IBM, Cognos to refund state $13m

Software contract found in violation Bidding rules seen bypassed

Email|Print|Single Page| Text size + By Andrea Estes
Globe Staff / May 23, 2008

IBM, the corporate parent of Cognos ULC, agreed yesterday to refund Massachusetts $13 million from a software contract that the state Inspector General found was awarded last year in violation of basic bidding rules.

In a four-page agreement hammered out over the past several weeks, IBM and Cognos agreed to return the money within 10 days. In return, Governor Deval Patrick's administration agreed to remove Cognos software from state computers.

Neither Patrick nor IBM executives would agree to interviews on the agreement. They issued statements that stressed that the contract was awarded to Cognos last August, before IBM bought the company in November.

"We won't disclose any information beyond what was revealed and announced in the agreement itself," said IBM spokesman Chris Andrews. "Any other actions are internal matters."

House Speaker Salvatore F. DiMasi had taken a strong interest in the contract last year. The former head of the Information Technology Division told state officials that the middleman in the deal, former Cognos executive Joseph Lally, had bragged about his relationship with DiMasi and suggested that DiMasi wanted the contract to go to Cognos. Cognos also contributed generously over several years to a charitable golf tournament hosted by DiMasi at his home course, the Ipswich Country Club.

DiMasi has strongly denied exerting any influence on behalf of Cognos. DiMasi has said he wanted the state to buy the special software, which allows state officials to track and monitor government services and operations from their desks. But he said he didn't care which vendor was awarded the contract.

The Patrick administration voided the contract in March, demanding a refund after Inspector General Gregory Sullivan found the administration had picked Cognos in an unusually rushed procurement process that bypassed basic bidding rules.

Not only was Cognos the high, rather than the low, bidder, but the bid review took weeks instead of months and did not conform to the requirements contained in a special bond bill that authorized the software purchase, Sullivan found. In addition, when the six-member team evaluating the bids recommended that the process be suspended until state officials could determine how they would use the software, state information technology officials ignored the recommendation and moved ahead with the purchase.

Sullivan launched his investigation last fall, after rival bidders complained and employees raised concerns about the procurement process.

The Patrick administration had also urged Sullivan to step in.

Jack McCarthy, Sullivan's spokesman, said yesterday that he was pleased that IBM is "doing the right thing.

"The inspector general's office laid out a case that demonstrated that procurement rules were not followed," McCarthy said. "We're happy that IBM has decided to recognize that and do the right thing by returning the money to the citizens of the Commonwealth."

According to the agreement released yesterday, the refund does not "reflect any dissatisfaction " with the "quality or functionality" of the software and states that IBM and Cognos will not be prohibited from bidding on future contracts.

The governor's office said the contract will now be rebid, but McCarthy said the inspector general is urging that the administration first determine whether it needs to make such an expensive purchase.

Before rebidding the contract, he said, the state should talk to employees "to see how or if they would use such a type of software."

"If they see a need, they've already discussed running their procurement strategy by the IG's office, and we're happy to work with them to make sure it's done openly, fairly, and competitively."

The $13 million software was intended for use by 20,000 state employees, according to state records, but because of the questions that arose the software was not widely distributed. After the first year, the state planned to pay Cognos an additional $2.45 million a year for support services.

Andrews said Cognos will submit another proposal if the contract is put out to bid again.

Cognos, a Canadian company with US headquarters in Burlington, was the sole "platinum" sponsor of the charity golf event hosted by DiMasi, held to honor the late brother of DiMasi's accountant and former campaign treasurer, Richard D. Vitale.

DiMasi has denied soliciting donations from Cognos or other sponsors, who have included Richard McDonough, a veteran lobbyist who earned $100,000 from Cognos in 2007, and Jay Cashman, another DiMasi friend and major state contractor.

Globe correspondent Stephen Kurkjian contributed to this report.

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