SF gives $50 million to Oracle — for what?

Two supes question long-term software contract that may be obsolete a year or two after it starts

By Tim Redmond

JUNE 17, 2015 — When proposed contracts come before the Board of Supervisors, they generally get approved without much challenge or question. The Budget and Finance Committee is supposed to check out the details; the budget analyst looks at the numbers. In a typical meeting, a dozen or more contracts, often totaling tens of millions of dollars, are approved by unanimous consent.

Not so yesterday, when two supes challenged a deal with Oracle and Accenture worth more than $50 million– but the rest of the board approved it anyway.

City contracts are one of the places where mischief happens in local government. The city spends such a vast amount of money that in the past we’ve seen all sorts of examples of deals going to friends of the mayor, deals going to campaign contributors … all sorts of ways that big chunks of taxpayer money went into dubious deals.

This particular contract may be just fine and dandy – but Sups. Jane Kim and David Campos raised some troubling questions.

The contractors are supposed to upgrade the city’s ancient software systems for financial administration and accounting. As Kim noted, the Controller’s Office showed her how the current system works – with decades-old computers using a black screen and green letters. It’s done; it has to be fixed.

There’s already money in the budget for the project, which makes perfect sense: You don’t scrimp on systems that track more than $8 billion in city money.

Here’s how it’s supposed to work: When you do a deal like this, you put out a request for proposals, you get bids, and you pick the best one.

In this case, according to the budget analyst, Oracle and Accenture came in $10 million above the next bidder. But the Controller’s Office said that cost was only one factor, and chose the Oracle and Accenture over two other competitors, CGI and Phoenix/SAP.

The original proposal was for five years, at about $26 million. After Oracle and Accenture were chosen, city officials went back to the company and negotiated a much longer deal, raising the price to more than $50 million.

The other two competitors weren’t given a chance to bid on the longer contract.

All of that’s a bit concerning, Campos said. “The size of the [final] contract is so much higher [than the original proposal] that it undermines the point of competitive bidding,” he said. “When you have a [project] scope and then turn around the double the scope, perhaps [with competitive bidding on the larger contract] you might have had a different outcome.”

Kim had a much larger concern. The current system the city uses is way, way out of date, she said. But “the system we are voting on today is likely to be our system for the next 25 years.” And soon, she said, “the system will look just as outdated and scary” as the current technology.

That’s because companies that sell licensed software like Oracle tend to set things up so it’s hard to change vendors. “That’s part of Oracle’s business plan,” she said. “They get you and you just can’t get out.”

More and more private companies, she said, are opting to use open-source, flexible – and free – software for things like accounting, she said. In this tech hub with so many options, the city should look for ways to “wean us off our dependence on giant companies.”

(Of course, Oracle brought us the America’s Cup – and look how well that turned out for the city.)

Nobody else on the board expressed any concerns. The motion to approve the contract for more than $50 million passed 9-2.