CDC memo about issues related to its Celerant dealings

• How CDC hired Celerant Consulting

• Read memo to CDC staff from senior agency official

• Read the agency's risk management analysis memo



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.

And an explanation offered late Friday by CDC officials appears to illustrate questionable practices that experts say are designed to award contracts to favored companies, denying others the opportunity to compete and taxpayers the assurance that the government is paying a fair price.

Gerberding and CDC officials have refused repeated requests to release documents involving the firm Celerant Consulting, which worked at the agency from 2003 through 2005. The agency also has refused to release documents relating to whether a conflict of interest existed when James W. Down, Gerberding's volunteer business adviser, recommended Celerant to overhaul CDC's procurement and grants office. He made the recommendation around October 2003, four months after Celerant sent out a press release announcing Down as a new member of the firm's U.S. Advisory Board.

Celerant and Down contend the press release was mistakenly issued and that he never accepted the firm's position.

Down, who lives in Winchester, Mass., and has been a member of the CDC Foundation board of directors since 2004, declined to be interviewed. His attorney, former Massachusetts Attorney General Scott Harshbarger, said Saturday that Down never had a conflict of interest and was only trying to help the CDC. He praised Down's integrity.

"Candidly, I am defending Jim Down here, I'm not defending some of the issues CDC and the foundation need to address," Harshbarger said. He said volunteers like Down are put at risk of questions of impropriety because the agency and the foundation are lax in having procedures for them to make formal disclosures of even potential conflict of interest issues.

Celerant, a global consulting firm with its U.S. headquarters in Lexington, Mass., declined to grant interviews. In a brief statement, the company said: "Celerant's business relationship with the CDC was legal and proper."

And the company said it never had any relationship with Down, despite the 2003 press release. Harshbarger said that while Down had a discussion with Celerant, he never agreed to work for the firm. He said he doesn't know why Celerant never issued a correction.

CDC officials said Friday that while some mistakes were made in the contracting process, their only intent was to get the agency the expertise it needed to revamp its sluggish contracting office. The agency believed it followed proper procedures, they said, and that taxpayers were well-served, regardless of the process used.

"The procurement and grants office at CDC is a completely different entity than it was a few short years ago," said Alan Kotch, the office's acting director, citing dramatic drops in processing times and increases in productivity as a result of Celerant's help.

Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, said late Friday that he will be asking the CDC to provide information on its contracting with Celerant. He also said he will ask the Government Accountability Office, the investigative arm of Congress, to examine the CDC's contracting procedures.

Fear of bad publicity

The Atlanta Journal-Constitution has been seeking records about Celerant and Down under the federal Freedom of Information Act since Oct. 3.

After the FOIA request was made, a CDC employee from the Office of the Director performed a risk analysis of issues facing the agency if and when information about its dealings with Celerant became public.

The analysis, obtained by the AJC, said there was "No assurance that CDC received the best value solution to its concerns because [of the] inappropriate procurement process used." It states that the agency "inappropriately backdated a contract document" and notes a "potential conflict of interest between external individual serving as adviser to CDC and Celerant."

The analysis was prepared by Martin Landry, who is listed in an agency directory as a management adviser in Gerberding's office.

Among the "threats" identified by Landry in the document: "Negative publicity will further question top CDC management, as it was so involved in the early process."

And among the top four questions Landry posed — without an answer — in the memo were: "Why did CDC's top management collude to provide a generous, $10 million, sole-source contract to Celerant, primarily based on the recommendation of another CDC contractor who was discussing potential employment with Celerant at the same time?"

Landry did not respond to interview requests.

Donna Garland, chief of CDC's Office of Enterprise Communications, an arm of the director's office that specializes in risk communications, did not respond to an interview request about Landry's analysis.

She sent an e-mail to all CDC employees and contractors Friday evening, in anticipation of this report, saying the analysis was "an internal document that was not using the facts, but conjecture."

She wrote: "CDC's core values of accountability, respect, and integrity count. When we get it wrong we must own it. The fictitious questions that someone could possibly ask when pursuing a story about PGO [the procurement and grants office] were written down, and I own that this was not a good idea. I apologize for this."

'This is a common abuse'

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.

Nelson, former chairman and chief executive officer of United Parcel Service, became a key 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.

Nelson said he feels "horrible" that Down is facing scrutiny. He added that when the issue first surfaced within the government in 2004, he was so comfortable that Down had done nothing wrong that he added Down to the CDC Foundation board.

"I think he is a very fine, moral man who has made a huge personal sacrifice to try to help the CDC," Nelson said.

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."

It's called "out-of-scope contracting," and in the wake of revelations that some interrogators at Abu Ghraib prison in Iraq were paid under an IT contract, "this has been a matter of acute concern in the government," Yukins said.

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.

A scramble to fix things

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.

In a brief statement, HHS spokeswoman Christina Pearson said: "Through internal and independent reviews, we found that CDC entered into what it believed to be an acceptable contracting arrangement through an NIH contract."

The statement noted that HHS identified the need for stronger contracting controls at both the CDC and the NIH and both agencies promptly addressed those issues.

A spokesman for the NIH did not respond to an interview request.

To reach staff writer Alison Young, call 404-526-7372.