Is HP making MAS in T&T?

The Hon. Minister of Education and the Hon. Prime Minister have both attempted to allay concerns expressed through media questions following reports of Hewlett Packard's (HP's) US$55 million settlement with the US Department of Justice (DoJ) yesterday.  The fears seems to arise from HP being accused of being involved in kickbacks, which in T&T parlance is most often indicative of some Minister or Party-in-Power representative getting undue state funding.

On analysing publicly available information, it appears that the US case differs from the T&T contract in key elements, enough to suggest that the risk of similar kickback charges in T&T is low or non-existent.  However, there are some questions relevant to T&T.  First though, a summary of what happened in the US.

What are the charges that led to the HP/DoJ settlement?

HP's settlement, first announced by them on 02 Aug 2010, relates to a case brought by the DoJ, which joined whistle-blowers Norman Rille and Neal Roberts’s civil qui tam lawsuit alleging '... violations of the False Claims Act [FCA] and the Anti-Kickback Act of 1986 [AKA] by HP and other technology companies. The companies are accused of participating in an industry-wide practice of using partnership and alliance programs to make improper payments and cause the submission of false claims in connection with government IT contracts. The Department of Justice alleges an industry-wide scheme where companies provided millions of dollars in improper payments, known as “alliance benefits,” to each other, causing the federal government to make payments to the companies which they were not entitled to receive under the contracts' (see here for a link to a PDF of the original complaint filed that includes details about the charges and the relevant laws).

The general charge is that HP allegedly paid fees to systems integrators (SIs) and other third-parties to gain favourable recommendations from them, that led to HP winning many high value federal contracts to supply IT systems.  The systems integrators were hired by the US government to help with IT procurement: so basically, HP is alleged to have paid some SIs to jump the queue.  In this case, the 'kickbacks' - as defined in the AKA - didn't go from federal funds to HP executives' pockets: HP allegedly paid a kickback to a 3rd party SI(s) to get favourable referrals during federal IT tenders.

Does this risk of kickbacks apply in T&T with the current SEA Graduate Laptop contract?

From what little info we have on T&T's SEA graduate laptop case, our Ministry of Education (MoE) invited bids from numerous vendors (including HP) but no SIs were contracted to manage or advise on which of these tenderers should be given the contract to provide the laptops. Thus, it is different to the US case, and there is no risk that HP paid any third-party to influence the MoE's tender decision (since no third-party was involved in reviewing the bids).

Some folks may express concern whether HP is capable of employing kickbacks in the course of its business dealings with governments.  HP has denied the allegations, but the man in the street would opine that if you're not guilty, why pay a settlement?  Sometimes, large businesses choose to settle out of court rather than seek to prove their innocence.  HP has agreed to a settlement without any admission of wrongdoing, in order to resolve the allegations in full.  However, we need to recognise the circumstances underlying that settlement and the T&T laptop tender are different: so don't just get distracted by the term kickback in the US settlement, apply the T&T definition of it and then make wild accusations that HP paid some kickback in T&T to win a contract.

From the limited local press reports, HP was the preferred bidder for MoE's laptop tender, and I did raise questions on what's in it for the local HP agents. However, that has nothing to do with the HP settlement announced yesterday; well, at least the kickback portion of it.

Is HP making MAS in T&T?
I'm more interested in the second driver of the settlement: a charge that HP allegedly withheld material information from the US General Services Administration (GSA) that led to an improperly priced Multiple Award Schedule (MAS) contract.  This umbrella contract is centrally negotiated by the GSA on behalf of the whole federal government, and allows the various arms of the federal government to obtain HP products and services at discounted prices based on the relatively larger size of the procurement needs of the whole government (rather than get the undiscounted, higher near-retail prices that would've applied if they were contracting individually with HP).

MAS works like this.  If you, as an individual, buy an HP laptop from their website, you pay their full website price.  If you partner with 100 other people who want to buy a laptop, and all of you approach HP as a single group, then you can ask for and get a large group discount off the website retail price for each laptop (due to bulk purchasing).  Similarly, with the MAS contract, instead of individual federal government departments (who each have their own procurement staff) buying individually from HP and paying near-retail prices, the GSA negotiates with HP what sized discount should be applied if any federal department buys HP products during the term of the MAS.

According to the terms of the MAS, if HP failed to provide required material information to the GSA, then it would have breached the contract (and potentially led to the discount being too small).  US regulations apparently allow the GSA to seek redress from HP (or any other vendor for that negotiated a MAS contract with it) in these cases.

Now, since the T&T government is in all likelihood seeking to purchase laptops every year going forward, here are my concerns arising from this story.  Did the T&T government negotiate with HP a similar umbrella MAS contract for the supply of HP products to other Ministries besides the MoE, as well as discounts for any future MoE laptop purchases (say, to replace stolen or broken laptops in the currently due shipment)?

If a MAS contract was negotiated between the Government of T&T and HP:

• For what period does it apply?  Will it, for e.g., apply to any purchases made for the Sep 2011 intake of SEA graduates, thus resulting in HP obtaining further business without a new tender being opened in 2011?
• Is the T&T government confident that HP didn't withhold pricing policy information that may have influenced the price?

Hon. Min. Tim Gopeesingh said the tender process was transparent, but to whom?  Since we still don't have many details about the tender, much less how it fits in with the overall education policy, how is this transparent?  Lastly, does T&T have, or intend to have, any legislation similar to the USA's False Claims Act and Anti-Kickback Act?  Do any T&T laws protect against unfair influence on stakeholders involved in state procurement?

Some other links for further reading:
http://www.contractormisconduct.org/index.cfm/1,73,221,html?ContractorID...
http://www.defendernetwork.com/index.php/home/hm-news/hewlett-packard-se...
http://www.hp.com/hpinfo/newsroom/press/2010/100802b.html
http://www.guardian.co.uk/business/2010/aug/31/hewlett-packard-settle-ki...