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Critics question federal contract

BearingPoint, faulted for the failure of the Bay Pines VA Medical Center computer system, wins a Homeland Security Department deal.

By PAUL DE LA GARZA, Times Staff Writer
Published October 7, 2004

The consulting firm behind the failed computer system at Bay Pines VA Medical Center in St. Petersburg has won another multimillion-dollar federal contract for a similar project.

BearingPoint signed a contract two weeks ago to combine accounting and management systems for the Department of Homeland Security, made up of 22 formerly separate agencies. The contract could be worth up to $229-million.

The deal was made only two months after Veterans Affairs officials concluded that the new computer system installed by BearingPoint at Bay Pines would not work and scrapped it. The VA had planned to eventually expand the computer system nationwide.

The Justice Department said in August it would launch a preliminary criminal inquiry of the Bay Pines project, known as the Core Financial and Logistics System.

In an unrelated case last week, the state of Florida canceled a $173-million contract with BearingPoint and Accenture to maintain and overhaul its computer hardware because of questions over how the two companies had won the lucrative contracts.

Florida's two U.S. senators, both Democrats, are questioning the Homeland Security contract.

Sen. Bob Graham said Wednesday he would ask the General Accounting Office, the investigative arm of Congress, to investigate how BearingPoint won the contract. Sen. Bill Nelson wrote Homeland Security Secretary Tom Ridge and asked for an explanation and how the agency plans to avoid repeating the mistakes at Bay Pines.

Homeland Security spokesman Larry Orluskie said that the agency was aware of the computer problems at Bay Pines before it awarded the contract and that "every large company has successes and failures."

Before it signed the contract, the agency was warned about BearingPoint and CoreFLS by House Appropriations Chairman C.W. Bill Young, R-Largo.

"I gave them plenty of information, plenty of notice, and plenty of advice: "Make sure you know what you're doing,' " he said.

Young said Homeland Security officials acknowledged BearingPoint performed poorly on the computer experiment at Bay Pines, but they also blamed VA management for the problems there.

"I don't want to be overconfident," he said, "but I would say because of the tremendous exposure that BearingPoint has had, as well as the VA has had on the Bay Pines issue, I think that everyone is going to be extremely cautious in exercising this contract and performing under the contract."

The contract with Homeland Security is worth less than the failed project at Bay Pines. Congress set aside $472-million for the project, and the VA spent close to $300-million before killing the pilot. The VA paid BearingPoint about $117-million as systems integrator.

An independent assessment of the computer project at Bay Pines by Carnegie Mellon University said it could serve "as an exemplary case study in how not to do technology transition."

On Sept. 20, Homeland Security selected BearingPoint to help consolidate and integrate the agency's vast financial resources and assets under a program known as eMerge2. The agency says the scope of eMerge2 "focuses on the areas of accounting and reporting, acquisition and grants management, cost and revenue performance management, asset management and budget and will be integrated with the current MAXHR effort."

MAXHR is the agency's new human resources management system.

Orluskie, the Homeland Security spokesman, said that because of the problems with CoreFLS the agency delayed awarding the contract for two months "until we were comfortable with the program and what BearingPoint was capable of doing for us."

He said the agency is confident BearingPoint could fulfill the contract.

"Every large company has successes and failures, right?" Orluskie said. "However, the eMerge2 program has strong controls in place, including a prudent, before-we-implement-it process and procedure."

He said BearingPoint would conduct a pilot program before installing the new system.

BearingPoint declined to comment.

But in an interview in September with the trade publication ComputerWorld, company executive Darryl Moody said the project would help protect the country.

"The terrorists are coming, and they're coming by land, by air, by sea and by cyber (means)," Moody said. "Therefore, (Homeland Security) needs the ability to know where its assets and resources are so that it can move and apply them where the highest threat is at that moment."

Critics, pointing to the computer problems at Bay Pines, wonder how the agency will accomplish that goal.

At Bay Pines, staff members often complained that they could not keep track of basic hospital supplies such as rubber gloves and of hospital expenditures because the three software packages that made up the computer system could not communicate with one another. Vendors also said they were not getting paid.

In February, as a result of mismanagement and problems with keeping surgical supplies in stock, Bay Pines was forced to cancel surgeries.

Congress and the VA launched a series of investigations.

The VA inspector general said that VA management virtually gave BearingPoint a "blank check" by failing to monitor the project properly. As a result, a single work order to the company in 1999 for $750,165 mushroomed into a $116.5-million pay day with no competition.

Investigators said neither BearingPoint nor any other vendor should be awarded additional work. Last week, Young said the VA would try to get back some of the money it paid BearingPoint.

In the Homeland Security contract, the initial job order to BearingPoint totals $3-million. The project's overall budget is $229-million.

Keith Ashdown, vice president of Washington-based Taxpayers for Common Sense, criticized the Homeland Security contract with BearingPoint.

"They need to be held accountable, and throwing a new mega-Homeland Security contract at them really does nothing to hold their feet to the fire," Ashdown said. "We're going to roll this boulder up the hill, and it's going to come back at us with a big fat check due from the taxpayers."

Paul de la Garza can be reached at 813 226-3432 or

[Last modified October 7, 2004, 00:31:08]

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