A secret love affair, leaks of inside information and heavy-handed arm-twisting by a retired general played into a scheme by a top procurement official at the Department of Veterans Affairs to steer business to a favored vendor, according to a new report by the agency’s inspector general.
Susan Taylor, deputy chief procurement officer at VA, misused her position and violated numerous government ethics rules by manipulating her subordinates into awarding a contract to FedBid Inc., a company based in Vienna, Va., according to the report released Friday. Taylor also supplied the company with inside information and then tried to cover her tracks when the IG began investigating, the report says.
“Ms. Taylor had complete disregard for the laws, regulations, and VA policies which governed her ethical conduct,” the IG concluded. “We found that Ms. Taylor continually misused her position.”
Taylor was in charge of procurement for the Veterans Health Administration, which runs all of VA’s hospitals and healthcare facilities.
FedBid provides what are called “reverse auction” services. Instead of soliciting bids directly from vendors, agencies contract with the company to hold an auction in which potential suppliers bid down the price of goods and services they will sell to the government.
The lowest price wins and FedBid gets paid through fees charged to the supplier, allowing it to claim its service comes at no cost to the government.
About August 2010, Taylor began circulating a news article about how some government agencies are cutting costs by using reverse auctions for procurement. The article did not name a specific vendor.
She forwarded the article under the heading “FedBid” to her subordinates in the procurement office, touting the company as providing a free service to the government.
Internal agency reviewers concluded the FedBid service would be too expensive to use in a large number of auctions because of the fees charged to vendors, costs that are included in the final price.
About that time, VA officials were looking into buying their own software to allow them to conduct reverse auctions on their own. At that point, Taylor pushed her staff to rush through the contract and select FedBid, according to the IG.
She also leaked confidential bidding information to FedBid officials, according to the IG. Taylor told company contacts when the request for proposals would be issued and what bidding requirements would be, giving them an advantage, according to the IG.
The VA procurement officer responsible for the solicitation, Jeffrey Ryan, said Taylor repeatedly tried to steer the contract to FedBid.
“Mr. Ryan told us that after FedBid’s presentation, FedBid aggressively pushed VHA to immediately award a sole-source contract but that he resisted the idea,” the IG report says. “He said that Ms. Taylor wanted to make an award quickly; FedBid was the only one she ‘advocated or pushed’ to her contracting staff to use; so FedBid was the only reverse auction service provider that garnered their attention.”
FedBid was awarded a VA task order to provide reverse auctions in November 2010.
By 2012, Jan Frye, deputy assistant secretary for acquisitions at VA, was getting complaints from suppliers forced to go through FedBid to sell to the agency. He instituted a moratorium on using reverse auctions at VA, and specifically ordered no more dealings through FedBid.
That drew a rebuke from top officials at the VA, according to Frye, who singled out former VA Chief of Staff John Gingrich and former Deputy Secretary Scott Gould.
“They went after me,” Frye told IG investigators. “They made it look like I had performed a criminal act by protecting the public’s interest. I know that it was VHA that fed this information to FedBid within hours or minutes maybe after I put this moratorium directive out.”
Within hours of Frye issuing the directive, Gingrich got a call from Gen. George Casey, retired Army chief of staff and since 2012 a member of the FedBid board of directors, according to the IG.
At Casey’s behest, Gingrich arranged a meeting between company officials and Frye in March 2012. After the meeting, Gingrich ordered Frye to end the moratorium and reinstate the contract, according to the IG.
Gingrich told agency investigators he concluded the moratorium was the result of an internal “feud” and ordered the moratorium lifted because agency lawyers said the contract was legal.
Emails later uncovered by the IG confirmed that Taylor was feeding inside information to FedBid officials.
“Email records reflected that FedBid executives considered Ms. Taylor to be a valuable source of inside information; they were committed to protecting her; and Ms. Taylor expressed concerns that her identity be protected,” the IG report says.
Taylor’s motives for favoring FedBid are not clearly laid out in the report.
One connection was the close personal relationship she had with William Dobrzykowski, former chief financial officer at the U.S. International Trade Commission, another federal user of FedBid.
Dobrzykowski sought employment with FedBid in early 2012 and was being considered for a position as a “strategic adviser” for the company. However, he instead took a job at the ITC, where he suggested the commission begin using reverse auctions. The commission’s contract with FedBid was signed two months after Dobrzykowski started his new job.
Taylor and Dobrzykowski had a 20-year relationship which culminated in 2006 when he proposed marriage and Taylor accepted. The problem is that during their entire relationship, Dobrzykowski was married and living with his wife, according to the IG.
Taylor also suggested at one point that FedBid hire her, but there is no evidence that she or Dobrzykowski ever worked for the company.
The IG sent its findings to the Justice Department for possible criminal charges. DOJ declined to prosecute.
VA officials say they are reviewing the findings of the IG investigation.
“VA will review the evidence collected by the IG to determine whether that evidence is sufficient to support accountability action against the employee,” agency spokeswoman Genevieve Billia said in a written statement. “If the evidence is sufficient, accountability action will be proposed. If the evidence is insufficient, VA’s Office of Accountability Review will immediately commence its own administrative investigation.”
Gingrich and Gould both retired from the agency last year.
FedBid issued a written statement saying it “has cooperated fully” with the IG.
“We believe FedBid took appropriate actions to protect its ability to lawfully perform the business services it was contracted to provide with VHA,” the statement says. “It is important to point out, as our data demonstrates, that this report does not dispute that the FedBid marketplace stimulated competition that resulted in lower prices for VHA.”
