that:

  • Cost have increased by over 700%
  • There have been 102 contract amendments increasing the vendor’s contract from $33 million to $310 million.
  • The complete deployment has been pushed back by seven years, and sounding the death knell
  • A majority of the courts believe their current case management systems will serve them for the foreseeable future.

Just pull the switch. OK, That’s two days – total savings of $3.3 billion

Intensify Fraud and Waste investigations of Medical and other state benefit and revenue programs – Savings: $1.5 billion

Federal payments made to the wrong person, at the wrong time, or in the wrong amount, last year totaled approximately $110 billion. Federal agencies paid more than $1 billion to dead people. President Obama has set an aggressive goal to eliminate $50 billion in improper payments between 2010 and the end of FY 2012.

Each of these actual headlines involves programs most of which are administered and half funded by the states, and of course the biggest chunk is California’s. Fed OMB estimates California’s Medical fraud alone could be over $5 billion a year.

Ironically, a program championed by the Governor Brown during his Attorney General days could be a model for an expanded, state-wide effort potentially recouping billions. The AG investigates problems in the state’s $40 billion Medical program whose state share is nearly one-quarter of the state’s entire budget. The AG recovered nearly a quarter billion dollars last year, a 400% increase under AG Brown. However, this may be only the tip of the iceberg. By expanding the utilization of new technology based business intelligence analytics, improper payments can be substantially eliminated.

And the best part is the technology companies and vendors who provide these services, don’t get paid unless the money is recovered, or better yet not paid at all, then they take a small cut. I know that smacks of capitalism and market forces, terms sometimes anathema to many of our elected officials in Sacramento. But believe me, I’ve seen this, it works. OK, That three days – total savings of $4.8 billion

Finally, Getting the balance of our $5 billion was pretty easy, with plenty of options.

The state’s 75 IT project in its portfolio even after removing FI$CAL and the Courts Case Management system stands well over $5 billion. Serious re-examination of scope, schedules, and procurement strategy, even cancelling several non-performing projects could easily shave 10-20%. There’s another $500+ million savings.

Other areas besides MediCal are ripe for aggressive, technology based investigation. Unpaid California state taxes are nearly $7 billion a year, a cumulative total of over $100 billion. Similar error rates apply to other state programs across the board.

Take your choice, Governor, and get serious about ending this profligacy.


  1. Anonymous says:

    Get rid of OTECH and can the Federated Data Center. It’s all a sham to bilk the State out of more money. Look into it, none of it makes sense.

  2. The Dude says:

    What about the CALPADS fiasco? There’s a million-dollar screw-up that could be killed.

  3. erb says:

    Interesting analysis. However, what I wonder is how many of these project vendors have contributed to political candidate election campaigns and therefore may feel they are “owed” a continuation and/or completion of the projects. It would be interesting to cross reference candidate contribution lists with potential vendors on these projects to see if there are any matches.

  4. Shawn says:

    I think the premise of eliminating ineffective programs is not something that should be limited to only IT projects. Having stated that what would be more effective would be to revise the process and regulations, in addition to replacing senior management positions, in order to be more fluid and progressive with the acquisition and adaptation of said processes.

    Essentially what you would need to do is revamp the bid process entirely in addition to how the contractual agreements are made. This would be a top to bottom change as even ordering simple non-IT items is a cumbersome process.

    After doing that, implement strict limitations on projects’ scope, in order to retain focus on the original intent of the program. This would be in opposition to allowing it to grow outside of the original intended function. However, this is highly contigent upon having the original investigation reports being factual and wholly accurate as to the scope and means needed to actually accomplish the original goal. It would not be uncommon to have a non-IT oriented individual attempting to draft up the needs of an IT project or being dictated such parameters from upper management who have similar inexperience with those types of projects.

    Given the nature of actual deployment of projects, it would make more sense to restucture how they are implemented and who is actually implementing them. Rather than having a half and half setup (nearly) between existing staff and vendors, it would make more sense to simply have the capable personell within the state to apply the project in order to avoid schedule conflicts or conflicts of interest within the project. Even looking at the application end on an individual basis, many programs and harware can be developed or built for much less than buying it retail effectively. The same can be said for paying for consulting services from 3rd parties.

    A top down style overhaul of how money and projects being applied would seem to make sense in this instance as well, by perhaps allow different government bodies to compete with each other for funding based upon net result of those projects and award them annually. Full up front funding, combined with in house application and development would reduce several of the steps regarding “waste”, but this is highly contingent on restructuring the bid process and how contracts are executed and by who are recommending them. Simply stating which programs and venues which are not performing well based upon required paramaters and feedback mechanisms is not sufficient and simply looks at a short term gain with no real long term solution and could lead to greater long term shortfalls.

  5. Anon says:

    I am with you 100%, you could not be closer to the truth! They beat up on the poor Gov worker, the poor whose jobs Big business has given away. Just close the loop hole on China and India and Joila 500,00 new jobs between, IBM, HP and the banks! Decent paying 9 to 5 jobs!!
    Your article hints at the “other IT projects” worth nearly 5 billion – dig deaper, OCIO’s office! That is where you will find some huge rats, with really stinky cheese!! OCIO is passing policy that will set the State back some 10 to 15 years!! Remember the old saying, “He who controls the money controls Way or He who has the money has the say!!”, OCIO is taking all of the Depts projects funding in the name of consolidation, then they tell you – they cant help you or they cant support your requests. Ask Gov Brown to Audit OCIO’s books, then you will have your real laugh!

  6. FI$Cal Employee says:

    I work on the Fiscal Project, and I’m amazed that it’s not been a target for at least a delay. It is exactly as you describe it, except worse. All of the progress reported has been more about the schedule, than the quality of the products being produced (planning documents and requirements, read them, they are horrible, and full of unverified facts). People are yelling at each other, and the technology team has already locked out some of it’s business partners during requirements review for “Delaying the project” with questions about the requirements. Delay it!

  7. FI$Cal Employee says:

    I also agree with some of the comments about the data center. We are locked into using it, and there is no competition, so they do whatever they want, however they want to do it. If the engineers come up with a stupid idea, it won’t be killed by the competition. The state just pays extra for some hair brained idea on how something works, and when it doesn’t “THROW MONEY AT IT” with consultants and more hardware.

  8. Tikiman says:

    Look at AB2408 and the whole consolidation effort. There was no financial analysis done and it is costing state government IT more money to move to OTech (formerly DTS, formerly HHSDC, fomerly Teale formerly HWDC). With the new ITAP review of all IT orders at the OCIO level it is costing more in state time and funds. Does it make sense to spend several hundred dollars reviewing a $12 USB device? Moving our servers from local server rooms to Otech and paying more for rack space along with data storage. How exactly is this saving money to the state and taxpayers. Total sham and was Takai’s push to get this through. Stop the IT madness now.

  9. anonymous says:

    Heh heh…yes, don’t just look at the projects and all the beaurocracy surrounding them but take a good close look at Contractor Salaries/RA’s etc..and all the local town cronyism. Plus–hello Unions(what have you done for the worker lately)..these projects and dept’s are so loaded up with consultants ..doing work that falls into classifications that many state workers could do ….for 1/3 or less what these folks are getting paid. Of course..then there’s no pension or Health care to pay the consultants..but..still the salaries are outrageous…esp. in these times with many very qualified folks not working.

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