U.S. plans criminal inquiry into VA computer system; [SOUTH PINELLAS Edition]

PAUL DE LA GARZA. St. Petersburg Times. St. Petersburg, Fla.: Aug 20, 2004. pg. 1.A
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Copyright Times Publishing Co. Aug 20, 2004The U.S. Justice Department said Thursday it will conduct a preliminary criminal inquiry into the $472-million computer system at Bay Pines VA Medical Center that has been scrapped because it doesn't work.

Sen. Bill Nelson, D-Fla., requested a criminal investigation in a two-page letter Thursday to Attorney General John Ashcroft. He said the review was warranted "to ensure accountability where there is possibility of fraud and violations of contract or conflict of interest."

Separate investigations released last week raised questions about the contract governing the Core Financial and Logistics System, or CoreFLS, which once was expected to be rolled out nationwide after being tested at Bay Pines.

The VA inspector general found that the VA awarded contractor BearingPoint the project for $750,165 in 1999 under a competitive process, even though CoreFLS had an initial budget of $372-million. Using 22 separate "task orders," the VA awarded BearingPoint additional work totaling $116.5-million without competition.

Investigators also questioned whether BearingPoint should have been allowed to compete for the CoreFLS project, noting that its bid package lacked crucial cost estimates.

According to an independent assessment by Carnegie Mellon University, the contract issues with CoreFLS started during the acquisition process.

"Independent Government Cost Estimates appear to agree with contractor estimates to the penny. There is little evidence of a robust, rigorous procurement or contracting policies, processes or procedures," the Carnegie report said. "Without clear direction, the procurement process is at best inadequate and has resulted in a contract that has little control over the contractor."

Last month, VA Secretary Anthony Principi pulled the plug on the pilot project at Bay Pines. The system was designed to track and control finances, vendor payouts and supply inventories, but it failed to work properly after installation in October.

Software glitches and inadequate training have triggered surgery delays. Hospital staff members also say they can't keep track of expenditures.

Congress had set aside $472-million for the project; the VA spent about $278-million.

Nelson wrote that the findings by investigators suggest "that problems with CoreFLS may go well beyond mismanagement or incompetence."

BearingPoint spokesman John Schneidawind said the company would have no comment.

In a statement, Principi said he would direct all VA employees to cooperate fully with any investigation by the Department of Justice.

"I welcome any inquiry that will help us determine all of the facts in this matter," he said.

Principi noted there were no allegations of criminal misconduct in the IG report.

"However," he said, "if the Department of Justice determines that there were incidents of criminal conduct during the CoreFLS project, I will fully support prosecution of those charged."

House Appropriations Chairman C.W. Bill Young, R-Largo, said he supports Nelson's call for an investigation. He said Principi and his legal team already have launched an audit of the contract to see if any laws were broken.

"I'm not a lawyer," Young said, "but I can tell you from my standpoint, I think the way the contract was (executed), the way the contract was managed, smells pretty bad."

As Appropriations chairman, Young conducted his own investigation of CoreFLS and allegations of mismanagement at Bay Pines.

In response to Nelson's letter, the criminal division of the Justice Department will conduct a preliminary investigation of the computer project. If further investigation is warranted, the FBI and the U.S. Attorney's Office will join the case.

In his letter to Ashcroft, Nelson cited five findings from the inspector general report, including the task orders awarded to BearingPoint without competition.

He also pointed to BearingPoint's practice of writing the work orders and cost estimates without VA oversight, which, investigators said, "was tantamount to issuing BearingPoint a blank check."

Nelson said he also wanted to know why the VA paid BearingPoint an incentive bonus of $227,620 to bring the project in on time last October, even though CoreFLS was flawed from the start. Nelson asked that $4.2-million in travel costs paid to BearingPoint also be reviewed.

In an interview, Nelson said he requested the investigation based on the findings by the inspector general and Carnegie Mellon.

The Carnegie report concluded that the VA would have to rebuild the entire system because it's not viable. "Transition, both change management and deployment, had numerous flaws, to the point where it is tempting to consider CoreFLS as an exemplary case study in how not to do technology transition," the Carnegie study said.

At Bay Pines, the inspector general also raised questions about oversight.

In one case, the department in charge of surgical supplies brought a local vendor representative into the department to order medical supplies to expedite the acquisition and delivery process.

He was given access to vendor files and allowed to log onto the system with an employee's access code. The vendor placed dozens of orders with other various vendors. He also placed orders with his company for 32 items valued at $62,679.

Investigators believe the VA was overcharged. They found 30 of 32 items valued at more than $60,000 that the representative purchased from his own company had previously been bought by the medical center for less than $19,000.

Caption: Pieces of a letter from Sen. Bill Nelson to Attorney General John Ashcroft asking for an investigation into the Bay Pines VA Medical Center's computer problems.; Photo: PHOTO ILLUSTRATION

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People: Nelson, Bill, Ashcroft, John, Principi, Anthony, Young, Bill
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