Software contract called improper
State report says bid rules violated
The state inspector general has found that a Canadian software company was improperly awarded a $13 million contract last year in an unusually rushed deal in which House Speaker Salvatore DiMasi had an active interest.
At almost every turn, DiMasi, his aides, or his friends played a role in either creating a demand for
DiMasi personally met with the state's chief information officer to push for the kind of software that Cognos produces. A middleman in the deal, Joseph Lally, portrayed himself to key state officials as DiMasi's friend. A longtime DiMasi friend, Richard McDonough, was hired as a lobbyist for Cognos and was paid $100,000 by the company.
The result of the process was a contract award that violated basic state bidding rules.
In a five-page letter sent to Administration and Finance Secretary Leslie Kirwan on Thursday, Inspector General Gregory Sullivan recommended that the contract be voided and that the state seek a refund.
Governor Deval Patrick's administration asked Sullivan to look into the contract in December after the newly appointed head of the state's Information Technology division, Anne Margulies, raised concerns about "discrepancies" in the bids. The request also was made amid grumbling among state employees and rival bidders about possible political interference in the contract process, said a former employee of the division.
Margulies's predecessor, Bethann Pepoli, spearheaded the bidding process last year. Pepoli, who was a holdover from the administration of former governor Mitt Romney, has told investigators that Lally set up a meeting between her and DiMasi in the speaker's office where DiMasi expressed his interest in "performance management software," the type of computer program that was eventually purchased from Cognos, according to two sources with firsthand knowledge of her statements.
Pepoli, who was acting chief information officer, told investigators that Lally said DiMasi wanted the state to buy the software and was specifically interested in Cognos, according to the two sources.
In an e-mail obtained through a public records request, Pepoli wrote Kirwan that the push for performance management software "started as a requirement from the legislature" and that DiMasi's chief of staff, Maryann Calia, was "the lead on this."
While she would not discuss the extent of her contact with DiMasi, Pepoli denied she was swayed by the speaker or political factors.
"The speaker and I never had a conversation about a vendor," Pepoli told the Globe. "I don't feel like my recommendation was influenced by any outside sources."
A spokesman for DiMasi said the speaker had "absolutely no involvement" in the administration's bidding process but declined to describe his relationship with Lally or say whether he had met with Pepoli to discuss the contract. The spokesman, David Guarino, said DiMasi spent years encouraging state officials to buy the type of "performance management" software that Cognos and other companies produce.
Such programs allow government officials to keep track of reams of data, from tax revenues to prison populations, all at once. Two other companies,
"The awarding of the contract was handled entirely by the Patrick administration under the terms of the bill, which specifically called for an "open and fair competitive process," said Guarino.
"The speaker's only interest was in bringing a performance management program to state government, not which company provided it."
Lally, who Pepoli told investigators asserted he was DiMasi's friend, was a former vice president of sales at Cognos, an Ottawa-based company with US headquarters in Burlington, which was recently bought by
He is now a principal of Montvale Solutions, a local company that sells Cognos and other software.
Lally would not discuss the transaction or his relationship to DiMasi.
"I don't discuss anything that has to do with my clients," he said on Thursday.
He was not the only friend of DiMasi who had an interest in the deal.
Richard McDonough, a lobbyist and longtime friend of DiMasi, registered as a lobbyist for Cognos just as funding for the software was approved. McDonough reported earning $100,000 from Cognos in 2007. He had lobbied for the company before, but not since 2003, according to records of the secretary of state's office.
McDonough did not return phone calls seeking comment.
In a statement, Steve Milmore, Cognos spokesman, said "Cognos fully complied with the process required by the Commonwealth for bidding this transaction."
Because of the cloud surrounding the process, the software was never widely distributed, even though Cognos received the entire $13 million payment last year. The software was distributed to only one state agency, Administration and Finance.
Language authorizing the purchase was tucked into an "immediate needs" bond bill, which was filed in the House on March 14, 2007. It flew through the House and Senate in one week and was signed by Patrick on March 23, 2007. By contrast, there are several bond bills filed last year that are still languishing in the Legislature.
According to the inspector general's sharply critical report, the bidding and review process was fundamentally flawed.
It was not only rushed, - taking weeks instead of the several months typically taken to analyze such deals - but the process didn't conform to state bidding rules or bid requirements that were contained in the special bond bill authorizing the purchase, the inspector general found.
Cognos was recommended as the winning bidder in May. But the procedures for picking a contractor - including establishing selection criteria, advertising for bidders on the Internet, and determining how the state would use the software - were not even certified by the state comptroller until July.
The inspector general also found that:
Kirwan yesterday would not say what the state will do next.
She issued a written statement saying: "This administration takes the integrity of the procurement process very seriously."
Andrea Estes can be reached at estes@globe.com. 