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TMCNet:  New Supercomputer Living on State Handouts: N.M. lawmakers worried project won't pay its own way Copyright ? 2009 Albuquerque Journal

[May 17, 2009]

New Supercomputer Living on State Handouts: N.M. lawmakers worried project won't pay its own way Copyright ? 2009 Albuquerque Journal

May 17, 2009 (Albuquerque Journal - McClatchy-Tribune Information Services via COMTEX) -- Is New Mexico's $11 million supercomputer a super bust? Not yet, but a report prepared for state lawmakers indicates that it could be headed in that direction. Among the problems identified in a new Legislative Finance Committee report: The supercomputer unveiled in January 2008 hasn't produced the kind of revenue projected. Including the purchase price, the operation has cost the state $13.8 million, but has taken in only about $300,000 in cash. Other revenue has been in the form of in-kind services.

LFC chairman Luciano "Lucky" Varela, D-Santa Fe, said the supercomputer shows promise but needs to "start generating some dollars." "It's all nice and pie-in-the-sky, but we're waiting to see when it is going to become self-sustaining." The project's ability to raise enough money to operate indefinitely is in question. Three research universities, two national laboratories and one nonprofit have used the supercomputer at no cost since July 2008, and the supercomputer isn't currently generating any revenue.

"An enterprise operation cannot be self-sufficient if 60 percent of available capacity is given away," the report said.

The vendor that built and does maintenance on the supercomputer filed for Chapter 11 bankruptcy last month -- perhaps not a big surprise since the same firm was emerging from bankruptcy in 2007 as New Mexico officials pre-selected it for the job.

Officials with the New Mexico Computing Applications Center, a nonprofit organization formed to manage computer operations, declined to be interviewed last week, saying they wanted to first fully review the report.

Gilbert Gallegos, spokesman for Gov. Bill Richardson, told the Journal that, in general, "That report is fundamentally flawed and flat-out wrong on most of its major allegations." He added the supercomputer initiative "has already surpassed expectations and is off to a strong start." A one-page response provided to the LFC from center officials said their revenues from sources other than the state are at or above projections. They also said there are 28 contracts pending to stabilize costs.

They also disputed the claim that the winning company was pre-selected.

Sen. Mary Kay Papen, D-Las Cruces, said in an interview that she hopes the supercomputer turns out to be the economic boon its supporters predict.

"My questions are, how much more money are they going to be asking the state for to maintain it, to upgrade it, to move it ... In these very tight, scarce money times, it's about how can we make it selfsustaining." If the project can't pay its own way, the LFC report said, officials involved "may want to consider divesting the state of the supercomputer ..." Original plan Richardson's science adviser originally asked the Legislature for $42 million over six years for a 200-teraflop supercomputer project that included gateways to the national laboratories, New Mexico State University and the New Mexico Institute of Mining and Technology in Socorro as well as other connections, the LFC report stated.

Funding was to come from commercial, foundation, federal and state sources.

The plan was to be self-sustaining within five years, but that has been recently amended to seven years, the report said.

"Currently, (the center) is totally reliant on state appropriations," the LFC report said.

Documents cited in the review show that $115 million will be required over a sevenyear period for recurring and nonrecurring costs.

The center contends that it brought in $3 million this year. Of that, almost $2 million is inkind contributions, such as the Intel plant in Rio Rancho providing physical space valued at $1.2 million a year.

"Of the 10 revenue-generating prospects identified in November 2008, only one has generated $300,000," said the report.

Three research universities, two national laboratories and one nonprofit have run more than 65,000 jobs on the computer.

"With projected revenues not materializing as anticipated, a minimal charge of $10 per job would have generated $650,000," the report states.

The center's business plan proposes 44 videoconferencing sites or gateways across the state, but there's not enough funding in its current operating budget to support them, the LFC review states.

The center has no full-time, permanent staff, instead relying on part-time contractors.

Pre-selected? SGI, of Freemont, Calif., was selected to build a supercomputer at Los Alamos National Laboratory when Gov. Bill Richardson served as Department of Energy secretary in the Clinton administration.

Richardson in 2002 was the keynote speaker at an SGI energy summit.

New Mexico officials selected SGI to build the state's supercomputer even before issuing a formal request for proposals, according to the LFC report.

The company was offering a 60 percent discount on hardware and had teamed up with Intel, which offered to host the supercomputer free of charge for an indefinite time.

Typically, a vendor is selected after an evaluation of responses to a request for proposals. In this case, the evaluation of the vendors' responses was just a formality, said the legislative review.

SGI came in first among four vendors who applied.

The RFP mandated that vendors submit proof of financial stability.

But the LFC review said it appears the committee that evaluated the proposals never rated vendors on that factor. The committee was composed mostly of scientists and at least two state officials.

The evaluation committee "did not even raise a 'red flag' " about the SGI's disclosure that it was emerging from bankruptcy.

"According to the General Services Department State Purchasing Division, the state does not have the expertise necessary to evaluate financial stability," the LFC report stated.

SGI filed for Chapter 11 bankruptcy again the first week of April 2009, and Rackable Systems Inc. is acquiring most of its assets and will keep the name.

SGI still has contracts with New Mexico for maintenance, support and system administration.

The computer center's written response to the LFC didn't mention the bankruptcy.

It stated that "pre-bid information was obtained from vendors which set the basis for the dollar amount request to the Legislature. The normal state RFP process was then implemented with full, even and fair consideration of formal bids from all interested vendors." Attorney costs The LFC report also questioned some of the center's expenditures.

For instance, an attorney for the supercomputer project was hired at $250 an hour, while other state agencies pay between $150 and $174 per hour for contracted legal services.

The attorney's invoices showed among other things that he "requested and was paid to review and summarize his own contract, negotiate a contract for his associate, answer questions about his invoices, and prepare and submit monthly invoices." He also billed and was paid for reviewing retreat materials and planning a five-day retreat last July. The retreat occurred before the effective date of his contract.

The attorney's hiring was questioned by legislative staff, who found he was employed under two separate contracts that totaled $148,000 -- an amount that would ordinarily have required a competitive bid.

The center told the LFC it wasn't required to follow the state procurement code because it was established as a nonprofit, but intends to follow the code "to the extent possible while still meeting demands of being a business entity." Encanto: The Breakdown Named Encanto, the state's supercomputer was ranked third-fastest in the world when New Mexico purchased it in 2007. Now, it has slipped to 12th, according to a legislative report.

Designed to be a powerhouse for solving complex problems, the computer is supposed to stimulate economic development and attract large companies to New Mexico. Its initial focus was to be on digital media, health and energy.

Plans call for the computer -- 14,336 liquidcooled Intel processor cores capable of 172 trillion calculations per second -- to be accessed through a statewide network of "gateways" on college campuses and other locations.

The project announced its first commercial partnerships in February that it said would create more than 100 jobs in New Mexico. One of the partnerships involved the supercomputer; the other did not.

Encanto is billed as the fastest nonfederal computer in the world. More On Encanto Computer designed to solve complex problems A6 To see more of the Albuquerque Journal, or to subscribe to the newspaper, go to http://www.abqjournal.com. Copyright (c) 2009, Albuquerque Journal, N.M.

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