SJSU sidestepped sole source documentation in Cisco deal

Instead evaluated Cisco pricing in other western US contracts to justify not bidding $28M project

The San Jose State University did not file sole source/sole brand requisition and justification documentation with the California State University's Chancellor's office before awarding a $28 million contract to Cisco reseller Nexus IS without a competitive bid. This appears to be in violation of the CSU Information Technology Project & Procurement Planning Guidelines, which state:

If the plan proposes using other than full and open competition when awarding a contract, the plan shall also include a sole source/sole brand justification.

SJSU did not file the sole source/sole brand documents because it said it completed an evaluation of "competitively procured agreements and price negotiation" involving Cisco, its resellers and other vendors to determine the best price for the university. Those agreements include the Western Strategic Contract Alliance (WSCA) agreement to obtain Cisco equipment and services, which was competitively bid from the State of Utah and expires in May, 2014; Santa Clara County, CA., and Cisco reseller Nexus IS from Feb. 2011 to Jan. 2014; and CSU's Master Enabling Agreement with AT&T for procurement of AT&T services, Cisco networking products, Juniper security appliances, Aruba WLANs, and AlterPoint products and services. Instead of renewing this arrangement, CSU just awarded Alcatel-Lucent a $22 million, five-year contract to refresh the networks of CSU's 23 campuses.

After evaluating the terms and conditions of these contracts, SJSU then discussed the scope of its "Next Generation Technology" project only with Cisco, and negotiated pricing with Nexus IS. Nexus quoted SJSU a 62% discount on equipment, and a 46% discount on prepaid five-year SMARTnet services, according to the Approved Solicitation Plan filed by SJSU's AVP of Finance, Josee Larochelle, to SJSU CFO Shawn Bibb:

These percentage discounts are not available to other customers and is specifically offered as a long term partnership with San Jose State

Discounts offered under WSCA are 35% for equipment and 10% to 17% on services; 43.5% for equipment and 10% to 30% for services to Santa Clara County; and 42% for equipment and 30% for services to CSU. Under the agreement just signed with Alcatel-Lucent, however, CSU is receiving a 74% discount on equipment and a 60% discount on maintenance, according to the RFI 3353 CNI Network Equipment spreadsheet documents obtained by Network World from the CSU Chancellor's office.

Below is Larochelle's response to why SJSU did not file sole source/sole brand requisition and justification documents:

As stated in the Solicitation Plan, SJSU completed an evaluation of competitively procured agreements and price negotiation for the best price.  The end result is a pricing agreement with Nexus that gives the University the best price for Cisco products and Nexus professional services.  The University merely has the opportunity to place orders against this pricing agreement - which has the most favorable pricing the University.  The sole source/brand sourcing would not have resulted in actual purchase agreement/orders for equipment and services.  It is important to note that the University enters into discreet purchase orders for equipment and services needed for particular projects and the pricing is pre-set based on the negotiated pricing agreement.   If the University decides at any point in time, that our pricing agreement no longer is the best price for these items and services we are not obligated to purchase from Nexus.

According to the RFI 3353 spreadsheets on the recent CSU systemwide bid, Cisco reseller AT&T offered CSU a 34% discount on equipment and a 25% discount on services. Alcatel-Lucent's proposal represented a savings of $100 million over Cisco/AT&T's, CSU has said.

In the spreadsheets, bidders were required to propose access switches supporting Gigabit Ethernet and 10G Ethernet over single mode and multi mode fiber, scaling from 24 ports to 480 ports. CSU then used a blending formula to calculate how many single mode and multi mode 1G and 10G switches its campuses needed: 37.5% single mode vs. 12.5% multi mode.

Under this formula and with the prices provided, Cisco/AT&T's price for single mode 1G scaling from 24 ports to 480 ports was 4.25x that of Alcatel-Lucent's: $328,864.16 vs. $77,157.11.

Vendors also proposed server farm and core switches, and border routers. The combined total from Cisco/AT&T was 6.55x higher than Alcatel-Lucent's: $391,294.20 vs. $59,715.50.

Below are prices for 120- and 144-port 1G and 10G access switches on single mode and multi mode fiber taken from the Alcatel-Lucent (top) and Cisco/AT&T RFI 3353 spreadsheets:

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