Wednesday, March 12, 2003

Auditors Blast Cal State's Systemwide Administrative-Computing Project By ANDREA L. FOSTER In a scathing report released on Tuesday, California auditors denounced a controversial nine-year project to overhaul administrative computing throughout the California State University System at a cost of more than $440-million. The report accused the university of understating costs and failing to establish a business plan for the undertaking. The goal of the project, known as the Common Management System, is to replace outdated computer systems on Cal State's 23 campuses with one system. It would run software from PeopleSoft Inc., which sells administrative systems to colleges and businesses. According to the audit, prepared by the California Bureau of State Audits, the total cost of setting up, maintaining, and operating the Common Management System from the 1998-99 fiscal year through 2006-7 could reach as high as $662-million. In 1999, the university projected it would cost only $440-million. The audit said the university had failed to include in its projection $63-million in implementation costs charged to other campuses and $117-million related to campus maintenance and operations costs. Auditors also blasted the university for not undertaking a detailed cost-benefit analysis of the project, saying that without such a study "the university cannot ensure that the ... project is a worthwhile expenditure of resources." The university responded to the report by saying that it disagreed with the auditors' cost projections but agreed with their recommendations for improving management of the project. Among those recommendations was a suggestion that the university take steps to minimize the cost and effort of installing the PeopleSoft software. "We remain on budget and on schedule with this project," Richard West, executive vice chancellor and chief financial officer for the Cal State system, said in a prepared statement. The statement also said the project would bring clear benefits to the university. "Students will have easier access over the Web to admissions and graduation information, class schedules, grades and financial aid." It added: "Faculty and staff will have access to information over the Web that will make it easier to advise students on classes and review students' transcripts." The auditors said they have doubts that the university would achieve all the objectives of the computer-system overhaul. They also said the software-procurement process did not seem fair and objective. For example, the audit report said that "the university did not use a quantitative scoring process to select objectively between" PeopleSoft and another vendor, both finalists. Steven M. Hendrickson, chief deputy state auditor, said the other finalist was SCT. The report also said that a university senior executive "appeared to have a conflict of interest while participating" in procurement decisions. According to the auditors, the executive reported receiving $20,303 to $47,300 from PeopleSoft between 1996 and 1998 for consulting fees, travel reimbursement, and facilitating meetings while he held a top administrative position at the university. The university conducted the software-procurement process from April 1997 to September 1998. The report also said that the executive "participated in key activities related to" the selection of PeopleSoft, including site visits to measure the quality of the company's products and services, and "was on the final contract negotiations team." Mr. Hendrickson identified the executive as David Ernst, assistant vice chancellor for information technology. Colleen Bentley-Adler, director of public affairs for Cal State, said Mr. Ernst did not participate in the final decision to select PeopleSoft. The auditors said another administrator purchased between $10,001 and $100,000 of stock in a computer company -- later identified by Mr. Hendrickson as Dell Computer Corporation -- a day before the university signed a major contract with the company that was related to the university's technology overhaul. Mr. Hendrickson identified the administrator as Lenore Rozner, assistant vice chancellor for business planning and information management. Ms. Bentley-Adler said Ms. Rozner's husband purchased the stock without her knowledge. Neither Mr. Ernst nor Ms. Rozner returned phone calls on Tuesday. Ms. Bentley-Adler defended both administrators, saying that they had been open about declaring their financial interests, which were revealed on Form 700 documents. "No one was trying to conceal anything," she said. Jim McGlothlin, regional vice president for PeopleSoft, said he was proud of the progress that his company has made with the Cal State system. Fifteen campuses have successfully installed and are running PeopleSoft software, he said. He disagreed with the auditors' cost projections and said the university's total cost estimate of $440-million for the project was accurate. In addition, he said the bidding process was fair and objective. The audit was requested by Cal State's campus unions, which have criticized the project's cost. Patricia Evridge Hill, an associate professor of history at San Jose State University who is the secretary of the California Faculty Association, said the audit report "vindicates what CFA has been saying." She added, "The heart of the university, which is teaching and learning, has been shortchanged because of the Common Management System." Background articles from The Chronicle: Giant Cal State Computing Project Leaves Professors and Students Asking, Why? (1/17/2003) State Auditor to Review Cal State Project (6/21/2002) Easy-to-print version E-mail this article

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