Give $5 Million, Get Back $80 Million?
Submitted by Allen Gwinn on Tue, 04/07/2009 - 11:20.
BREAKING: We received word from a source who requested anonymity that DISD officials have contacted Dell to instruct them not to discuss anything related to this issue with anyone outside DISD. This likely explains why Dell has not returned our calls asking for "general" information about seat licensing. Again, this raises the question: what is going on here?
QUESTION OF THE DAY: If it's all a big mistake, why did the District's I.T. chief sign it?
If this is a case of "we scratch your back, you scratch ours," it is probably one of the more lucrative we've seen.
The Michael and Susan Dell Foundation has been extraordinarily generous with DISD in the past 2 years. On Thursday, Trustees are being asked to ratify a lease agreement with Dell worth about $80 million dollars over the next 5 years.
As has become too often the case with DISD, the documentation is sketchy and limited to a simple one-page document signed by District I.T. Executive Director Patricia Viramontes. The District now claims the document was sent to the Board in error and that it should not have contained the $80,000,000 price tag. What hasn't been explained is why Patricia signed it in the first place.
Patricia is, of course, the wife of District Chief Transformation Officer Arnold Viramontes who is credited with bringing the Dell Foundation grants (link) to DISD.
We called Dell asking for more information regarding the lease agreement.
"We don't comment on customer relationships," was the position of Dell spokesperson Colleen Ryan.
Ryan noted that even though Dell "values Dallas taxpayers as important customers" the company's relationship is with DISD, not with the taxpayers, and deferred comment to the District.
Dell's website lists the starting retail price of its desktop computers at $269 (plus $160 for a base monitor). $80 million dollars would purchase over 160,000 of Dell's base level systems at retail prices.
Dell's "special" pricing for education starts out around $259 (plus $160 for a base monitor). We can't tell yet whether this is a lease fee or purchase price.
More general information about Dell's "seat management" contract for K-12 can be found here.
District spokesman Jon Dahlander emailed us at 12:46 letting us know he is asking for more information.
UPDATE: We received the following from Jon Dahlander...
The initial board document submitted on this agenda item should not have included a dollar figure. No additional funding is needed. The ratification of this agenda item will not extend the initial three year price agreement with Dell initially approved by the board in September 2008 but will extend the lifespan of leasing individual computers from three to five years. Board members will be briefed on the issue tomorrow and a corrected board document will be submitted for ratification prior to the regular meeting on April 23.
OK, so here are our questions:
Where did the original $80 million figure come from? Does this mean that no additional funds will be spent with Dell in year 4 and 5?
How much has been spent so far, and how much will be spent after 5 years?
How much has been spent already and on what pieces of technology and how many?
Jon's reply:
I'm not sure where the $80 million figure came from, but as I said, it should not have been on the document.
The price agreement is for 3 years and goes until September 2011. The price agreement approved by the board is for up to $48 million.
If individual computers are leased until that time, we are bound by this price agreement but the lifespan of that individual computer has been extended from 3 to 5 years. So, conceivably, a new computer could be leased at an elementary school beginning in August 2011, with payments for that particular unit extending until 2016. By then, however--actually in September 2011--there will be a new price agreement with whoever wins the contract at that point.
I don't know how much has been spent so far--or on what--but the maximum that can be spent will be $48 million, per the contract approved by the board in September, which indicates that this is only for computers and laptops from Dell.
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[Ed Note: I have a sneaking hunch this was placed on the wrong agenda--that it was never intended for the Board Briefing. It was probably destined for the consent agenda in a couple of weeks where, if anyone had questions, it would have to be pulled to the regular agenda. That, of course, must be done 2 days ahead of time.
But, now, the whole thing must be explained tomorrow--starting with: how much have we spent, how many computers have we "leased," what happens to them at the end of the lease agreement, and how much will we spend by the time all is said-and-done?
Of course the question of the day is: Why did she sign it? This is a one page document. How did a one page document bearing an erroneous $80 million dollar figure get the signature of Patricia Viramontes, Executive Director of IT?
Anyway, we'll hopefully find the answers to these questions and more tomorrow.
Obviously, we'll be there to cover this in more depth.]
Leasing Computers
In my humble opinion, leasing computer equipment is primarily for one of two reasons. One, you have to have the latest technology every 3-5 years, or two, you cannot afford the lump sum purchase price so regular installments work better even though you end up paying more in the long run.
Allen, even though you are correct with your statement that computer technology changes greatly every 3-4 years, I think it is a stretch to call it obsolete in that amount of time. Five years ago you could still get a computer with a gig or two of memory, plus a flat screen monitor, a decent CPU, large hard drive, and Office 2003. If most schools had that as the standard on their campuses, I'm sure they'd be more than satisfied. Albeit a lot cheaper to get that now, my point is that I would say for the education arena, many times purchasing is a better option than leasing, and to be honest, most educators only use their computers for three reasons: internet, email, and ms office. It doesn't take a state-of-the-art computer to do that.
One more thing, the real issue here is about the value of the lease agreement and doesn't really have anything to do with the 5 million dollar grant the district received from the Michael and Susan Dell Foundation (MSDF). Dell is one of the largest computer manufacturers in the world and Dallas ISD has used them for many years now. The fact that a completely separate entity MSDF has awarded Dallas ISD 5 million really is not related at all.
[Ed Note: What is DISD doing leasing computer gear in the first place? They're a public entity so they don't need the tax breaks. Further, they do "staggered refreshes" (replacing a portion of their technology each year) so after 2 years you lose any cost advantages that leasing initially brings.
Dell uses grants as a marketing tool as do most vendors. Again, I have no problem with this. What I have a big problem with is not being able to get a straight answer out of the District's IT department.]
Kept a copy
Hope you kept a copy of the signed "mistake".
[Ed Note: Yep, sure did. I'll put it up in case they remove theirs. They just changed the name on it. I fixed the link.]
DISD Doesn't Own It's Computers?
This $80,000,000 is for a lease, right? So Dell keeps the equipment after the lease? We own nothing?
[Ed Note: That may be the case, but we haven't been able to find out any details. Keep in mind that computer technology (both hardware and software) is a resource which becomes obsolete every 3-4 years. At end-of-life, obsolete equipment is worth a fraction of the cost it was when it was new.
Technology is my background and this is an area I know extremely well. I've been in I.T. for over 30 years. While I'm not a fan of technology lease programs, it might technically be possible to structure a reasonable lease agreement for the District.
Still, $80 million is a lot of money and buys a lot of computers.
And as more time goes on, with the District being "mum," I must admit I'm getting a little more skeptical. They must need some time to come back with whatever they're going to come back with.]
5 million+?
Also ask Ms. Viramontes how much the district plans to spend on software and yearly fees to fully implement the student data management system Dell so generously gave the first $5 million grant for. You wouldn't buy half a pig, would you?
5 million +
I feel as though I have half a pig. This year I received a brand new computer for my classroom, but my school could not afford to buy microsoft word.
[Ed Note: See, and I don't know how this works into the "seat management" contract with Dell, or even if it does. I thought the District had an Open License Agreement with Microsoft that allowed Office 2007 to be installed everywhere. Apparently this may not be the case.]
Microsoft does not sell Open License Agreements
Microsoft does not sell Open License Agreements and the district has not purchased it.
[Ed Note: No, of course they don't. I think for large organizations they've branded it as a Select agreement.]
Dell
Why does it not surprise me that Dalander hasn't gotten back to you?
Sounds like someone was trying to pull a fast one and they need Dalander to spin it just right.
[Ed Note: Dahlander's hands are tied. He can only say what they tell him he can say. It must be a difficult existence.]