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Pennsylvania's payouts to Deloitte Consulting near half-billion dollars
[February 25, 2008]

Pennsylvania's payouts to Deloitte Consulting near half-billion dollars


(Patriot-News, The (Harrisburg, PA) (KRT) Via Thomson Dialog NewsEdge) Feb. 24--With the amount of money Deloitte Consulting has been paid by the state in recent years, some might consider it deserving to be a state agency in its own right.



During the last five years, state records show Deloitte Consulting, which opened an office in Susquehanna Twp. three years ago, has been paid nearly $414 million. With the contracts Deloitte still holds, the company is on track to approach or exceed the half-billion mark soon.

The international firm, with U.S. headquarters in New York City, provides audit, tax, consulting and financial advisory services. Most of its contracts with the state have been primarily for services related to information technology.


For perspective, Deloitte received more money from the state last year than the auditor general's office, the Department of Banking and the Pennsylvania Historical and Museum Commission.

Some current and former state workers question how this one company has gotten so much of the state's business and whether it has anything to do with the ties to Deloitte held by four people in high-level positions in the Rendell administration. They also question whether any of this has clouded state officials' judgment in being good stewards of tax dollars.

Treasury records show Deloitte's contracts over the last five years dwarf the state's $27.7 million payments to a competitor, Accenture. That international consulting firm, although still interested in contracts with the state, is closing its Harrisburg office this month. Contractors who have worked with Accenture said the volume of state business Deloitte is getting contributed to its closing.

Curtis Topper, deputy secretary for procurement for the Department of General Services, which oversees the state's buying of supplies and services, said he isn't surprised at the amount paid to Deloitte over the last five years.

"They are a well-qualified firm," Topper said.

Art Stephens, Gov. Ed Rendell's deputy chief of staff and a former Deloitte partner, said, "I knew they were doing work at [the Liquor Control Board], PennDOT and Welfare and other agencies, but I hadn't looked at the overall dollar figures because of the way they are competitively procured. Every procurement is done individually."

But a half-dozen state workers or former employees familiar with information technology services expressed concern about how Deloitte has landed many state contracts.

"They know our business better than us," said one state worker, who requested anonymity for job security reasons. "It gives them a distinct competitive advantage."

The bulk of the money -- $306 million -- paid to Deloitte was for work done at the state Department of Public Welfare.

A former employee of that department, who declined to be identified for fear of retribution against a family member who has a state job, said Deloitte is "driving the agenda" on IT needs and services there.

Deloitte spokeswoman Deborah Harrington said virtually every contract that her company has gotten with the state was competitively bid.

Harrington made no apologies for her company's success and its knowledge of the state's information technology infrastructure.

"If you know something well but are not doing a good job, they are not going to hire you," she said. "We have consistently gotten very good marks for our work."

Pennsylvania is one of many public-sector clients for Deloitte, which earned nearly $10 billion in revenue in the United States last year. Two of its contracts that recently were in the news included one in Michigan for $70 million to overhaul the state's foster care, welfare and child support caseload systems. It also was issued a $95 million contract for a payroll system for the Los Angeles Unified School District.

Kelly Lewis, the president and CEO of the Technology Council of Pennsylvania, said Accenture and others used to be targets of complaints about getting a lot of state business in Gov. Tom Ridge's administration.

Technology leaders have said some firms do well under one governor, and others do well under the next.

Contributing to the tension among technology contractors, state spending on new information technology projects is down by more than $300 million annually, compared with the Ridge years, making competition for those contracts fierce, Lewis said.

He said many "new" contracts that are put out to bid are actually rebids of existing contracts. Lewis said competing information technology companies often do not bid when the incumbent company is also bidding because bids take time, money and resources to prepare and submit, and "they've learned by experience that the cards are stacked in favor of the incumbent provider."

State employees or former employees who expressed concern about Deloitte's success in landing state IT contracts all pointed to one potential explanation: Several people in positions in the Rendell administration had ties to Deloitte.

Stephens, the one-time Deloitte partner, was the state's chief information officer before moving to the governor's office.

Kristen Miller worked as a senior manager for Deloitte before coming to the state and succeeded Stephens as the state's chief information officer. She resigned from that post in September to return to work for Deloitte in the same position she once held. Attempts to reach Miller last week were unsuccessful.

Rosa Lara, a deputy chief information officer for health and human services, also worked for Deloitte Consulting as a public sector consultant.

And Topper, the deputy secretary of general services for procurement, was married to a Deloitte partner. However, Topper said he was separated from his ex-wife before he came to work for the state in 2003.

Doug Robinson, the executive director of the National Association of State Chief Information Officers, said it is unusual for state CIOs "to come from a firm that does business with the state." But it is increasingly common for them to leave state jobs to go to work for those businesses.

One person familiar with the state's IT services said, "The fact that several key deputy-secretary-level commonwealth employees came from or had ties to Deloitte Consulting certainly has the appearance of impropriety."

That person, who asked to be anonymous for job security reasons, also said the campaign contributions by Deloitte employees compound that perception. State Department records show those contributions total $77,625 to Republicans and Democrats in state races over the last five years, with $46,250 going to Rendell's campaigns.

Stephens said someone unfamiliar with the state's procurement procedures could reach the conclusion that improprieties exist. "But if you understand all the checks and balances in procurement, it's such a detailed process that there really is not a lot of opportunity for that," he said.

Proposals and contracts for IT projects require approvals from several agencies, including the Department of General Services and the Office of Administration. But a state worker said many of the people involved in those decisions are the officials with the ties to Deloitte.

Harrington, the Deloitte spokeswoman, said her company has lost more bids for state contracts than it has won.

In 2006, Deloitte bid on 21 contracts and won nine, she said. In 2007, it bid on 19 projects and won seven. Topper said Computer Aid Inc. beat Deloitte for a contract for information technology staffing that paid about $111 million from April 2005 through last year.

Each project is independent and "involved different independent processes, involved different independent evaluators, and no person here in the commonwealth would have been in a position to influence all of those independent outcomes" to direct work to Deloitte, Topper said.

"There is a bidding process for getting work," Harrington said. "We certainly follow the process, and it's certainly all above board."

DELOITTE CONTRACTS:

Amounts paid to Deloitte Consulting:

2002: $19,709,007

2003: $83,397,118

2004: $76,273,892

2005: $62,400,280

2006: $91,499,918

2007: $100,223,482

Source: Pennsylvania Treasury

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