Order Cuts Year-End Technology Buying in California

Gov. Arnold Schwarzenegger terminates unfilled vendor contracts in response to state budget crisis.

by / June 9, 2009

An order issued Monday by California Gov. Arnold Schwarzenegger will halt much of the last-minute technology buying typically done by state agencies as the fiscal year draws to a close.

Grappling with a $24.3 billion state budget deficit, Schwarzenegger terminated unfilled vendor contracts dating back to March 1. The purchasing ban extends through June 30, the end of California's 2008-2009 fiscal year. In addition, all executive branch agencies and departments must cut vendor contracts by 15 percent for next year.

The move eliminates the year-end shopping spree for PCs, storage devices and other IT commodities that state agencies often engage in as they spend leftover budget money. In normal years, state agency IT spending can spike to double the normal monthly amount during the final 30 days of the fiscal year, said Adrian Farley, chief deputy director for the California Office of the Chief Information Officer (OCIO).

"That will effectively be put on hold," Farley said. "There will not be purchases of new technology hardware, unless it's required to address a critical public safety need."

Better Technology Purchasing

Cooling off the year-end buying cycle will lead to better purchasing decisions, said Farley, noting that the California OCIO is trying to bring more standardization and oversight to the process.

"An environment where you have multiple agencies doing independent purchases typically doesn't result in a strategic outcome," he said. "This is really about the state taking a business perspective on how we spend money -- that's what the taxpayers deserve."

Farley said the governor's order will force agencies to re-evaluate the necessity of new equipment purchases and reduce the automatic replacement of still-usable devices.

"The state will continue to purchase IT over time, but it will just be done in a more strategic way," he said. "And that really aligns with where we need to go anyway."

Schwarzenegger's executive order exempts multiyear IT systems and service contracts that are approved by state CIO Teri Takai. The order also exempts emergency and disaster response activities, as well as other functions of state government directly related to public safety.

Looking for Savings

To comply with next year's 15 percent cut in contract spending, the OCIO will re-examine existing IT contracts for potential savings.

"It will include renegotiating contracts through changing things like terms and conditions, and looking to see if every deliverable needs to be delivered," Farley said. "It's a robust process of prioritizing how we manage risk and determining if we need to make this investment now."

Those goals dovetail with efforts already under way by the state CIO's office, Farley added. Earlier this year, Takai released a five-year capital IT plan designed to coordinate and prioritize technology projects throughout the state. California also is studying the impact of restrictive contract terms on the price of IT projects.

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