San Diego County is withholding a $44 million payment to the lead contractor it hired to upgrade its computers and telephones, contending that the firm has not lived up to its contract.

County government officials said they have refused to pay because there have been persistent problems with the company's work, including computer outages.

"A contract is a contract, and we will not pay for services we are not receiving," said county Chief Administrative Officer Walt Ekard.

Frank Pollare, a spokesman for Computer Sciences Corp., said the company had no comment.

Ekard said public services have not been affected by the problems and will not be interrupted during the contract dispute.

Three years ago, county officials announced they were going to turn over installation, operation and maintenance of their computers and phones to a consortium of firms headed by Computer Sciences. The seven-year, $644 million contract was believed at the time to be the largest privatization effort undertaken by a local government. It received national attention in technology and government sectors.

The contract was criticized by the leaders of unions representing county employees, who said they feared the loss of jobs and a negative effect on public services.

An investigation published by the The San Diego Union-Tribune in early 2001 showed that the transformation had not gone smoothly. Internal e-mails and memos obtained by the newspaper documented that computers in several departments regularly crashed for hours at a time and some newly installed phones did not work, causing employees to rely on their own cell phones for county business.

At the time, county leaders insisted the problems were only temporary glitches that were to be expected when a vast bureaucracy transforms its technology system.

But the problems have continued.

A letter by outside lawyers for the county sent to Computer Sciences on Thursday cites problems such as inadequate Internet bandwith and lack of anti-virus software.

"Most of these failures have been occurring on an ongoing basis throughout the term of the agreement," said the letter, which was obtained by the Union-Tribune.

The letter declares Computer Sciences in default of the contract and gives the company 30 days to fix the problems.

Ekard said he expects the company to sue the county to get the $44 million payment that was due in January. Another $44 million is due in July. Officials declined to comment on whether they intend to make that payment. It could not be immediately determined yesterday how much of the $644 million the county has paid the consortium.

Meanwhile, the county has also refused to pay Computer Sciences $14.8 million on a separate contract for a new payroll system. That payroll system was supposed to be operating by Dec. 31 but has been delayed.

The county and the company had been discussing their disagreements over the telephone and computer contract for four months. But Computer Sciences officials canceled a scheduled Wednesday meeting, Ekard said. The company "decided to walk away" from negotiations, according to the default letter.

Mary Grillo, head of the county's largest union and a chief critic of the technology contract, called the county's action gutsy.

"Frankly, I'm impressed the county is making this move given the publicity that surrounded this effort," she said.

Grillo, however, said no one knows how much money the problems have cost the county treasury.

"I hope they (county officials) have learned a lesson from this," she said.

Ekard said that despite the problems, the county's technology is better than it was three years ago and, he said, it will get better.

"In the end, every (public) service that could be put online will be put online," he said.

San Diego Union-Tribune

-- Anonymous, April 21, 2002