On The Money: Outsourcing Outrage
California taxpayers are shelling out millions of dollars for outside vendors to perform jobs that state workers say they can do – for much less money.
The practice of outsourcing is coming under increasing scrutiny, especially by the labor unions representing state employees.
The Employment Development Department (EDD) is one of many government agencies using outside contracts for internet technology services.
California's unemployment rate is currently 12.4%. On The Money encountered Corey Coleman at EDD's Sacramento office on 50th Street. Coleman, an unemployed construction estimator is now looking for work and told CBS 13, "There are some good leads right now, but most are them are from out of state."
California now has more than two million unemployed workers – that's more than double the number compared to early 2008. Recent Unemployment Numbers
The influx put a strain on the state's Employment Development Department, so EDD hired outside help to process all those claims.
But EDD's internet technology contract was offered to just one vendor, for $5 million, with no competitive bidding.
The Contract runs from May 2009 – December 2011 at a cost of $161,292.32 per month.
The single source contract was awarded to M-Corp, a Sacramento firm that has experience with the state's old fashioned COBOL computer programming system. But state employees were ready, willing and able to handle the load, for much less money, according to their union.
"The public should be well aware that there's a work force out there that the administration has developed, that is costing us two and three times more money," said Margarita Maldonado, the bargaining chair for Service Employees International Union, local 1000.
The union says outsourcing the internet technology work is costing taxpayers close to $200 an hour – compared to $55 an hour for a state worker, even with benefits. EDD disputes those figures – saying the top of the scale under the outsourcing contract is $135 an hour for a senior programmer – while a state worker would make $60 - $65 an hour as a System Software Specialist.
As for the urgency of the situation - EDD points to Governor Arnold Schwarzenegger, who declared an economic emergency in April 2009, http://gov.ca.gov/proclamation/12041/ . EDD says it needed help in a hurry, opting to outsource the contract instead of using state workers.
The contract states, "The current economic situation has created unmanageable workloads and existing staffing levels cannot adequately handle the legislated stimulus efforts. Modifications must be made immediately. The Contractor will provide temporary augmentation of the mainframe staffing levels needed to address this short-term emergency…"
"We did go out and advertise among all state workers," said Loree Levy, a spokesperson for the Employment Development Department.
Levy told CBS 13, "We brought on board anybody who applied and had the requisite skills. But we fell far short of what we needed. So we needed to bring on some additional help."
But that help is now costing the state $5 million – a sore spot for state workers.
"This was not an emergency," said Margarita Maldonado of SEIU. The union representative added, "The state knew that technology was going to need to change going into the future."
Maldonado told CBS 13,"The administration has chosen to outsource and that is not good public policy."
Incoming Governor Jerry Brown may look at outsourcing in a different light. Sterling Clifford, a spokesman for the Governor-elect, told CBS 13 the Brown administration "will be looking to create efficiency and reduce expenses everywhere that can be done."
Clifford added, "The Brown administration will look critically and analytically at every dollar the state government spends."
California's unemployment insurance program is insolvent and operating only because of loans from the federal government. But that loan will soon start accruing interest and "we'll owe the federal government about $362 million come the end of September," said Loree Levy of EDD.
The multi-million dollar loan will be yet another financial headache for the incoming governor to handle.
If you have information about outsourced contracts – or a tip about questionable government spending, send us an e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress at http://twitter.com/#!/mikeluery
