State to cancel contract with software firm
Seeking $13m refund from company
Governor Deval Patrick's administration said yesterday it is canceling a software contract found by the state inspector general to be improperly awarded and is seeking a $13 million refund from
The state was responding to a finding by Inspector General Gregory Sullivan last week that the steps taken last year to award the contract to
The Globe reported last week that House Speaker Salvatore F. DiMasi had taken a strong interest in the contract. A former administration official who was instrumental in the bid award has told investigators that DiMasi met with her to push the type of software manufactured by Cognos.
The middleman who put the deal together, software reseller and former Cognos executive Joseph Lally, presented himself to state officials as DiMasi's friend. And Cognos hired one of DiMasi's longtime friends, Richard McDonough, as a lobbyist.
In a letter sent yesterday to IBM executive Wendi Monahan, Patrick's chief information officer, Anne Margulies, did not raise the subject of political influence. She wrote that the state is immediately terminating its agreement with Cognos, which was recently bought by IBM.
"Because the procurement process followed here did not adhere to the applicable statutory requirements, the agreement is void and unenforceable," she wrote.
Margulies cited the inspector general's report, which "concluded that the procurement process was inconsistent with state laws and regulations . . . [and] that it must be voided and that IBM must return the $13 million fee to the state." She said the state wants the money refunded within 30 days.
Margulies also pointed out that IBM bought Cognos after the questionable deal with the state had been completed. "I regret having to bring this matter to your attention," she said. "Nonetheless, I am sure that you will agree with me that unwinding this transaction is the right thing to do."
Spokesmen for IBM and Cognos would not say yesterday whether they will agree to refund the money. "We aren't going to comment or speculate about what might happen next," said Steve Milmore, Cognos spokesman.
The inspector general did not investigate whether political influence was involved in the awarding of the contract. David Guarino, DiMasi's spokesman, has said the speaker was only interested in bringing the state the type of software the company and other companies sold, performance management software.
"The speaker is deeply concerned with the integrity of the procurement process, and he hopes that this time the governor will follow the rules and regulations clearly laid out that it should be a fair, open, and competitive process," Guarino said after reviewing the letter sent to IBM.
In a scathing five-page report sent to Administration and Finance Secretary Leslie Kirwan last week, Sullivan found that the contract was awarded in an unusually rushed process that bypassed bidding rules. Bidders were not solicited by public advertisement, and state officials were not even sure how they would use the software before former acting chief information officer Bethann Pepoli told her superiors that Cognos was the best choice.
The bidding process took only a few weeks, but should have taken several months at least, Sullivan wrote.
When the six-member team evaluating the bids recommended they suspend the process to give state officials time to determine how they would use the software, Pepoli ignored their recommendation, instead telling her boss, Undersecretary of Administration and Finance Henry Dormitzer, that Cognos was the best choice, Sullivan said.
The Patrick administration asked Sullivan to look into the awarding of the contract last December after Margulies, who had just been appointed, noticed discrepancies in the bids. There was also talk about possible political influence in the process among state workers and rival bidders, though the administration did not ask Sullivan to look at whether DiMasi or his staff tried to sway the outcome.
Pepoli, questioned about the process, told investigators that Lally had set up a meeting between her and DiMasi in the speaker's office, where DiMasi had expressed his interest in the software, according to two sources with firsthand knowledge of her statements. She also told investigators that Lally said DiMasi wanted the state to buy the software and was specifically interested in Cognos, according to the two sources. Lally has refused to discuss the sale or his relationship with DiMasi.
McDonough was registered as a lobbyist for Cognos at the same time a special bond bill authorizing the purchase was working its way through the Legislature last March.
He reported earning $100,000 from Cognos in 2007. He had lobbied for the company before, but not since 2003, according to the secretary of state's office. 