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CDC deal possibly unlawful

Internal review criticized how firm was picked

By Alison Young

The Atlanta Journal-Constitution

Published on: 12/03/06

It began when a prominent Atlanta business leader introduced Dr.

Gerberding to a man who wanted to be her free management adviser, to help

her transform operations at the Centers for Disease Control and Prevention.

Now the agency is scrambling to explain the gyrations it used to give $10

million in business without competition to a consulting firm associated

with and recommended by CDC director Gerberding's free adviser.

A CDC public relations risk-management analysis obtained by The Atlanta

Journal-Constitution identified several " threats " to the agency, including

" significant procurement mistakes " and an " inappropriately backdated "

contract document.

The circumstances described in that risk analysis —- which CDC officials

now seek to discredit as merely " conjecture " —- raise questions about

serious and potentially criminal violations of federal procurement law,

according to government contract experts.

And an explanation offered late Friday by CDC officials appears to

illustrate questionable practices that experts say are designed to award

contracts to favored companies, denying others the opportunity to compete

and taxpayers the assurance that the government is paying a fair price.

Gerberding and CDC officials have refused repeated requests to release

documents involving the firm Celerant Consulting, which worked at the

agency from 2003 through 2005. The agency also has refused to release

documents relating to whether a conflict of interest existed when W.

Down, Gerberding's volunteer business adviser, recommended Celerant to

overhaul CDC's procurement and grants office. He made the recommendation

around October 2003, four months after Celerant sent out a press release

announcing Down as a new member of the firm's U.S. Advisory Board.

Celerant and Down contend the press release was mistakenly issued and that

he never accepted the firm's position.

Down, who lives in Winchester, Mass., and has been a member of the CDC

Foundation board of directors since 2004, declined to be interviewed. His

attorney, former Massachusetts Attorney General Harshbarger, said

Saturday that Down never had a conflict of interest and was only trying to

help the CDC. He praised Down's integrity.

" Candidly, I am defending Jim Down here, I'm not defending some of the

issues CDC and the foundation need to address, " Harshbarger said. He said

volunteers like Down are put at risk of questions of impropriety because

the agency and the foundation are lax in having procedures for them to make

formal disclosures of even potential conflict of interest issues.

Celerant, a global consulting firm with its U.S. headquarters in Lexington,

Mass., declined to grant interviews. In a brief statement, the company

said: " Celerant's business relationship with the CDC was legal and proper. "

And the company said it never had any relationship with Down, despite the

2003 press release. Harshbarger said that while Down had a discussion with

Celerant, he never agreed to work for the firm. He said he doesn't know why

Celerant never issued a correction.

CDC officials said Friday that while some mistakes were made in the

contracting process, their only intent was to get the agency the expertise

it needed to revamp its sluggish contracting office. The agency believed it

followed proper procedures, they said, and that taxpayers were well-served,

regardless of the process used.

" The procurement and grants office at CDC is a completely different entity

than it was a few short years ago, " said Alan Kotch, the office's acting

director, citing dramatic drops in processing times and increases in

productivity as a result of Celerant's help.

Sen. Grassley (R-Iowa), chairman of the Senate Finance Committee,

said late Friday that he will be asking the CDC to provide information on

its contracting with Celerant. He also said he will ask the Government

Accountability Office, the investigative arm of Congress, to examine the

CDC's contracting procedures.

Fear of bad publicity

The Atlanta Journal-Constitution has been seeking records about Celerant

and Down under the federal Freedom of Information Act since Oct. 3.

After the FOIA request was made, a CDC employee from the Office of the

Director performed a risk analysis of issues facing the agency if and when

information about its dealings with Celerant became public.

The analysis, obtained by the AJC, said there was " No assurance that CDC

received the best value solution to its concerns because [of the]

inappropriate procurement process used. " It states that the agency

" inappropriately backdated a contract document " and notes a " potential

conflict of interest between external individual serving as adviser to CDC

and Celerant. "

The analysis was prepared by Landry, who is listed in an agency

directory as a management adviser in Gerberding's office.

Among the " threats " identified by Landry in the document: " Negative

publicity will further question top CDC management, as it was so involved

in the early process. "

And among the top four questions Landry posed —- without an answer —- in

the memo were: " Why did CDC's top management collude to provide a generous,

$10 million, sole-source contract to Celerant, primarily based on the

recommendation of another CDC contractor who was discussing potential

employment with Celerant at the same time? "

Landry did not respond to interview requests.

Donna Garland, chief of CDC's Office of Enterprise Communications, an arm

of the director's office that specializes in risk communications, did not

respond to an interview request about Landry's analysis.

She sent an e-mail to all CDC employees and contractors Friday evening, in

anticipation of this report, saying the analysis was " an internal document

that was not using the facts, but conjecture. "

She wrote: " CDC's core values of accountability, respect, and integrity

count. When we get it wrong we must own it. The fictitious questions that

someone could possibly ask when pursuing a story about PGO [the procurement

and grants office] were written down, and I own that this was not a good

idea. I apologize for this. "

'This is a common abuse'

The road that led to the CDC's hiring of Celerant began with an

introduction made by Atlanta businessman Kent " Oz " , who at the time

was board chairman of the CDC Foundation, a nonprofit that supports the

agency.

, former chairman and chief executive officer of United Parcel

Service, became a key Gerberding adviser after she was named CDC director

in July 2002. , among other things, worked to identify business

consulting expertise to help Gerberding chart a new strategic vision and

reorganization of the agency.

" I told her I'd be glad to help and began searching for someone.

Coincidentally, around the same time, I got a phone call from Jim Down, "

said in an article in the CDC Foundation's 2002-2003 annual report.

In an interview, said he knew and respected Down from Down's work

years earlier as a UPS consultant. Down " was extremely effective in

strategic planning, " he said.

said he set up a meeting between Down and Gerberding. " They hit it

off very well, " he said. And Down agreed to provide his help and expertise

for free, flying between Massachusetts and Atlanta nearly every week,

said. The CDC reimbursed Down only for expenses, added.

said he feels " horrible " that Down is facing scrutiny. He added that

when the issue first surfaced within the government in 2004, he was so

comfortable that Down had done nothing wrong that he added Down to the CDC

Foundation board.

" I think he is a very fine, moral man who has made a huge personal

sacrifice to try to help the CDC, " said.

In June 2003, while Down was serving as Gerberding's adviser, Celerant

Consulting issued the press release announcing that Down had been appointed

to the company's advisory board.

Around October 2003, CDC officials began discussing the need to overhaul

the operations in its procurement and grants office. Down recommended

Celerant for the job to CDC Chief Operating Officer Bill Gimson, said

Seligman, the CDC's chief information officer, in an interview Friday.

Gimson said Down did not mention any potential conflict of interest when he

recommended Celerant. " Jim's conversation, as a matter of fact, was

extremely brief, " Gimson recalled Saturday. " He said 'I would like to

introduce you to a company I think would do great work for CDC.' " After

the agency became interested, Gimson said, Down had no further involvement.

After examining Celerant and interviewing company officials, CDC decided to

hire the firm, CDC officials said.

Rather than open up the consulting contract to competitive bidding, CDC

executives went looking for an existing contract elsewhere in the federal

government that would allow them to hire Celerant directly. Seligman, Kotch

and Gimson said this is a common and accepted practice. " Government

agencies are encouraged to use government-wide contracts when they're

available and appropriate, " said Seligman.

Seligman called contracting officials at the National Institutes of Health,

who he said identified a pre-existing contract that would work. According

to the NIH Web site, this particular contract, called ECS III, is for the

purchase of computer hardware and software " to satisfy your agency's

desktop computing needs. " CDC officials said it also allowed for the

purchase of " services. "

And, most important for achieving the agency's goal of hiring Celerant, one

of the prime contractors had as a listed vendor Novell, the computer

software giant, which at the time owned Celerant.

" This is a common abuse of IT hardware and software contracts, " said

Yukins, associate professor of government contracts law at the

Washington University Law School in Washington. " In this case you

have an information technology —- really a hardware/software contract —-

being used for consulting services that have little to do with information

technology. "

It's called " out-of-scope contracting, " and in the wake of revelations that

some interrogators at Abu Ghraib prison in Iraq were paid under an IT

contract, " this has been a matter of acute concern in the government, "

Yukins said.

Regardless, the NIH contract is the mechanism CDC used from about December

2003 to February 2004 to hire Celerant to do an initial assessment of how

to fix the agency's procurement and grants office. The cost of this initial

phase was about $580,000, Seligman said.

The CDC was pleased with Celerant's initial work and wanted the company to

go ahead and implement its overhaul plan, at a cost of $10 million.

Although the first contract had ended, Seligman said CDC let Celerant

continue working and incurring costs while the agency sought NIH approval

to again link to the IT contract.

Celerant worked without a contract in place for three months, Kotch said.

Yukins, the government contract law expert, said: " The federal government

takes work done without a contract very seriously. ... It's a violation of

federal law, [and] technically speaking it is a criminal violation of law. "

While prosecutions are rare, he said, it is a very serious matter.

A scramble to fix things

In April 2004, an anonymous letter arrived at the U.S. Department of Health

and Human Services, the parent agency of both the CDC and the NIH, alleging

improprieties in the Celerant contracting process. Gimson said that when

HHS notified him of the letter, he immediately sent a memo to HHS asking

that it conduct an independent inquiry.

By July 2004, HHS officials were sufficiently concerned about the

appropriateness of the contract that they issued a formal stop-work order.

HHS officials would not grant interviews on the matter.

In September 2004, the CDC said HHS officials allowed the Celerant contract

to be reinstated, but required the CDC to take over managing it. They also

required the CDC to renegotiate the terms, which resulted in Celerant

reducing its costs by $500,000, to $9.5 million. And the CDC set the

effective date back to cover the February-May period when Celerant was

working without a contract, the agency said.

In a brief statement, HHS spokeswoman Pearson said: " Through

internal and independent reviews, we found that CDC entered into what it

believed to be an acceptable contracting arrangement through an NIH contract. "

The statement noted that HHS identified the need for stronger contracting

controls at both the CDC and the NIH and both agencies promptly addressed

those issues.

A spokesman for the NIH did not respond to an interview request.

To reach staff writer Alison Young, call 404-526-7372.

HOW THE CDC HIRED CELERANT

> Late 2002: Atlanta businessman Kent " Oz " , then chairman of the CDC

Foundation, suggests to new CDC director Gerberding that Down

become her adviser. Down begins serving, for free.

> June 2003: Celerant Consulting press release announces Down's appointment

to its U.S. Advisory Board, quoting Down: " I am pleased to be a part of

Celerant ... " Down and Celerant have since said the release was sent out in

error.

> Around October 2003: Down recommends Celerant to the CDC's chief

operating officer, Bill Gimson, to overhaul the agency's procurement and

grants office. CDC officials hire the firm.

> Around December 2003: Rather than take competitive bids, CDC executives

use an existing computer technology contract from the National Institutes

of Health to pay Celerant about $580,000 to do an initial assessment.

> February 2004: The CDC agrees to pay Celerant $10 million to re-engineer

CDC's procurement and grants office. The initial contract has ended, but

the CDC lets Celerant work anyway.

> April 2004: An anonymous letter to the Department of Health and Human

Services, the parent agency of the CDC and the NIH, alleges improprieties

with the Celerant contracting.

> May 2004: The CDC gets NIH approval to again use its computer contract to

pay Celerant.

> July 2004: HHS issues a stop-work order while it investigates.

> September 2004: HHS allows reinstatement of the Celerant contract but

requires the CDC to renegotiate it and to take over managing it. The CDC

gets Celerant to reduce the contract costs by $500,000. The CDC also sets

the contract's effective date back to cover the February-May period when

Celerant worked without a contract.

> Sept. 16, 2004: The CDC Foundation, the agency's nonprofit support arm,

announces the appointment of Down to its board of directors.

> August 2005: Celerant completes its CDC work and leaves the agency.

> Friday: Sen. Grassley says he wants information from the CDC

about its Celerant contract. He says he will ask the investigative arm of

Congress to examine the CDC's contracting procedures. CDC officials credit

Celerant for a vast improvement in its procurement and grants office,

resulting in $4.9 million in savings.

Sources: Interviews with CDC Chief Information Officer Seligman and

acting procurement and grants director Alan Kotch, a CDC memo sent to

employees Friday, and AJC research.

--------------------------------------------------------

Sheri Nakken, R.N., MA, Hahnemannian Homeopath

Vaccination Information & Choice Network, Nevada City CA & Wales UK

Vaccines - http://www.nccn.net/~wwithin/vaccine.htm