TxDOT Moving to Privatize IT Operations

Feb 8, 2013
TxDOT moving to privatize IT operations
By Christopher Calnan, Austin Business Journal

The Texas Department of Transportation plans to privatize a portion of its technology department in an attempt to improve consistency statewide, and there are only about a dozen companies in this country that can take on the task.

TxDOT, which had a $19.8 billion annual budget in 2011, sent a request for proposals to vendors to solicit bids for operating the department’s information technology department.

The department scheduled a pre-bid conference for Feb. 7 and plans to award the contract in May, according to the RFP.

The five-year contract would include an additional two-year renewal clause. And size requirements of the prospective vendors means that only about 10 to 12 companies in the United States would be large enough to qualify to bid, industry experts said.

TxDOT’s IT department has operated with a decentralized structure.

As a result, each office has generated custom applications with each district and business unit having its own version of applications.

Government agencies that outsource tech functions typically save the most money by reducing energy consumption though cloud computing and reducing employee numbers, said IT services veteran Tommy Wald, the former CEO of Austin-based White Glove Technologies LLC.

Centralized consistency sought

TxDOT, which is headquartered in Austin, employs 12,000 workers and operates 21 divisions, six offices, four regional support centers and 25 geographical districts.

It manages more than 18,000 personal computers, laptops and workstations, and it processes 4,000 tickets per month for the Texas Department of Motor Vehicles.

The amount of tech support has varied across the system.

“Some districts have had gold-plated service, which has resulted in significantly higher support costs over the years,” the RFP states. TxDOT officials couldn’t provide the annual cost of its tech department.

The project isn’t open to startups. Bidding vendors must have generated at least $2.3 billion per year in revenue and completed at least one similar engagement at a state, federal or local level.

Prospects also need to be engaged in at least one other state project.

The privatization of government services has been taking place for 20 years. But it really became especially popular starting with the global recession in 2008 as governments needed to cut costs while providing more services, said Charles Weaver, president of the MSP Alliance, a California-based accrediting body for the managed services industry.

As a result, service providers use cloud computing by virtualizing applications and servers to save operational costs, he said.

A troubled track record

Texas has had some notable debacles when outsourcing its technology management, and many of the problems have come from the handful of companies who are eligible to bid on this latest contract.

In 2010, the Texas Department of Information Resources was forced to scuttle a data center consolidation project with IBM Corp. (NYSE: IBM) six years into a nearly eight-year, $863 million initiative designed to merge the data centers of 28 state agencies into two facilities.

In March 2012, state officials agreed to a settlement that required Texas to pay $35 million to IBM in exchange for $20 million worth of equipment. The DIR then agreed to pay France-based Cap Gemini S.A. (Euronext: CAP) $127 million over six years to complete the project. It’s also paying Xerox Corp.’s ACS division $901 million to work on the project for eight years.

In 2005, Texas awarded Accenture PLC (NYSE: ACN) an $899 million contract to operate the state’s food stamp eligibility program. But mismanagement of the venture caused benefit problems for thousands of eligible Texans resulting in the worst performing federal food stamp program in the nation.

DIR spokesman Thomas Johnson said the department, which is responsible for technology implementation statewide, doesn’t comment on the workings of other agencies. It also doesn’t comment on the privatization approach.

TxDOT Executive Director Phil Wilson issued a letter about the RFP in which he stated that workers frequently complained about inefficiencies in the IT department.

“We should always be looking at how to do things better,” Wilson wrote. “And that’s exactly what we’re doing with our IT program. The RFP published last week enables us to learn about how people outside of TxDOT could improve our IT function.”

TxDOT tech by the numbers 1,200 laptops supported on behalf of the Texas Department of Motor Vehicles’ registration and titling system 2,500 desktop computers supported for the DMV 4,000 tickets processed per month for the DMV 5,320 remote access users 14,100-plus TxDOT and DMV users 18,000-plus personal computers, laptops and workstations supported for TxDOT 21,181 external email items sent per day 28,112 spam email items quarantined per day 84,142 internal website portal hits per day 158,771 external email items received per day 708,263 internal email items processed per day Source: Texas Department of Transportation

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