NC state government reforms could be boon for IT contractors

After months of speculation, North Carolina Governor Bev Perdue late last week released a four-part plan to restructure, consolidate, eliminate and privatize parts of her administration. Among the proposed changes, Gov. Perdue will be looking towards private vendors to consolidate the state’s IT services and manage its purchasing functions.

According to a release from the governor’s office, the restructuring will be the most dramatic change to the state’s government in thirty years. The plan calls for the consolidation of 14 departments and offices to eight cabinet-level divisions through a four-step process that would 1) consolidate and privatize 2) eliminate 3) freeze and 4) review 150 boards and commissions. From public safety to human resources, to more than 400 boards and commissions, few parts of North Carolina state government would go untouched.

Much of the impetus behind the proposal comes from the state’s projected $3.7 billion budget gap and the end of Recovery Act stimulus dollars.

“State government must seize this opportunity to become a more streamlined, focused enterprise,” Perdue told a crowd in Pinehurst, NC Friday. “My priorities are simple: jobs for our people, investments in our children through a strong education system, and setting government straight.”

Although the governor said full details of her restructuring proposal would be released with her budget next year, elements of the plan were first reported by the Raleigh News & Observer in July after Gov. Perdue released a memo to her cabinet secretaries about privatizing parts of the state’s IT operations. The state was hoping to hire a private consultant in August to study the NC’s IT infrastructure and then hire a different contractor to implement the plan.

Other areas that are likely to have significance for the state’s IT infrastructure include:

  • A merging of the state’s Juvenile Justice, Corrections and Crime Control and Public Safety into one department
  • A restructuring inside the Department of Administration, which includes the incorporation of the state’s IT shop (ITS), the Office of State Personnel and the Controller’s Office
  • Closing 100 computer service units and centralizing IT services under the purview of a private company
  • Elimination of “back office functions” such as human resources, training and administration

According to INPUT Principal Analyst Jason Sajko, the potential size and scope of North Carolina’s IT outsourcing project depends on the route they take. “[It] could be anywhere from $500 million – $2 billion over a ten year period,” he wrote in an email. “VA’s IT infrastructure outsourcing is a 13-year $2.091 billion partnership with Northrop Grumman; Texas and IBM have a $1.097 billion 10-year agreement for outsourced data center services; San Diego County and Northrop Grumman are partnered on a 7-year ITS outsourcing [deal] valued at $667 million.”

Mr. Sajko indicated that potential bidders include Northrop Grumman, Hewlett-Packard (EDS), IBM, ACS (now part of Xerox), and Unisys. He also said that due diligence, forethought and a well-defined chain of command were critical when undertaking a project of this size.

Also notable was mention of the state’s purchasing functions. Earlier this month, a state audit said the Department of Administration was doing a poor job managing its internet-based e-procurement system. One of the biggest issues was that contracts were regularly approved for the same item or service with multiple vendors at different prices, a news report said. The governor’s restructuring proposal would outsource the state’s purchasing to “find savings through bulk purchasing and coordinated bid requests.”

Budget recommendations are expected to surface in more detail after the first of the year. For more information on the proposed changes, click here.

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