Telephone, computer privatization set to cost Ga. $35.2M more

ATLANTA — State officials say the 2009 privatization of telephone and computer services eventually will save the state significant money, but so far it’s cost the state tens of millions of dollars more.

In fact, the state plans to spend a total of $35.2 million more on technology this year and next compared with what it spent the year before privatization took effect. That’s according to figures from the Georgia Technology Authority, which manages contracts with IBM and AT&T.

These increases come as budgets for nearly all other state functions are being cut to balance the state budget. But state officials say they’re needed to upgrade the state’s woefully outdated computer and telephone equipment.

“We were so far behind,” GTA Executive Director Patrick Moore said. “(If you have old computers), you’re going to have to spend some money in order to get computers.”

The plan has always been that privatization would take about two years to show cost savings, Moore said. And Moore said the effort is on track to save the state $180 million over the life of the deal, just as Gov. Sonny Perdue promised when he announced the contracts in November 2008. But the contracts are hefty, valued at $873 million during eight years for IBM and $346 million during five years for AT&T. And this spending can be difficult to track, which has raised questions in a state Legislature now looking to cut Perdue’s budget to avoid tax increases in a still-struggling economy.

State Rep. Austin Scott, R-Tifton, called the contracts a “money pit” this month. Scott, one of about a dozen candidates for governor this year, has complained repeatedly about the extra costs and the way privatization was handled. Though 31 entities initially went after the two contracts, most fell by the wayside as the state discussed what it wanted from potential bidders.

In the end, IBM was the only company to bid on the largest contract.

“If that had been any private business, it would have gone back to the market for additional bids (with different specifications),” Scott said. “When you super-size the contracts, what you do is push the small businesses in the state out of the ability to bid on the business.”

But Perdue’s administration has defended this decision. Michael Clark, spokesman for the authority, said last week that other vendors bowed out of the bidding process as it became clear that “what we were looking for was not something they were in a position to provide.”

Also of concern: The state’s technology spending can be difficult to track. The Georgia Technology Authority doesn’t have its own section in the governor’s annual budget report, which is where the governor lays out his spending recommendations to the Legislature. But departments make payouts to GTA, and those payments are contained in line items within each department’s section of the budget.

The authority essentially takes that money to pay IBM and AT&T for equipment, tech support and access to the Internet and telephone networks.

The Telegraph tallied about 175 budget line items in the governor’s latest budget proposal in an attempt to quantify the new spending. That showed a $5.4 million increase proposed for fiscal 2011, as compared with spending in fiscal 2010. But more detailed records provided by GTA at The Telegraph’s request put that increase at about $6.2 million.

Further complicating things is the fact that the authority itself sends some money back into the departments. But that money comes back to the authority after it’s used to draw down federal matching dollars. It’s an extra step that means millions more in federal funding, Moore said.

Said Scott: “If they could just explain it in a manner that we could understand, it would be different.”

These issues flared up during recent budget hearings, and at least one department rose to the GTA’s defense when it comes to the extra spending. Department of Natural Resources Commissioner Chris Clark said his entire department had about 15 BlackBerrys — cellular telephones that can access e-mail and the Internet — before the contract went into effect in April 2009. The department has more than 2,300 employees.

“Quite frankly, we were grossly underfunded,” Clark said. “So we knew that there’d be an increase there.”

The GTA has about 165 employees now, down from the 678 it had before privatization. Many of those former employees were offered jobs with IBM or AT&T, the governor’s office said when the contracts were announced.

The remaining state employees at GTA manage the contracts with IBM and AT&T as well as run about 80 state Web sites, Moore said. “Right now it’s the right number,” Moore said. “Over time, we’ll be looking to make it smaller.”

Moore said IBM and AT&T are providing “a higher level of service” cheaper than these upgrades could have been done in-house.

“But we always said that there was going to be an initial investment,” he said.

To contact writer Travis Fain call 361-2702.