San Jose State University only negotiated with a single vendor for its five-year, $28 million IT project, opting not to put it out for bid.
The university said its decision preceded the California State University's systemwide RFP for a 23-campus network overhaul, which was awarded to Alcatel-Lucent for $22 million. Cisco, CSU's and SJSU's incumbent vendor, was the high bidder for the CSU systemwide project with a proposal that exceeded Alcatel-Lucent's by $100 million.
SJSU's project has come under scrutiny since the CSU systemwide contract and bidding results were disclosed as to why it went in a different direction than the whole state-funded university system. SJSU says its decision to stay with incumbent Cisco and award the contract to Cisco reseller Nexus complied with CSU's Executive Order 862, which covers Information Technology project management. The Executive Order states this proviso:
But procurement guideline documents located here and here explain how a CSU can apparently justify single-source procurement if the project is deemed an expansion of an existing installation, or for other reasons:
8. If the vendor of an existing suite of goods or services offers products or services that provide added functionality, is a feasibility study required to add the new product or service?
Yes, if the acquisition and implementation costs combined exceed $500K. For example:
° As part of the PeopleSoft acquisition, CSU purchased the Grants module. The Grants module is not currently included as core functionality for the CMS baseline. A campus assesses that implementation of this module will cost $100K; maintenance for 3 years and routine and regular upgrades to the software will cost an additional $100K. The total cost is $200K and so no feasibility study is required.
° The same campus will spend $300K to implement the Grants module; it must add a Database Administrator for $75K (salary and benefits) and will spend $200K over four years for maintenance and upgrades. The total cost is $800K and so a feasibility study is required.
° Ten CSU campuses decide to implement the PeopleSoft Grants module and want CMS central at the Office of the Chancellor to maintain and support the software. The cost to the system for implementation, new personnel and hardware upgrades is $650K; a feasibility study is required.
(2) Competition. Describe how competition will be sought, promoted, and sustained throughout the course of the procurement. If full and open competition is not contemplated or achievable explain why, under current CSU policies, this decision should be considered. Identify the key logistic milestones that may affect competition.
Identify the major components of the project to be procured, such as required hardware and software components.
Describe how competition will be sought, promoted, and sustained for these components.
"We needed far more than individual pieces of equipment," explains SJSU spokesperson Pat Lopes Harris for the school's rationale in not bidding out the project. "Our starting point was our president's sweeping vision for a cutting edge, comprehensive, integrated system to improve the learning environment for our 30,000 students. By that we mean using technology to reinvent teaching and learning so students pass tough courses the first time around, and go on to graduate on time, thereby saving state resources for other students."
SJSU's first step in this process was to discuss its goal with incumbent vendor Cisco, Harris says.
"During those discussions, we learned Cisco and Nexus could help us build the integrated, comprehensive system we needed to support the president's vision," she says. "This system includes 51 next-generation classrooms with all the equipment needed to enable high-definition recording, indexing and transcription of lectures; a unified IP phone system; and free, secure wireless Internet service."
Harris says SJSU's procurement team studied comparable purchases by other public agencies before commencing negotiations with Nexus, which is also installing the Cisco network for the university.
"We believe we ended up with better pricing than any of the comps," which included The State of Utah, Santa Clara County and a CSU agreement with AT&T that also involved Cisco, Juniper, Aruba and AlterPoint, Harris says.
SJSU completed its procurement plan "well before" the CSU/Alcatel deal was completed, Harris says. Also, the Alcatel deal is "very limited in scope, and does not address the comprehensive nature of the SJSU project," she says.
Cisco has declined to publicly explain why its CSU bid was found to be $100 million more than the low bid. But privately, the company denies that its bid could be "six times higher than the competition," according to an internal memo posted here.
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