Connecticut awards IT contracts to high-priced and out-of-state companies

Why pay $134 per hour for your information technology services when you can pay $291? Recently-awarded state of Connecticut IT contracts present precisely this question and, if history is any guide, some agencies will choose the more expensive option.

The Department of Administrative Services awarded one-year contracts to four information technology companies to service the Oracle and PeopleSoft software used by UConn and the State Comptroller’s Office.

22nd Century Technologies, Accenture LLP, SVAM International and Technology Resources all received contracts worth up to $700,000, which expire May 31, 2018.

When a state agency has difficulty with the software they can choose between the four different companies based on their rates for each service, which are set in the contract.

Only Technology Resources is headquartered in Connecticut, while the others have corporate headquarters in New York, New Jersey and – in the case of Accenture – California, although they maintain a Hartford branch.

While three of the four companies have similar pricing structures, Accenture’s pricing often doubles those of the other three corporations, averaging $216 per hour for the various IT services, compared with $110 per hour for 22nd Century’s services.

Len Matteo, president of Edge Technology Services based in New Haven, was one of the other 21 bidders for the contract. He says that awarding the contracts to out-of-state companies that sometimes charge higher rates is “frustrating.”

“It’s not that Edge didn’t get the business but when you’re competitive and the job still goes out of state, I think that raises a concern,” he said in an interview.

Matteo, who also serves on the Greater New Haven Chamber of Commerce and the Regional Leadership Council says “we hear about keeping jobs in Connecticut but its hard when the state is hiring out-of-state companies.”

Department of Administrative Services spokesman Jeffrey Beckham says that price is only one of the factors agencies use to select a contractor. He notes the bids were “multi-criteria” which score prospective companies on a number of different factors.

That scoring ranked Accenture the second-highest-rated bidder in the process, even though they scored low for pricing. “Accenture offered much more in terms of skills sets and personnel than other suppliers,” Beckham said.

22nd Century Technologies had the lowest pricing of the four selected but actually scored third overall. Beckham says that 22nd Century Technologies was the most used vendor by the agencies last year due to their lower pricing and because the state directs agencies to use the lowest cost option.

Beckham notes that they added a fourth option – SVAM International, Inc. based in New York – so there would be a greater selection to choose from. The average cost of services by SVAM is $143 per hour.

Based on their bid for the contract, Edge Technologies offered lower prices for some services plus a 2 percent prompt payment discount. The average pricing offered by Edge was $114 per hour.

“The exact same talent is out there for half the rate,” Matteo said. “When I look at the rate it has to be a real strong justification to pay double or triple.”

Accenture is a major international corporation and a big service provider for the state of Connecticut. The company was paid $37.2 million in 2016 for IT services, mostly for the state comptroller’s office.

The company has a $62.5 million contract with the Department of Revenue Services for the installation and upkeep of its Integrated Tax Administration System, the online DRS system. The contract doesn’t expire until 2050.

But Accenture does maintain offices in Hartford and employs Connecticut residents. Matteo worries that the use of out-of-state companies like 22nd Century and SVAM is hurting employment in Connecticut because those companies will not likely hire Connecticut employees.

“People don’t realize that the state of Connecticut is actually the largest employer in the state,” Matteo said. “What I’m advocating for is before you go out of state, to do their due diligence to look at Connecticut companies who can do the same work.”

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