House unit chief asks halt to $806m IBM NIH pact

Electronic News, Jan 13, 1992 by Joanne Connelly

WASHINGTON -- House Government Operations Committee Chairman John Conyers Jr. (D., Mich.) last week asked that a potential $806 million IBM mainframe contract with the National Institutes of Health be cancelled following the release of a government report that charged the agency had already wasted over $16 million in unnecessary computers since the contract was initiated.

In a letter last week to Health and Human Services Secretary Louis Sullivan, Representative Conyers urged that no further options be exercised on the Total System project, and added that he has "serious doubts as to whether this contract continues to be, or ever was, in the best interest of the government."

Jack Mahoney, associate director for administration at NIH, said the agency is considering "all options," including modifying or curtailing the contract, in the wake of the allegations.

A one-year award with nine one-year options, the Total System pact calls for the provision of total system operation -- including hardware, software, communications, personnel, maintenance and related services -- by a single vendor. As the only company to submit a best and final offer, IBM was awarded the contract in 1988, and has since installed a system based on six IBM 3090-300J machines.

The letter followed release of a U.S. General Accounting Office report, requested by Representative Conyers, that specifically charges that ineffective management by NIH resulted in acquiring excess computer capacity, and expenditures of over $16 million in unnecessary computers.

"Our estimate of NIH's computer needs showed that two of its six computers were unnecessary," the GAO concluded. "Over $16 million in equipment leasing costs have been wasted on these two computers and additional millions can be saved by eliminating them."

The GAO went on to note that NIH voluntarily eliminated one of the mainframes after assessing data collected for the GAO report, but further recommended that at least one more mainframe be eliminated from the NIH system. In addition, GAO suggested that NIH's current approach of dedicating a full-size computer to back-up, testing and development be reassessed as one estimate has put the use of that machine at about five percent of available capacity.

Althoug the value of the Total System project has the potential to reach more than $800 million over the 10-year period, NIH paid out only $98.4 million over the first three years of the contract, according to the agency's Division of Computer Research and Technology. The initial year of the contract brought $33.4 million into IBM's coffers, according to NIH, with payments of $30.5 million in 1990, and $34.5 million in 1991. Figures were not available for the first three monts of the third option year. The next option year, should NIH decide to continue the project, would begin next September.

While focusing on management problems within NIH, the report also charged that the agency's efforts to obtain competition on the Total System contract were unsuccessful. The watchdog agency concluded that provisions in the contract which afforced NIH a high degree of flexibility in the quantity of equipment it would acquire, while advantageous to the government, increased the risk facing the potential contract awardee and therefore discouraged bidders. The contract specified that the government reserved the right to order up to 25 percent more or 75 percent less of the actual equipment specified in the contract.

The Total System concept itself, in which one vendor must have the resources to supply all aspects of the mainframe-based system, also served to limit competition, according to the GAO. The report further charged that NIH overstated specifications in the Total System RFP, unnecessarily increasing the size of the contract which may, in turn, have further limited competition.

"The many instances of malfeasance or nonfeasance on the part of NIH officials in this case give rise to suspicion on the part of the Committee that the procurement, in fact, may not have been 'full and open' at all, but rather was 'wired' from the outset to insure selection of the eventual contractor." Representative Conyers said in his letter to Secretary Sullivan last week.

Allegations of wired contracts and pro-IBM bias at NIH and other government agencies are by no means new. In 1989, a group of six computer vendors urged Secretary Sullivan to look into alleged pro-IBM bias at NIH, specifically charging that the bid specifications for the Total System project were so skewed in IBM's favor that not only could IBM win, "but that only IBM could win" (EN, Sept. 25, 1989). The GAO report issued last week is the result of those and other similar allegations that included not only NIH, but other major government agencies.

Both IBM and the agency have steadfastly denied charges of a pro-IBM bias in computer purchases. An IBM spokesman last week once again defended the Total System purchase as a competitive procurement which IBM won fair and square. He added that IBM has not heard from NIH regarding any changes to the Total System pact.