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$13m software deal is called unnecessary

Ethics investigation set; state's rush is unexplained

Email|Print|Single Page| Text size + By Stephen Kurkjian, Globe Correspondent and Andrea Estes
Globe Staff / July 1, 2008

Governor Deval Patrick's administration overspent by millions of dollars when it rushed to sign a $13 million computer software contract that has since been canceled and is now the subject of a state ethics investigation, according to technology analysts.

In making the purchase last year from Cognos Inc., the Patrick administration agreed to distribute the sophisticated management software to 20,000 state government users, many of whom, according to analysts, would lack either the skills or the need to use it. But by distributing the software to that many employees, it dramatically inflated the price.

"It is certainly not a tool for everyone in the organization," said Theodore Grossman, professor of technology operations and information management at Babson College. "It requires a level of sophistication to use it and understand the results."

While the Patrick administration paid $13 million to Cognos, Ohio put similar Cognos software in the hands of 6,000 employees. The Ohio price tag: just $2.9 million.

A spokesman for Cognos declined to answer questions about the difference in the prices charged the two states or about how the company negotiated its contract with the Patrick administration.

The Patrick administration rushed to sign the contract with Cognos, the highest by far of three bidders, at the same time last year that House Speaker Salvatore F. DiMasi was expressing a strong personal interest in the software procurement. The Globe reported in April that a sales agent working on behalf of Cognos, Joseph Lally, boasted of his personal connections to DiMasi and told a key state official involved in the selection process that DiMasi wanted Cognos to win the bid.

The Globe has also reported that Cognos was a top sponsor of a charity golf tournament hosted by DiMasi at his home course, Ipswich Country Club.

The Cognos contract was harshly criticized last year by the state inspector general, and state Republicans have asked for an investigation by the State Ethics Commission.

DiMasi has repeatedly declined to be interviewed about the contract. A spokesman for DiMasi has said the speaker had "absolutely no involvement" in the administration's bidding process, but confirmed that DiMasi had met with the head of the state's technology division, Bethann Pepoli, to advocate generally for the software.

Patrick administration officials have also declined to be interviewed on the details of the contract. Anne Margulies - the state's current chief technology official, who did not hold the post at the time of the award last year - said she believes that the state did not overspend.

Patrick officials could have avoided the excessive price tag of the Cognos contract if they had looked in their own files.

The administration ignored or overlooked a detailed analysis of state computer technology needs commissioned by the state in 2005. The analysis contained recommendations for some of the type of specialized management software but on a much smaller scale, meaning that fewer people would have been required to use it. It did not mention Cognos at all and recommended other vendors.

The software, a so-called "business intelligence" program, would allow state officials to view dozens of state expenditures, caseloads, expenses, and other indicators at once, providing a high-level snapshot of all operations.

In March, Inspector General Gregory Sullivan sharply criticized the Patrick administration, saying it used a rushed, corner-cutting process to award the contract to Cognos. His report said the state violated fundamental state bidding rules.

That negative review prompted the administration to rescind the Cognos contract; IBM, corporate parent of Cognos, has agreed to return the state's $13 million. The state is beginning a new bidding process.

While reversing its actions, the administration still has not explained why it set aside standard purchasing practices in its haste to pick Cognos.

Patrick's secretary of administration and finance, Leslie A. Kirwan, oversaw the bid award to Cognos in 2007 and signed the contract. She has declined to explain her decision-making.

Kirwan referred the case to the inspector general last year, once questions about irregularities began to surface within her department. That ultimately spurred the administration to cancel the contract and negotiate a refund, said Roy, the Patrick spokeswoman.

"This administration takes the integrity of the procurement process seriously," Roy said.

An administration official, who asked not to be identified, said a key reason for accepting the Cognos bid was that the company already had individual contracts with several state agencies. That made it easier to install and operate the firm's business intelligence software statewide, the official said.

Among the key criticisms by Inspector General Sullivan in his March 2008 report on irregularities in the Cognos contract award was a scathing observation that the state had not even performed a detailed assessment of its needs before seeking bids from vendors.

That assertion is striking, considering the detailed, 24-page assessment provided by the 2005 report, performed by NewVantage Partners LLC of Needham. It was commissioned in mid-2005 by Peter Quinn, then head of the state's Information Technology Division. It was based in part on interviews with the 20 top technology specialists in state government.

Administration officials, who asked to remain anonymous because they were not authorized to speak publicly, said neither Kirwan nor officials in the Information Technology Division, a division in Kirwan's department, were aware of the report.

Technology division officials, who checked into the report after inquiries from the Globe, said that the state had abandoned the NewVantage recommendations in early 2006.

While there is no language in the report that clearly states how many employees would have access to specialized management software, a computer specialist briefed on details of the NewVantage report said that its authors envisioned providing it to a far smaller group of state employees than the number in line to receive Cognos software.

Only top managers and policy-makers with a background in technology in state agencies as well as the staff of the Information Technology Division would have access to the specialized software, estimated at 1 to 10 percent of the workforce, or 800 to 8,000, according to the person briefed on the review. The Ohio contract awarded in 2003 was also for about 10 percent of the workforce.

By comparison, the 20,000 state employees and contractors who would have received the software under the Cognos contract in Massachusetts represent about 25 percent of the state's workforce.

Specialists said such a plan makes no sense for two big reasons: It unnecessarily inflates the price of the contract, since the cost is dependent on the number of people who are licensed to use it, and it is likely to lead to wasteful use of the software.

Three companies submitted proposals last year; Cognos's $13 million bid was accepted, even though it was nearly twice as high as the next highest bid, SAS Institute Inc. of North Carolina, which bid $7 million for the contract. Oracle Corp., the giant software company from California, submitted a $5 million bid.

Kurkjian can be reached at kurkjian@globe.com; Estes at estes@globe.com.

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