IBM-Cognos to refund $13 million to Massachusetts

IBM will repay US$13 million to Massachusetts for performance management software its subsidiary, Cognos, sold to the state in August 2007, according to an agreement reached this week.
The deal came under scrutiny last year following allegations the procurement process had been rushed to favor Cognos.

IBM declined to comment beyond a brief statement confirming it will give back the money and that the state will return the software. The statement also noted that Cognos struck the deal before IBM acquired it.

An IBM spokesman, Chris Andrews, refused to provide documentation pertaining to the agreement, as did Governor Deval Patrick's office, which issued a similar statement.

Massachusetts House Speaker Sal DiMasi has been at the center of a political firestorm over the controversy, with allegations flying over his connections to Cognos. The Boston Globe reported that Cognos was a sponsor of a memorial golf tournament DiMasi helped organize and that a DiMasi friend served as a lobbyist for the vendor.

DiMasi has adamantly denied any wrongdoing. His office declined to comment on Friday.

However, a March report by state Inspector General Gregory Sullivan's office provides a time line of an investigation the agency conducted into the software deal.

The inspector general began scrutinizing the procurement following a tip from a whistleblower, as well as a December request from Patrick's administration, according to Jack McCarthy, a spokesman for Sullivan's office.

"They accomplished what we asked them to do, it appears, to get the money back from a flawed procurement process," McCarthy said. "It's nice to know IBM recognized the flaws in the process and did the right thing for Massachusetts. We're also happy the Patrick administration hung tough and followed through."

The report does not mention DiMasi, but describes a number of alleged flaws in the way the Cognos pact was formed.

For one, the state's Information Technology Division did not widely advertise the fact it was looking for performance management software, according to the report.

Instead, "a staff member at ITD simply consulted a chart of leaders in performance management developed by the analytical firm Gartner Group and e-mailed the Request for Quotes to four companies identified as 'leaders.' "

Three vendors -- Cognos, Oracle and SAS -- responded to the e-mail, according to the report. ITD staffers developed a scoring sheet containing 104 criteria. The ITD team in charge never finished evaluating the vendors with the sheet, but at the time they stopped Cognos had the high score, with 69.39 points, followed by SAS with 57.38 and Oracle with 27.49, the report states.

The IG's investigation found that due to a typographical error in the spreadsheet's formula, the scores for all three vendors were flawed, with many points going uncounted.

The ITD procurement team never finalized or submitted the scoring document to the Patrick administration, and therefore the IG's office did not attempt to rework the calculations, according to the report.

Instead, after meeting with all three vendors the procurement team "unanimously felt that much more information had to be gathered because they did not adequately understand how various agencies and administrators would use performance management software," and recommended the procurement process be done over, the report states.

But on May 18, 2007, the acting CIO of ITD, Bethann Pepoli, told Henry Dormitzer, deputy to Patrick's secretary of administration and finance, Leslie Kirwan, that Cognos "was the best choice for performance management software procurement."

Dormitzer relayed the information to Kirwan, who subsequently signed an agreement to buy the software in August, the report states.

DiMasi allegedly met personally with Pepoli at some point to discuss the importance of performance management software, according to The Boston Globe. "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."

The ITD has "already approached us to help them go through the procurement process" as they once again seek to purchase performance management software," McCarthy said.

"It may not be Cognos' software," he noted.