Firm alleges contract conflict

December 05, 2006|By Sara Neufeld | Sara Neufeld,Sun reporter

The Baltimore school system is embroiled in a controversy over whether a consultant it plans to hire to help secure more money from a federal school technology program has a conflict of interest.

In the city school system's 2006 application for money from the federal Schools and Libraries Program, commonly known as "E-Rate," it asks for millions of dollars to pay for equipment made by Cisco Systems. Next week, the school board is scheduled to approve a three-year, $267,000 contract with Oklahoma-based Funds for Learning. The company also consults for Cisco, helping it to get E-Rate business from school systems.

An Owings Mills company that applied for the contract and lost has filed a formal protest with the school system, contending that the conflict of interest should prevent Funds for Learning from getting the award.

"There's something not right about this," said Garnet E. Person, chief executive officer of E-Rate Elite Services in Owings Mills.

Underwritten by fees on consumers' telephone bills, the E-Rate program spends $2.25 billion a year to give discounts to poor schools and libraries buying Internet access and other technology. Nationally, the program has been beset by frequent instances of fraud, waste and abuse, leading to increased monitoring by the federal government.

Because the purchases are supposed to be competitively bid, federal regulations prohibit schools from having any kind of relationship with the companies from which they're buying. The regulations specifically state that a "conflict of interest exists" when a consultant for a school system is also working for a technology service provider -- and involved in determining which services the system buys.

A spokesman for Universal Service Administrative Co., which runs E-Rate for the Federal Communications Commission, said he couldn't comment on whether a conflict would exist in Baltimore because the agency must maintain a neutral role.

City school system officials say there's no conflict because Funds for Learning won't be involved in selecting vendors.

John D. Harrington, the CEO of Funds for Learning, said his company does work for most of the major national vendors that are involved in bidding for E-Rate contracts -- not only consulting, but also providing them with electronic application forms. To avoid conflicts of interest, he said, his company follows a strict code of conduct prohibiting employees from advising school system clients what or from whom to buy.

"It's something we're extremely sensitive to," Harrington said, adding that his company frequently loses business because of that limitation.

Because Funds for Learning has not yet started work in Baltimore, Harrington said, "we literally have no idea what they're in the process of procuring" -- be it technology from Cisco or another vendor. The Cisco equipment would be sold to the city schools through Verizon.

As evidence that the consultant would be involved in selecting vendors, Person, the CEO of the competing company, points to the job description the school system posted when it sought applications for the consulting contract. Among the duties listed: keeping track of "future expected contracts."

Person said he used to work for the federal program and helped write the E-Rate regulations to avoid conflicts of interest. He said that, by the nature of their work, E-Rate consultants are involved in selecting vendors to work with school systems.

"That's what consultants do," Person said.

The purpose of the consulting contract is to resolve the city school system's existing trouble with the E-Rate program.

Last year, auditors found that the system couldn't prove that computer equipment funded during the 2002-2003 school year had been delivered or installed. As a result, the program is seeking to take back $2.5 million from the city schools and is holding up funding for subsequent years until the system can prove it has reformed its procedures.

Funds for Learning is supposed to help the system resolve problems cited in the audit and establish procedures so the city schools can again receive E-Rate funding.

The Baltimore school system has used the Owings Mills company, E-Rate Elite, for more than a year to help it with current applications. Person said his company helped the system win $1.3 million from E-Rate for a new e-mail system, but the school system had to give up the funds because it did not contract for the service when it was supposed to. E-Rate Elite also secured $200,000 for cell phones in the city schools, Person said, but the federal government will not release that money until the 2002 audit is resolved.

Person said much of his work in Baltimore involved helping the system cancel problematic E-Rate applications because it didn't have the necessary documentation.

sara.neufeld@baltsun.com

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