back to article HP 'overcharged New York City by $163m' on 911 system

New York City comptroller John Liu has accused Hewlett-Packard of overbilling the Big Apple to the tune of $163m on a long-delayed upgrade to the 911 emergency call system. HP says Liu is misinterpreting the contract and it is delivering its part of the 911 call center upgrade under budget. According to a statement put out by …

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Anonymous Coward

Should have read the small print on page 1255/section 3b/paragraph 6.2

Should have gone to Specsavers!

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Anonymous Coward

From acronyms that were introduced in the article without explanation:

PSAC = Public Safety Answering Centers

CAD = Computer Aided Dispatch

Whomever edited this article should go back and retake communication 101.

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(Written by Reg staff) Silver badge

Ouch. Thanks for the wake up call. It was a mild oversight. The copy has been tweaked.

C.

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Anonymous Coward

What a joke.

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This post has been deleted by its author

Bronze badge
FAIL

Well...if there is ANYONE who knows about fleecing people...

...it would be one John Liu...who has been under investigation for quite a while on illegal political campaign contributions. He is one of the biggest liars and dirtbags in a city full of them.

http://www.nytimes.com/2011/10/12/nyregion/irregularities-found-in-john-lius-campaign-finance-reports.html

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Mushroom

Where can I puke?

<quote>

"HP is committed to helping the city of New York build an effective and innovative 911 call center for the city’s greatest public servants – those at the front lines of emergency response every day. "

</quote>

I guess HP have been watching too many U.S. crime series and trying to buy in to the sickliness that pervades American politics: if you can't slag it off in public, talk nicely about it and no-one will know you're really sticking a finger down your throat and wishing you were European.

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Headmaster

wait... what?

"Liu is also estimated that based on a sampling of timesheets filled out by HP and subcontractors on the project that found $2.5m in time and material charges that as much as $50m in similarly unjustified costs might have been added to the ECTP contract by HP."

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Anonymous Coward

HP or EDS?

Is this an EDS contract that HP have inherited or theirs from the start?

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Megaphone

They didn't overcharge

Its called "profit margin" in the business world.

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WTF?

$300M+ for setting up a call centre, think that's their main issue

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WTF?

I was thinking the same

Let's imagine that we needd 50,000 computers for the full contract at an average cost of $2,000 a piece (1k for hardware, 1k for installation and support for a year or three). That's $100M. I can't imagine why a database PC would need to cost $1000. It should have been no more than $800 with a 24" wide screen and printer (HP can get those cheap). Then let's imagine about $10M for the data center... no it doesn't cost more than $10M for a data center on this scale unless you happen to need to build the building too. Then you have 10 developers, 2 managers and 2 administrators working at an average cost of $150,000 a year. That's $2.1M a year for 5 years, approximately $10.5M. Now we're up to about $150M after governmental rounding errors and such.

Don't get me wrong, I'm sure there's more involved in it than this... but still this scenario talks about 50,000 computers, probably will use thin clients instead attached to a VMWare rack... much cheaper.

In the end... this contract was criminal to begin with.

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Silver badge

why?

Why aren't the lawyers who advised the city to sign the contract being blamed? Or did a former NYC mayor sign it because it was printed on a Laserjet?

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FAIL

Re: why?

It's all just a game... Don't take any of this charades seriously.

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This post has been deleted by its author

Silver badge

Re: why?

"Why aren't the lawyers who advised the city to sign the contract being blamed? "

Because the problem isn't a legal one, it is a procurement one, and even if signed by the mayor, he'd would be most unlikely to read and understand a complex services contract, but would have to trust his procurement (and perhaps IT) people.

Unfortunately, no matter how big your procurement budget is, the in house procurement team procure BPO and change services very infrequently, whereas the vendor sales team do this day in day out and the same applies to the respective legal teams. So there's asymmetry of experience that works hugely in favour of the vendor. Then there's the large incentives paid to the sales team, whereas the incentives paid to procurement vary from zilch to insignificant. So there's asymmetry of motivation.

Then there's the fact that the structure of almost every BPO/change/IT deal involves a headline cost that looks as though it saves the buyer 20%, when in fact the overall costs of the vendor are higher, because any offshore savings are completely wiped out by the cost of "account management", fat cat directors, paying the interest on all HP's crappy acquisitions, and the 10% net profit margin etc.

An interesting figure from HP's accounts, is that last year they spent over $13bn on sales general and admin. The admin is piffle apart from the often large legal team, the general costs are piffle, so that's thirteen billion dollars mostly on sales and marketing plus a bit on legal. Over four times more than the spent on R&D. Now how much do you think their customers spent on their own procurement and legal functions?

That's why HP's average revenue per employee is about $370k per head. So on average that's what they need to charge for each oik deployed (note including hardware sales), and as you can see that's a lot more than most in house staff will be paid. I can't dig out the figures for the Services or IT divisions to get a more exact figure because their annual report appears intentionally barren of useful information (no point letting the sheep see inside the abbatoir). At the services level the revenue per oik is typically about half to a third of that $370k, but Meg's handing out around 30,000 pink slips with the objective of pushing revenue per employee highe, and even at the very lower end of that, we're still talking the customer paying an average of $130k per HP employee for commodity outsourcing work.

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Next job for Elon Musk?

Now that he's shown he can design, build, and launch a completely new rocket with a reusable capsule on a budget of a billion dollars, which is far more than any of the big players can do on far less money, maybe SpaceX needs to spin off a computer systems and integration company.

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