Audit: $24M in routers bad for W.Va.

Tiny Panhandle towns among those given oversized devices

CHARLES TOWN — More than $2 million worth of high-end broadband routers purchased with federal stimulus funds were installed throughout the Eastern Panhandle, many in rural locations, according to a scathing audit of the imbroglio that was released last week.

The report by the West Virginia Legislative Auditor excoriates state executive officials and tech giant Cisco Systems for wasting millions of dollars of taxpayer money on Internet routers, a number of which still remain in storage two years after being delivered, while others were installed in questionable locations — one expensive router was placed in the Marmet Public Library in Kanawha County, which is housed in a single-wide trailer and is open three days a week. Seven routers were placed in the tiny town of Clay, which has a population of 491.

Cisco CEO John Chambers grew up outside of Charleston and earned degrees from W est V irginia Univerity .

Cisco CEO John Chambers grew up outside of Charleston
and earned degrees from West Virginia Univerity.

The routers that were purchased – Cisco Model 3945 – are capable of linking between 700 and 1,200 of computers together but many were installed in locations with only a handful of computers, according to the report.

Jefferson County received the fewest of any county in the Eastern Panhandle, with only seven of the $20,000 routers. Two routers each were installed in Kearneysville and Harpers Ferry. Charles Town, Shepherdstown and Summit Point received one each. No routers were placed in either Jefferson or Washington High Schools.

Other counties in the Panhandle received many more of the routers. Mineral County received 24 routers, and Berkeley County received 15.

Hampshire County received 18 routers. Nine were placed in Romney. Three each were placed in Augusta and Capon Bridge. One each were placed in Slanesville and Springfield. One was placed in Levels, which has a population of 147.

The audit notes that according to Cisco’s “own literature, the model 3945 router was not an appropriate choice for the majority of the 1,164 [locations] that have or are to receive” them.

“The [Grant Implementation Team’s] decision to spend the federal funds on oversized routers resulted in millions of dollars in federal funds not being spent on expanding the state’s fiber optic broadband network,” the audit notes.

The auditor estimated the state could have installed more than 100 miles of fiber optic line if it had bought cheaper routers more suited to the locations in which they were placed.

Many of the routers, according to the report, have not been installed at all, instead remain boxed up in storage while their five-year service contract – purchased at a cost of over $8 million – runs down.

The audit recommends that state purchasing officials adhere to competitive bidding laws, and suggests that the state consider barring Cisco from competing for any future state contracts.

Cisco has since agreed to add three years onto the service plan, and to allow some routers to be returned.

The audit also sharply criticized the process by which the routers were purchased.

The report notes that state officials denied Cisco’s competitors – companies like Juniper and Alcatel-Lucent – a chance to bid on the contract to provide routers, opting to use a “secondary bidding process” that treated the $24 million purchase as a simple extension of existing contracts for network infrastructure.

It notes both companies have a history of bidding much lower than Cisco’s. For example, it notes that when California State University bid out the replacement of its network infrastructure last year, Alcatel-Lucent won the contract with a bid of $22 million. Cisco had bid $122.8 million.

“Instead of using an open competitive bid process to attempt to receive the lowest possible price and the highest quality product, the State of West Virginia simply relied on Cisco’s goodwill,” the audit states.

The auditor is also critical of Cisco sales representatives who recommended using the model 3945 routers.

“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.”

Brad Reese, a blogger who writes regularly about Cisco, says he believes the incident reflects a change in the sales culture at the company since it was taken over by John Chambers, a West Virginia University graduate who was raised in Kanawha City.

“Years ago, Cisco used to innovate in order to improve the business processes of its customers,” Reese said. “After Chambers became the chairman and CEO, they began to innovate solely to churn their customer base.”

“Their sales culture was dedicated to defining the buying agenda of the customer. That’s what you see there in West Virginia,” said Reese, who also blames state officials for allowing the company to bid on the project without any competition.

“The top officials of the state of West Virginia have basically allowed Cisco to define the buying agenda of the state. How else can you explain the legally unauthorized secondary bid process? Lots of customers are basically handing their wallets over to Cisco. That’s what happened in West Virginia.”

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