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Oracle Debacle Provides a Glimpse

Government: Hearings offer some insight into Davis' administration. But questions remain about the $95-million computer software deal.


SACRAMENTO — As a career public official, Gov. Gray Davis plays up his knowledge of the mechanics of government, laying claim as a candidate four years ago to being the best-trained governor-in-waiting California had ever produced and ending his campaign ads with the line, "Experience money can't buy."

But as California's latest computer debacle shows, Davis proved to be no better than his predecessors at high-tech procurement.

Though there is no evidence that Davis personally orchestrated the $95-million computer software deal with Oracle Corp., recently completed legislative oversight hearings provided unusual insight into his administration, portraying some top advisors as disengaged while others feuded. They all overlooked warnings from career civil servants--and none was willing to stand up and block a project that had not been vetted.

Although previous administrations fumbled computer projects, Davis and his aides added their own twists. Chief among them, Davis took a $25,000 campaign donation from Oracle in June 2001, a few days after the administration agreed to buy Oracle software without seeking bids from other firms. He returned the money once the deal ran aground, but not before fueling the perception that he trades policy for campaign money.

In the face of a critical state audit, and after more than 100 hours of oversight hearings, Davis is working to rescind the deal with Oracle and its partner, Northrop Grumman subsidiary Logicon. Still, fallout continues. Atty. Gen. Bill Lockyer is investigating circumstances surrounding the deal. Last week, Speaker Herb Wesson (D-Culver City) dumped the Democratic assemblyman who chaired the oversight hearing and was especially critical of Davis.

The Department of Information Technology, established in the 1990s to avoid such costly mistakes, was disbanded, and J. Clark Kelso, the McGeorge law school professor tapped by Davis to recommend improvements, last week suggested establishing a board, rather than a single czar, to set information technology policy. A board, said Kelso, would open the process to the public. That "sunshine" would help cleanse the procurement process and ensure open bidding by vendors, he said.

"We have to tighten the ethical standards," Kelso said.

The Oracle deal gained wide attention when the Bureau of State Audits issued a report in April. In unusually direct language, the audit found little demand within the state's 127 departments for the products offered under the $95-million, six-year contract, called an Enterprise Licensing Agreement. The report was so strong that it spawned legislative oversight hearings, a state Department of Justice investigation and at least an initial inquiry by the FBI.

In the view of Republicans and some Democrats on the Joint Legislative Audit Committee, that Oracle stood to gain a virtual monopoly on software for the state was significant. Oracle has not been a major campaign donor in California, and Davis' aides testified during the hearings that campaign money had nothing to do with their decision.


New Source of Funds

But Republicans nonetheless believe it was not lost on Davis' aides that Oracle Chairman Lawrence J. Ellison is among America's richest men, and potentially a new source of campaign money for the Democratic incumbent facing reelection this November.

"Every leader sets a culture for their office," said Assemblyman Bill Leonard (R-San Bernardino). "This administration is more politically aggressive than others that I've worked with.... There is a culture that to get ahead, you've got to be known as someone who has contacts with interest groups. When Oracle and Logicon came knocking, here was a chance for up-and-comers to open the door. This was their ticket to advance."

Republicans weren't the only ones to suggest that procurement had become subject to politics.

"Political and monetary influences were brought to bear on this contract," said Assemblyman Dean Florez (D-Shafter), who chaired the oversight hearings but was removed from the audit panel last week. "I am convinced this contract would have died a deserved death had it not been for those influences."

That the issue even reached the governor's top aides, if not the governor himself, was somewhat unusual.

Although Republican Gov. George Deukmejian's administration was not without its missteps--a failed $50-million Department of Motor Vehicles computer project got its start during his years--Deukmejian had a policy against allowing procurement issues to reach his office. Career civil servants dealt with such matters, not political appointees.

"We never got involved in procurement, period," said Sacramento attorney Steve Merksamer, who was Deukmejian's chief of staff. "We just didn't do it, as a matter of policy."

The Oracle deal was odd in other ways too. Dispelling the notion that government moves slowly, a mere 22 days passed between the first sales pitch and May 31, 2001, when five top Davis administration officials agreed to it.

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