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September 30, 2014

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After health care debacle, Gov. Brian Sandoval reluctantly extends Nevada’s ties with Xerox

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Sam Morris / Las Vegas Sun

Nevada Governor Brian Sandoval speaks to the Las Vegas Sun editorial board Wednesday, Dec. 12, 2012.

Gov. Brian Sandoval approved up to $7.8 million in new state contracts with Xerox on Tuesday despite his skepticism of the tech giant and its failed project to build Nevada's health care exchange.

The governor's approval at the Nevada Board of Examiners meeting avoids a potential legal battle after Xerox won public bids for two contracts. Both contracts cover audit work on unclaimed property for the state treasurer’s office.

Sandoval, a former federal judge, suggested he's still unhappy with Xerox but said it would “feel retaliatory for me to oppose” the contracts because of the health exchange problems.

The contracts spotlight the broad scope of Xerox's work for the state.

Xerox is best known for its copier business but it has evolved as a big player in government software through acquisitions of other companies. Since 2004, Nevada has now approved 11 contracts with Xerox totaling $147 million. Those contracts included office equipment, software and audits.

Asked about Xerox's relationship with Nevada, company spokeswoman Jennifer Wasmer said: “We look forward to continuing to have the privilege of serving the people of Nevada.”

About half of Xerox’s work in Nevada came from one project: The Silver State Exchange's online health insurance enrollment software. The exchange fired Xerox in May after the software had a series of problems after its launch last fall. The state paid the company $12 million of the $75 million contract.

The company also had a $32 million contract to supply office machines to the state’s purchasing division and a $30 million contract for “specialty services” related to copiers and software.

While Xerox had problems with the health care work, the company has done a "satisfactory job" with its auditing work, said Mark Mathers, Nevada chief deputy treasurer.

The auditing work

Sandoval was scheduled to approve Xerox's auditing contracts in July. But the governor halted the deal over concerns about expanding Xerox's work in Nevada while the state is still repairing its troubled health care exchange.

During the July Board of Examiners meeting, Sandoval said: “And I’ll be frank with why I asked these to be let out, is they’re with Xerox, and I just had some questions with regard to the nature of those contracts."

Xerox, a Fortune 500 company, has a diverse mix of business lines. The software group that works in health care operates independently from the auditing division.

In 2009, Xerox acquired auditing firm ACS. ACS had been working with Nevada on unclaimed property audits since 1986. In total, the audits have earned Nevada $71 million from unclaimed property, according to state and Xerox officials.

Xerox does similar auditing work in 48 states and has earned $954,000 for audits done on behalf of the Nevada treasurer’s office since 2010.

For one contract approved Tuesday, Xerox submitted a competitive bid against seven other companies to win one of the contracts with the treasurer’s office. The state ranked the company the highest.

For the second contract, the state submitted proposals to 150 companies but Xerox was the sole responder.

The company’s role is to find financial assets abandoned by their owners and turn them over to the treasurer’s office. Xerox is paid a 12 percent fee for the money it recovers. Xerox does not receive any additional money from the state.

During Tuesday's meeting, Sandoval asked the state’s lawyers and contracting staff if the state had options other than approving the auditing contracts with Xerox. Their answer: No, unless the state wanted to risk a potential lawsuit for not honoring Xerox as the winning bidder on the two contracts.

In response, Sandoval said Tuesday: “I don’t want to create additional exposure and additional issues and perhaps taking a legal position that may not be good for the state in this other contract that is completely not related to the exchange."

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