Lawsuit Accuses SAIC of Bid-Rigging - Did It Happen Before?

You never know when those old FOIA documents gathering dust in your office will come in handy.

POGO found out last week. The day before the Fourth of July holiday weekend, the Department of Justice (DOJ) announced it had joined a False Claims Act lawsuit alleging that Science Applications International Corp. (SAIC) participated in a bid-rigging scheme to win a $3.2 billion General Services Administration (GSA) information technology contract back in 2004.

The GSA sought bidders for a contract to provide support services to the NAVO MSRC--the Naval Oceanographic Major Shared Resource Center at the Stennis Space Center in Mississippi. In April 2004, the GSA awarded the contract to a consortium consisting of SAIC and subcontractors Applied Enterprise Solutions (AES) and Lockheed Martin Space Operations. The lawsuit accuses SAIC, AES, AES president Dale Galloway, and two NAVO MSRC officials--director Stephen Adamec and deputy director/contracting officer technical representative (COTR) Robert Knesel--of conspiring to rig the solicitation process in favor of the SAIC team and later attempting to cover up the scheme by destroying documents and computer hard drives. Adamec and Knesel allegedly shared information with SAIC that was not provided to the other bidders and put language in the solicitation that favored the SAIC team. SAIC denies the allegations.

When we heard about the lawsuit, bells went off. Something about it seemed oddly familiar. Here's where those old FOIA documents come into play: Last December, POGO submitted a FOIA request to the GSA Office of Inspector General (GSA-OIG) to obtain closed investigation files in cases involving several contractors in our Federal Contractor Misconduct Database, including SAIC. In response, the GSA-OIG sent approximately 1,000 heavily-redacted pages of documents from an investigation of SAIC that was closed in 2007.

The investigation file didn't seem particularly important or useful until last week's announcement. It prompted us to take another look at the documents, compiled during an investigation into possible Procurement Integrity Act (PIA) violations involving another GSA contract, a $90 million contract to provide IT services at the National Counterdrug Center (NCC) at the Department of Energy's (DOE) facility in Hanford, Washington in 2001. (The first few documents in the case file, which provide a good overview of the case, are posted here.)

The investigation, carried out by the GSA, DOE, FBI, and Defense Criminal Investigative Service (DCIS), determined that a number of questionable activities took place during the solicitation process which gave SAIC an unfair competitive advantage. A DOE program manager (name redacted) met privately with SAIC and gave it information that was not disclosed to the other potential bidders and tailored the language in the solicitation so that it would fit SAIC's qualifications. Sound familiar?

As the documents illustrate, the five-year investigation resulted in no punishment to SAIC, although the company probably dodged a bullet. At least one senior acquisition official at the GSA (name redacted) believed there was sufficient evidence to conclude that SAIC had violated the PIA. In August 2006, the GSA-OIG provided information to the GSA Debarment Section about the “inappropriate business ethics behavior” of SAIC; however, a recent check of the Excluded Parties List System shows no record of SAIC ever having been suspended or debarred. At one point, the U.S. Attorney's Office for the Eastern District of Virginia accepted the case for prosecution, but it later declined to prosecute and instead referred the case to the DOE, which handed out the only known sanction in the whole affair--a relatively lenient administrative punishment of the unnamed program manager.

Freedom of Information Act, we salute you.

-- Neil Gordon

Comments

[Bryan Rahija]

GT -

Feel free to send an email to [email protected].

[Gary C. Tucker]

I work at SAIC and am retiring soon. There is another scandal brewing inside my company, SAIC, that directly involves our CEO Walt Havenstein and Senior Counsel Brian Liss and others. They are covering up yet another in a long list of fraud. These men are the most unethical people I have ever met. They have no problem committing fraud against the taxpayers and lying about it. I know because I did it for them. Liss, according to many employees I know who are now preparing to provide testimony to the Inspector General in this new case, has been a major participant in covering up fraud at the Department of Defense and Department of Homeland Security involving more than $1B in fraudulent billing and overcharges to the taxpayers. This on top of the $600M NYC Mayor Bloomberg is seeking and the company is toast. There is just so much fraud and waste and backstabbing going on. I'm glad I'm leaving, but hopefully, someone will stand up against it all and do the right thing.

See more about Brian Liss http://www.linkedin.com/pub/brian-liss/8/286/216

SAIC is run by unethical dinosaurs like me who will take the company down.

Forgive me Lord, for I have sinned.

[Tom]

Looks like they are going to get away with it again.

[Bryan Rahija]

TED -- thank you for your comments. Please feel free to reach out to us if you have any more specific information:

http://www.pogo.org/report-corruption/

[TED]

As a SAIC employee preparing to retire, I'm well aware of unethical behavior by SAIC management and SAIC employees. Significant problems exist within SAIC in that SAIC, the company and management, will not accept responsibility. SAIC management will blame an individual employee or a couple employees for not following "published policy", when in fact, SAIC management encourages a win at all cost, and I would say most times is well aware of the wrong doing from the beginning. When SAIC gets caught, SAIC will put out a report stating that they conducted the "most thorough investigation" and did not find any evidence of wrong doing. I know for a fact SAIC destroys files to avoid successful fact finding investigations. Look at the case a few years ago where SAIC employees wrote at least portions of the Request For Proposal for FEMA TOPOFF contract.
Portion of SAIC's statement
“Pending the outcome of that review, we placed several employees on administrative leave as of July 23, 2008. On July 23, 2008, we withdrew our bid for the TopOff 5 task order to remove any on-going concern about unfair advantage,” the company said."
Sounds like SAIC management was well aware of the unethical practices before the SAIC proposal was submitted. Written, submitted, caught, and then place employees on administrative leave and withdraw from a multi-million dollar contract on the same day. That was some investigation.

[JR]

This does not surprise me. SAIC has pushed the envelope within DOD's contracting system to win new contracts at any cost. They are a zero defect type of company in that if a site manager loses a bid, he's axed. SAIC has allegedly abused OPTARs by setting up small companies owned or run by ex-employees or other friends who partner on a bid. Though these companies are supposed to be separate and autonomous, SAIC is actually pulling the strings. If true, THIS needs to be investigated more closely.

[Neil]

John,

Thanks for sharing your concern. Please let us know if you have any other information about this matter.

-Neil

[John]

I'm an employee at SAIC, and all I can say about this is that as a company SAIC stresses ethics in the extreme. I have personally never seen anything that could be termed illegal without flags being raised and people backing off immediately. If anything has happened in this case that is determined to be illegal, I'll bet you it's some individual acting alone, it surely does go against company policy!

I don't get how companies have to pay for peoples own self directed criminal acts!

[Mark]

Without prejuding this item in particular, its very important that the debarment process be used much more rigorously. Companies, like Boeing, whose staff engage in direct purposeful fraud should be debarred for extended periods of time from new work. Only real pain to the shareholders, managers, and employees will drive the level of self-policing that is needed. Government cannot adequately at a reasonable cost, look at and audit everything. By making the pain real these issues will be avoided.

this is not to say every technical violation should be a witch hunt - the rules are too complex to kill companies over technical violations, but when the problem is systemic, known, and deliberate, the price has to be high, consistently applied, and regularly highlighted.

Studies show that the fear of being caught is the first order driving force behind deterrence, and that consistency of tough penalties is the next driver. (However once the penalty reaches a certain threshold it ceases to deter much with further increase.) This suggests we need the penalties to be more than "cost of doing business", but not death of the company, and we need "regular examples" made of those caught in systemic deliberate acts of violations.

[Scott]

Neil, are they fixing bids or are they balancing them? It is my understanding that SAIC's competitors have won the lions share of the recovery dollars. I guess we'll see after years of litigation that will work to crush the company.