Many of the criticisms surrounding California State University’s $662 million Common Management System contract with software giant PeopleSoft have echoed those lobbed at another controversial CSU computer deal in 1998 called the California Educational Technology Initiative.

“It (CETI) was a very different project, but similar in that faculty and staff were very suspicious of it,” said James Chopyak, an ethnomusicology professor and President of the CSUS Chapter of California Faculty Association, the CSU faculty union.

The California State Employees Association, which represents CSU staff, shared CFA’s concerns about both computer deals. CSEA Senior Labor Relations Representative Teven Laxer says the staff and faculty’s outcry against CETI made CMS instantly suspicious.

“We had little trust for these folks from the beginning, since they were the ones that brought us CETI,” said Lexer, who believes a lack of oversight on information technology negotiations has led to cost overruns and conflicts of interest in the CSU administration.

CFA and CSEA represent 36,000 of the 45,000 CSU employees, and served as co-requestors of a state audit on CMS released earlier this year. The findings in the audit led to a contentious hearing of the Joint Legislative Audit Committee last month in which Sen. Richard Alarcon (D-San Fernando Valley) called the deal “a black eye for the CSU system.”

Chopyak said concerns about CETI and CMS expressed by faculty, staff, and students were constantly rebuffed by the CSU administration.

“We were told we had no choice, and were powerless to stop it,” Chopyak said.

CSU spokeswoman Colleen Bentley-Adler does not see the need for more oversight, and strongly disputes claims by faculty and staff that they were not adequately represented in CMS and CETI negotiations.

“The university knows better how to run its technology and its campuses than the legislature,” Bentley-Adler said. “We believe the legislature should be working on state issues.”

CETI was a proposed $300 million partnership between the CSU and four private companies–Hughes, Microsoft, Fujitsu and GTE–to develop and maintain a state-of-the-art computer infrastructure for the CSU system.

CMS is a managerial computer upgrade intended to unify information tracking, including financial, human resources and student administration information among the CSU’s 23 campuses.

In May 1996, the CMS Task Force was created to investigate replacing only the financial management systems, but Bentley-Adler said the decision to include human resources and student administration modules in the system was made in 1998.

The State Auditor’s report on CMS found that the university underestimated costs by over $200 million, failed to engage in competitive bidding or create a business model before signing the PeopleSoft contract, and got involved in a potential conflict of interest involving a high-level member of the administration.

There are distinct differences between the two systems–CETI would have created a public-private partnership while CMS was a simple procurement of a product.

However, both deals featured controversial corporate participation, legislative investigation, a lack of competitive bidding, union concerns about job security, and charges from faculty and student opposition of conflicts of interest and bad business sense.

Don Scoble, who was San Francisco State University’s vice-president in charge of banking and finance and represented SFSU in the CETI negotiations, fails to see the similarities between the two.

“I think the (CETI) deal failed because it was far too complex. It was a much bigger undertaking than anyone realized, and much more complex than CMS,” said Scoble.

Scoble, who retired last year to become SFSU President Kevin Corrigan’s Chief of Staff, said the two aren’t comparable in the least.

Chopyak disagrees, saying that there are “scary similarities” between the way the CETI and CMS deals were put together.”With both these deals, the CSU was trying to do it off the radar without any legislative oversight,” Chopyak said.

One element that distinguishes CETI from CMS is that the former was intended to be a “for-profit” deal.

CSU cannot legally engage in “for-profit” ventures, so CETI would have created a puppet foundation called Limited Liability Company to handle transactions and serve as a go-between for the corporations and the university, according to CSU documents.

Critics of the deal charged that the CSU was conceding too much control to the corporations–Microsoft, Hughes, Fujitsu and GTE would have owned a majority of LLC and controlled 10 of the 13 seats on the Board of Directors.

“We had legal, ethical and moral concerns about bringing entrepreneurial concerns into a public state university,” Laxer said.

In order to obtain funding, LLC would have borrowed $300 million from the four corporations for infrastructure improvement, while the corporations were to donate another $36 million.

In exchange, the campuses would agree to purchase computer products solely from the interested corporations for ten years, and the companies would create new revenue streams by selling communications services to students, staff, faculty and alumni.

CSU claimed that the university would pay back its loans by selling products and access to faculty, students, and other corporations.

CFA voted against CETI on Dec. 6, 1997, and in early January 1998, the California Legislature held a Joint Informational Hearing to discuss the matter.

The CSU administration fought hard for CETI–in December 1997, CETI spokeswoman and senior director of IT policy Patricia Cuocco even offered to “ghost-write” pro-CETI letters for supportive faculty, but no willing participants could be found.

Reed was not officially appointed CSU Chancellor until March 1998, but he also publicly stumped for CETI. On February 12, Assistant Vice Chancellor of Information Resources and Technology Thomas West wrote a letter to the heads of the four corporate partners in which he assured Reed’s unflagging support.

Still, Bentley-Adler claims that CETI was squashed because Chancellor Reed decided it was not in the university’s best interests.

“He reviewed it and pulled the plug on that one pretty quickly,” Bentley-Adler said.

Laxer has a slightly different take on the matter.

“CETI failed because of the massive outcry against it,” he said. “With CMS, people are still learning about it.”

CETI negotiations started breaking down early in 1998, and on March 17, Reed said there was a 50/50 chance the deal would still go through.

Microsoft and Hughes dropped out of the deal first, but an April 16 press release quoted Reed, “CETI–or a similar public-private partnership carefully negotiated to be in the best academic and financial interests of the CSU, its faculty, staff and students–is still the way to go.”

On June 23, 1998, CETI was officially squashed when the last of the corporate partners pulled out. In a press release, Reed said, “The CSU will spend the next several weeks assessing potential new funding sources and developing new approaches with current and new industry partners.”

Less than one month later, Reed confirmed the CMS Task Force’s recommendation to award the bid to PeopleSoft. The contract was signed in September, and in November, Ernst was given full responsibility for the CMS project.

The decision to add human resources and student administration modules to CMS was also made in 1998.

Chopyak believes both the CMS and CETI deals show that CSU has been too generous in its corporate dealings.

“The corporatization of the university seems like a far-off concept, but it’s actually a very practical matter with potential negative factors for students, faculty, and taxpayers,” Chopyak said.

During last month’s JLAC hearing, committee Chair Rebecca Cohn (D-Campbell) and several of her colleagues defined Reed and CSU’s response to the State Audit’s findings as “cavalier.” Chopyak feels a lack of oversight is to blame.

“He still doesn’t get it,” Chopyak said. “They’ve gotten away with things for so long.”

Click here to send private feedback about this article to the State Hornet’s News staff.