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Auditors Debate Merits of Oracle Software Deal

The State

June 06, 2002|JENIFER WARREN | TIMES STAFF WRITER

SACRAMENTO — It was the battle of the auditors in the Capitol on Wednesday. And for at least part of the day, everyone without an MBA struggled to stay awake.

Continuing its inquiry into the state's much-maligned software contract with Oracle Corp., a panel of lawmakers heard conflicting testimony about whether Californians got a good deal.

State Auditor Elaine M. Howle portrayed the contract as a money-loser that was hurriedly signed and based on faulty projections.

Then her former boss--Kurt Sjoberg, who worked in state government for 25 years but now consults for Oracle--took the microphone to defend the agreement.

Sjoberg predicted it would save California between $110 million and $160 million over the next 10 years.

Despite forecasting such savings, however, Sjoberg--the first witness testifying on behalf of Oracle--declined to say whether he would encourage the Legislature and Gov. Gray Davis to retain the contract.

"There's much more to this than just my analysis of the contract's value," he said, referring to the swirl of political controversy that shrouds the deal.

Signed a year ago, the Oracle contract was supposed to save the state up to $111 million through volume purchasing and maintenance of database software.

But in April, Howle issued a highly critical report predicting the agreement could cost up to $41 million more than if the state had kept its previous software contracts.

As Oracle continues negotiations with the state over whether to rescind the contract, the Joint Legislative Audit Committee continued its scrutiny of the deal.

Much of the day was consumed with dizzying talk about statistical methods, spending projections and arcane elements of the software agreement.

But there was a bit of drama.

Legislators were particularly interested in why Oracle hired Sjoberg to prepare his analysis of the contract in late January--several months before Howle issued her report.

Sjoberg deferred to Oracle lawyer Stephen Ryan, who said that his law firm decided to hire its own auditor to evaluate the agreement after media reports suggested that Howle's assessment might not sufficiently portray the "appropriate value of the contract" to the state.

The company chose Sjoberg to "fill the gaps," Ryan said, because of his background and credibility.

Sjoberg's credibility, however, came under attack throughout the day, first by Republican Assemblyman Rod Pacheco of Riverside, who repeatedly emphasized that the consultant had been paid--$275 per hour--to prepare his report.

Sjoberg said that in all, his firm would be paid as much as $100,000 for the Oracle work.

But he insisted that his conclusions were objective and based on "an analysis of data and facts."

Late in the day, Sen. Steve Peace (D-Chula Vista) returned to the issue of Sjoberg's credibility--and was far less subtle.

Peace said that it was inappropriate of Sjoberg to take a job that might lead him to oppose work produced by the state auditor, with whom he so recently worked.

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