Sierra sends out 744 layoff notices

Big military health insurer here will cease Aug. 31

Company lost contract to rival

February 19, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Seeing virtually no chance it could overturn a Pentagon bid award to a rival, Sierra Military Health Services yesterday sent layoff notices to all 744 of its employees - including 534 at its Baltimore headquarters.

The majority of the Baltimore employees would work until Aug. 31, when Sierra's current military health contract runs out. Some would stay for up to eight months longer to complete the necessary bookkeeping.

"There's a sense of finality, although it's not final," David R. Nelson, president of Sierra Military, said yesterday.

Sierra has worked since August to get the bid award reversed. "I don't see [the award being reversed] as I sit here today, but in government contracting, you never say never," Nelson said.

Lisa Haines, a spokeswoman for Health Net Federal Services, the bidder that beat out Sierra for a new contract to provide military health services, said yesterday that Health Net hopes to hire as many of the Sierra employees as it can.

However, Haines said, Health Net will set up its regional headquarters in Arlington, Va., where it is a significant downtown employer.

"I am disappointed that Sierra will no longer be providing health care services to Maryland's military families," Sen. Barbara A. Mikulski, Maryland's junior U.S. senator, said in a statement last night. "I am also troubled by what this means for the hundreds of Sierra employees. These are dedicated and experienced men and women who do a great service for our military families."

Sierra Military was formed and based in Baltimore in 1998. That year, it won a contract with the Pentagon under a program called Tricare to provide health care to more than 1 million active military, retirees and their dependents in a 13-state area from Virginia to Maine.

In re-bidding the contract, the Defense Department combined its 12 health regions into three. Health Net, a current Tricare contractor in the West, beat out Sierra for a new 21-state, five-year contract valued at more than $2 billion a year.

In December, the General Accounting Office rejected Sierra's appeal of the award. Sierra said it would consider other moves, including a possible court challenge.

Maryland's congressional delegation and economic development officials also met with Pentagon officials in what they conceded was a long-shot effort to overturn the award.

Nelson said yesterday that Sierra is still reviewing its options, but, at this point, even if Sierra were to prevail, it would likely win a monetary settlement but not the contract.

He said the law required a 60-day notice of layoffs, but Sierra wanted to give its employees as much notice as possible.

He said the workers would receive severance if they stay until the end. He also said Sierra would offer outplacement and training services and would hold a series of job fairs - the one in Baltimore will be June 17 - to connect employers with Sierra's workers.

The first group of employees to go, on July 23, would be 168 working in 40 service centers throughout the 13-state region.

The contract calls for Health Net to take over those centers the next day. Haines, the Health Net spokeswoman, said company officials had already visited the centers and "we got a lot of resumes."

While Health Net is looking to hire some of Sierra's workers in the Northeast, it is trying to help some of its 1,000 employees in Western states get jobs with the new Tricare contractor in that region.

Sierra said 292 employees, most in Baltimore, will end employment Aug. 31. Some will stay as late as April 2005.

Nelson said Sierra officials had met with employees since August to keep them updated on the appeal, so the layoff notice "wasn't a surprise."

Sierra was wooed to Baltimore with a package of city and state loans, training grants and tax breaks. It brought 300 jobs initially, and was projected to bring $26 million a year to the area's economy.

Some loans were to be forgiven based on Sierra meeting job targets - it exceeded them, as employment topped 500 - but Nelson said yesterday that the company would return about $1 million to the city and $275,000 to the state.

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