To quote from the article (with some re-ordering):
The road that led to the CDC's hiring of Celerant began with an introduction made by Atlanta businessman Kent 'Oz' Nelson, who at the time was board chairman of the CDC Foundation, a nonprofit that supports the agency.We have posted before about CDC management here. In that post, we noted that the agency was paying CDC managers, especially those within the Director's office, large bonuses in comparison to those paid to health care professionals at the agency. The rationale was the need for "management transformation" at the agency, and then to retain the top quality managers hired with that goal in mind.
Nelson, former chairman and chief executive officer of United Parcel Service, became a key [CDC Director Julie] Gerberding adviser after she was named CDC director in July 2002. Nelson, 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 Nelson in an article in the CDC Foundation's 2002-2003 annual report.
In an interview, Nelson 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.
Nelson 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, Nelson said. The CDC reimbursed Down only for expenses, Nelson added.
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 James 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 Christopher Yukins, associate professor of government contracts law at the George 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.'
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.
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.
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.
However, the current case suggests that CDC managers at best seemed to be putting expediency and personal relationships ahead of careful business practices. Was this the sort of management transformation meant above? Now tell me again why it is so important we put managers and bureaucrats, rather than health care professionals, in charge of health care organizations?