Virginia IT officials expected the statewide seat management contract -- the first of its kind in the nation -- to deliver state-of-the-art desktop computing to more than 10,000 workers by now. Instead, it covers less than 500 users and has been broadsided by a series of unforeseen challenges.
"On one hand, it's been a disappointment," said Donald Upson, Virginia's secretary of technology. "On the other hand, I've tried to figure out why because I think it's the best thing for the state of Virginia. We need to figure out a way to make it work."
Launched in September 2000, the program was meant to revolutionize state IT procurement by turning computing power into a utility much like electricity or telephone service. Agencies no longer would own rapidly depreciating personal computers, peripherals and networking gear. They would simply specify how many employees needed a networked PC on their desks and one of three contract vendors would provide the hardware, software and support for a "per-seat" price over three years.
So far, however, the program has been a tough sell thanks to tight funding, lack of multi-year agency budgets, inflexible procurement rules and a litany of other thorny issues.
Good News, Bad News
By eliminating PC purchases, the technique transfers IT spending from volatile capital budgets to stable operating budgets. The goal is to make PC acquisition, support and replacement a predictable, long-term operating expense. That's a huge change from the haphazard way most states procure desktop technology.
Virginia state agency budgets typically lack funds for regular replacement of desktop computers, said Constance Scott, manager of the Seat Management Section of Virginia's eGovernment Implementation Division. Instead, agency managers cobble together IT upgrades by raiding pockets of unspent money at the end of the fiscal year.
Managers never know how much leftover cash -- if any -- they will find. When they do find funds, they tend to pay top dollar for high-end PCs, simply because they don't know when they'll have money to replace them again.
"[Agencies] are in a reactive spending pattern. The whole point of seat management in Virginia is to eliminate this," Scott said. "You can't do your job without a PC. It's a utility now, so let's treat it as such."
Tough Transition
But moving from reactive to proactive IT spending has proven harder than expected, and Virginia officials point to a number of reasons for the difficulty.
First, the seat management contract hit the streets just as Virginia slid into an unprecedented budget crunch. Earlier this year, lawmakers failed to amend Virginia's biennial budget for the first time in modern history, throwing the state into fiscal turmoil. Recent estimates put Virginia's budget shortfall at anywhere from $50 million to $500 million, according to newspaper accounts.
The economic downturn injected plenty of uncertainty into the IT spending plans of state agencies. "The timing was terrible," said Scott.
Another key sticking point, according to Upson, is the lack of multi-year funding for Virginia agencies, which makes them reluctant to enter a three-year contract for seat management services.
"We haven't been able to figure out the budgeting issues in a way that makes it easy for them [to join the program]," he said. "In other words, when you enter into a three-year lease, we've got to be able to provide assurance that the money will be there."
Even when agencies do have money for technology, procurement rules can make it difficult for them to spend those dollars on seat management services. For instance, some federal funds directed to state agencies can't be used to lease IT equipment, which is a central component of the seat management program.
Similar rules lock out much of higher education from the seat management contract, added Upson. Virginia colleges and universities use the state's Equipment Trust Fund to pay for IT equipment. The fund relies on asset-backed bonds and those require equipment purchases.
"The law upon which our bond rating is issued does not allow the leasing of computers," he said. "The problem is, we can't open it up [to allow leasing] without opening up the whole bond-rating issue. We're working with the Treasury Department to change that policy."
Finally, most state agencies recently upgraded their PCs for the year 2000, making them reluctant to jump into a new desktop computer acquisition so soon.
"People are saying, 'We just got new computers and now you want us to take them out and get other ones?'" Upson said. "I accept some blame for not taking that into consideration. Frankly, I think that's reflected across the country and is one of the reasons that PC sales are not what they could be."
Par for the Course
Although Upson wanted the program to yield faster results, observers say the slow start is typical of seat management initiatives and other complex IT contracts.
Federal government seat management programs run by the General Services Administration and NASA took several years to get off the ground, said Ray Bjorklund, vice president of consulting services for Federal Sources Inc., which tracks government contracting opportunities. He predicted a similar lag for the Virginia program.
"Looking at data from other contracts, it should reach some sort of steady state in two to three years," said Bjorklund. "In general, it takes some time to ramp these things up. You have to put money in the budget. You have to get approval for the program, and you actually have to do the contracting work."
Holli Ploog, president of Dyncorp Management Resources, said the success of federal seat management programs proves that the concept can work. "There is a lot of activity throughout the federal government," she said. "They have shown that it really has tremendous value."
Dyncorp is one of three IT vendors participating in the Virginia program. Ploog said the firm has won a single order through the contract covering fewer than 30 seats.
She agreed that budget issues and widespread year-2000 computer replacement hobbled the program's introduction. Virginia also may be paying a price for venturing onto IT procurement's cutting edge. "They're a pioneer, and there were a lot of issues that were unanticipated," Ploog said. "It's a seven-year contract, and I think [the issues] will be resolved and it will proceed."
Making a Case
Despite the challenges, Upson remains committed to seat management. The program's regular PC upgrades and asset management features are key to building and maintaining an infrastructure for electronic government, he said.
In particular, Upson hopes to improve desktop technology in small, underfunded state agencies. These agencies, which lack the clout to win capital funding for IT projects, often struggle with ancient PCs and little formal IT support.
"I want to remove politics from acquisition of the desktop environment," he said. "The minute you take [IT funding] from the capital budget to the operating budget -- which seat management does -- it's recurring and untouchable. You've given everybody who is in the program state-of-the-art technology permanently."
Upson currently is seeking state money to move 14 of Virginia's smallest agencies onto the seat management program. He expects total cost of ownership (TCO) data collected during the first 10 months of the program to help him make a strong case for the funds before state lawmakers.
That data may be one of the program's most significant achievements thus far, he said. In all, 40 state agencies have conducted TCO studies in connection with the initiative, giving Virginia government uncommon insight into its computer-buying practices.
"We didn't get the 10,000 seats that we wanted," said Upson. "But what we do have now are the facts and figures. It's very compelling information on the need to switch over to seat management."
