Auditor: Cisco sneakily used legally unauthorized purchasing process to outlandishly overprice 1,164 routers to take advantage of West Virginia
"It is the opinion of the Legislative Auditor that the Cisco representatives showed a wanton indifference to the interests of the public in recommending using $24 million of public
funds to purchase 1,164 Cisco model 3945 branch routers."
Cisco Vice President Customer Assurance - Curtis Hill:
"Specifically, Cisco will be an active participant in the Governor's proposed task force, we will support the redeployment or return of the routers identified by the State's comprehensive site capacity study, and we will extend the already-discounted router maintenance agreement by 3 years."
"State officials in West Virginia must have been in the coal mines when Cisco apparently pulled the wool over their eyes in selling them more than they needed for their network. This is only the most recent case of Cisco fleecing its customers. It has become a pattern of bid influence and involvement resulting in millions spent and a loss of buyer cred."
"A pattern of the curious amount of involvement and influence Cisco has in actually defining the bid for its customers. And there are likely scores more in all of the contracts 'awarded' to Cisco between 2004, when San Jose determined that Cisco actually wrote portions of the contract for the $8 million City Hall upgrade."
Here's the totally platitudinous and absolutely absurd nonsensical reply from Cisco to the State Auditor's report:
"Cisco remains committed to meeting the needs of West Virginia and we are actively working with our customer to do just that.
"We believe the criticism of the State is misplaced and fails to recognize the forward looking nature of their vision.
"The positive impact of broadband infrastructure on education, job creation and economic development is well established, and we are committed to working with the State to realize these benefits for the people of West Virginia now and into the future."
9-months ago I blogged that Cisco willingly and knowingly ripped off the State of West Virginia.
Well, earlier this month a scathing State of West Virginia Legislative Auditor report as shown below, confirmed that Cisco did indeed ripoff the State when Cisco successfully achieved its sales objective of defining the buying agenda for the State of West Virginia.
"The Legislative Auditor believes that the Cisco sales representatives and engineers had a moral responsibility to propose a plan which reasonably complied with Cisco's own engineering standards.
"It is the opinion of the Legislative Auditor that the Cisco representatives showed a wanton indifference to the interests of the public in recommending using $24 million of public funds to purchase 1,164 Cisco model 3945 branch routers."
"The State Purchasing Division should determine whether the actions or inactions by the Cisco representatives fall under the purview of §5A-3-33d of the West Virginia Code and are grounds for debarment."
"A legally unauthorized purchasing process was used to buy 1,164 Cisco model 3945 routers at a cost of $24 million using federal stimulus funds.
"The process used to purchase the Cisco routers was not equal, fair or consistent with the
intent of the purchasing statute. The Legislature has declared that its intent is 'to promote equal and fair bidding' and 'to eliminate fraud.' Vendors of non-Cisco branch routers such as HP, Brocade, Juniper, and Alcatel-Lucent were not given notice or any opportunity to bid on the statewide expansion of broadband.
"Because the secondary bid process excluded all other branch router makers, the state cannot be certain that it received the best possible price for the routers, including the lowest possible price Cisco was willing to offer through its partner vendors.
"For example, in 2012, California State University, the largest four year university in America, used a competitive bidding purchase to purchase an eight year refreshing of its 23-campus 10G network. The Director of Cyber Infrastructure of California State University provided documentation showing that Alcatel-Lucent won the project with a bid of $22 million. Cisco's bid was $122.8 million. The other bids were Brocade at $24 million, Juniper at $31.6 million, and HP at $41 million. Furthermore in May of 2011, Purdue University bid out replacement components for its Hansen Computer Cluster. Cisco won the Purdue University competitive bid process by offering a 76% discount off the cost of its products.
"While the Legislative Auditor cannot say with certainty that a more open competitive bid
process, required wherever possible by West Virginia law, would have resulted in a lower cost for the branch routers purchased by the BTOP grant, it is a basic principal of our free-market economy that competition between vendors leads to lower prices and higher quality products.
"Yet, instead of using an open competitive bid process to attempt to receive the lowest possible price and highest quality product, the State of West Virginia simply relied on Cisco's goodwill.
"The Director of Purchasing should take action to immediately cease allowing any state
purchases to be made through the legally unauthorized secondary bid process."
In the following 10-minute scathing audio interview, State of West Virginia Legislative auditors slam Cisco.
Amazingly in my opinion, at exactly the 5:10 time mark below, auditors explain that Cisco's sneaky secondary bid process does NOT even legally exist in the State of West Virginia:
A special 9-page U.S. Department of Commerce Inspector General report blasts the Cisco router purchase by West Virginia:
"Executive Office of the State of West Virginia (EOWV) has not demonstrated most efficient use of Broadband Technology Opportunities Program (BTOP) funds to purchase routers."
"We determined that EOWV could have realized a cost savings had it considered purchasing 2900 series routers for community anchor institutions (CAIs) with non-mission-critical requirements in less-populated counties (representing less than 50 percent of routers deployed), whose needs could have been met with the smaller router. Although we did not complete a similar analysis for counties with larger populations, EOWV may have realized additional cost saving if they had assessed the needs of all non-mission-critical CAIs."
"EOWV has not effectively managed and tracked router inventory."
"EOWV could not demonstrate that its tracking and control of the 1,164 routers was effective. Federal cost principles require the safeguarding of federal assets. Additionally, GAO's Standards of Internal Control in Federal Government requires that the recording of assets be complete and accurate. As the lack of an effective asset management system increases the risk of fraud, waste, or abuse, it is vital for EOWV to maintain an accurate equipment inventory tracking system, including router inventory."
Looking for Cisco's side of the story?
Highly recommend that you contact directly the Cisco engineer, Mark Williamson, who was personally responsible for specifying the outlandishly overpriced 1,164 routers to the State of West Virginia, his contact information is as follows:
Experience for yourself Cisco's incredible transparency when it comes to explaining its side of the story on why it excels at ripping off your tax dollars.
Is Cisco so transparent on the issue of ripping off your tax dollars because Cisco itself dodges paying most of its U.S. earned taxes through brazen tax shams?
I mean afterall, according to the U.S. Senate Permanent Subcommittee on Investigations' Offshore profit shifting video as shown below, Cisco's only dodging taxes on the profits it earns from sales to the U.S. Government so that you can personally pay extra taxes in order to make up the difference from Cisco's failure to pay its own fair share of taxes:
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