More Bugs in the System

LESS THAN A YEAR AGO, the San Diego Data Processing Corporation was cruising fat, happy and sassy below the radar of its parent agency, the San Diego City Council. Its supporters would have us believe that the organization responsible for providing computer and telecommunications services to City Hall was a model of efficiency that saved taxpayers millions of dollars a year; it was the city’s self-serving bureaucracy that was to blame for problems plaguing the sprawling information technology system. But news of spending abuses—and possibly criminal conduct —breaks, and suddenly the city-owned organization not only needs reining in, it should be eliminated altogether. New city manager Lamont Ewell, in a report released April 29, recommends dissolving the 25-year-old DPC in favor of bringing some IT functions in-house and outsourcing the remaining functions to a private vendor, much like the county did four years ago. Over time, the move would save the city, struggling with a $25 million budget shortfall, millions of dollars a year, the report states. (Although technically speaking the DPC is an outsourcing agency, in practical terms it’s a quasigovernmental arm of the city, created in 1979 as a public/private venture to get around the constraints of organized labor.)

Mayor Dick Murphy and Councilmember Jim Madaffer (District 6) initially give Ewell’s report, which calls for dismantling the DPC within 24 months, a ringing endorsement. But at the behest of an ad hoc committee of DPC directors—and facing an audience packed with more than a third of the DPC’s 320 employees fearful of losing their jobs—they and their colleagues on the Rules, Finance and Intergovernmental Relations Committee back off. Instead of sending the city manager’s original proposal on to the full council, the committee, in a 5-0 vote on May 19, approves a watered-down version. The upshot is the creation of a “project team” to study the matter and report back with a recommendation after 180 days—the week following the November election. (Also on the Rules Committee are Deputy Mayor Toni Atkins [District 3], Scott Peters [District 1] and Brian Maienshein [District 5]. Murphy and Peters face run-offs in November; Atkins, Madaffer and Maienshein were all re-elected in the March primary.)

Atkins, the only member of the Rules Committee to initially challenge the city manager’s report, calls the recommendation to dissolve the DPC a “kneejerk reaction . . . following the political egg on our face” and applauded the measured, analytical approach. She says the timing vis-a-vis the election is not an issue with her.

My cynicism comes from having several months ago had a report where everything about the DPC was good, then we get a report that says everything is bad,” she says. “I’m not talking about the tequila shots [at DPC dinner meetings]. We all agree that’s bad.

“But how, within a period of months, can things go from being really good to being really bad as it relates to the technical job of DPC?” she wonders. “There are a lot of people with a lot of different agendas. . .. I’m not very trusting of this report.” The project team—which consists of representatives from the DPC’s senior management, the city manager’s office and city attorney’s office, as well as the DPC’s attorney and outside legal counsel—is to submit an interim report on or about August 19. A pivotal issue complicating the dissolution of the DPC is sorting out who owns what and establishing property rights.

Meanwhile, the Rules Committee agreed with the city manager’s recommendation to restructure the DPC’s independent board of directors. Under the new configuration, three city staff members would be appointed to the seven-member panel, and the chair position would be held by the city’s chief information officer, Rey Arellano—who is also the architect of the proposal to dissolve the DPC. This would put Arellano, who has had no direct control over the agency providing most of the city’s IT services, in a position to oversee the DPC and its $68 million annual budget. The move would provide the accountability that has been lacking, its proponents say. The full council was scheduled to vote on the matter in mid- June.

Former DPC board member Phil Thalheimer, who is challenging Councilman Peters, describes the six-month delay as “humorous.” While restructuring the DPC board is a “big step in the right direction,” the entire matter “could have been done in 90 days,” he claims. “This way it’s off the table for the election, probably for the mayor more than anything else.” Peters says he believed the matter was too important to make a hasty decision and supported further study, but he wanted the team to report back in five months, prior to the election, as originally proposed. However, Madaffer asked that another month be tacked on, Peters says. Madaffer, the council’s DPC liaison, declined to comment.

County supervisor and mayoral candidate Ron Roberts says the root of the DPC problem is not the agency itself but a lack of leadership within city government. Nothing was being done until the DPC came under fire by the news media, but putting off any relevant action until after the November election is just playing politics, he says. “This is just a symptom of the way the city is being run. It needs leadership and somebody that knows how to do it.

Murphy says the timing has nothing to do with the election and everything to do with understanding the legal implications—and that takes time. “I continue to believe that the city should consider dissolving DPC and outsourcing or in-sourcing its functions,” he says. “However, I agree we need to analyze the legal issues carefully before making a final decision. In the meantime, restructuring the DPC board of directors will increase accountability.”

Roberts contends that the county, which outsourced its IT services to a private vendor four years ago, is a good model, despite the initial disputes over its seven-year, $644 million contract with a consortium led by technology services giant CSC and San Diego–based Science Applications International Corporation. His solution is not dissolving the DPC but auctioning it off and letting it compete with other private contractors to provide the city’s IT services. “The Data Processing Corporation should have some value, and if it has value, then sell it,” Roberts says.

WHEN THE DPC WAS FORMED, it was the right decision at the time, say critics and supporters alike. But as the organization grew, it became an uncontrollable stepchild that refused to cooperate with city officials, according to the city manager’s report. Among the conclusions detailed in the report is that the DPC “staff has not been willing to share detailed information concerning overhead costs, stating that city staff had no right to examine certain areas the DPC had the responsibility to manage as an independent entity. The flaw behind this rationale was recently illustrated by the spending abuses by DPC executive staff, which is, in part, symptomatic of more fundamental oversight and accountability issues.

San Diego Magazine was the first to report the lack of oversight and out-of-control spending at the DPC (“Bugs in the System,” November 2003). A local television station later reported on the matter, and on January 9, city auditor Ed Ryan released an audit documenting lavish spending on liquor and wine at DPC-hosted parties and business meetings.

DPC president and chief executive officer Roger Talemantez resigned five days later. Prior to the audit, he had told San Diego Magazine: “This is not government money. . . . We’re not held to government standards.

However, the few thousand dollars Talamantez authorized for alcohol and fine dining was just the tip of the iceberg compared to the hundreds of thousands paid to a private contractor to help develop and promote portal technology licensed from Viador Inc. It was technology that then- CIO Dianah Neff said the city didn’t want or need but was championed by Councilmember Madaffer and, later, Murphy. What’s more, former board members estimate total DPC spending to integrate the portal technology into the city’s Web site was probably in the millions, but Talamantez refused to reveal the full extent of the expenditures, they say.

Talamantez is now being investigated by the district attorney for possible criminal conduct. According to statements of economic interest filed with the city, Talamantez owned stock in Viador between September 26, 2001, and April 1, 2003. At the time, he was not only pushing Viador’s portal technology on the city, he had also personally authorized contracts with SA Ventures, which was hired to resell the technology to other government agencies. The city’s municipal code states: “It is unlawful for any city official to be financially interested in any contract made by them in their official capacity.

The fate of the DPC is now in limbo, pending the project team’s recommendation, but with Ewell and Arellano still favoring its dissolution, a case will have to be made for preserving the agency if it is to survive.

Councilmember Atkins, who believes the $2 million to $4 million estimated cost of dismantling the DPC is “grossly underestimated,” may make that case. “The thing that concerns me most is this appears to be a foregone conclusion, and that’s no objective assessment,” she says. “Just because you have a political embarrassment doesn’t mean you don’t do the right thing and fix the problem.

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