Pay spat clouds Pearson achievement

Subcontractors on TSA work say checks are slow to come

Pearson Government Solutions has been publicly praised by administration officials, including Transportation Secretary Norman Mineta, for completing the mammoth job of finding, screening and hiring some 57,000 airport screeners in less than nine months for the Transportation Security Administration.

But the job has left a bad taste in the mouths of some of Pearson's subcontractors, which said the company made them jump through bureaucratic hoops before paying invoices. One company said it has not been paid in full by Pearson.

Pearson officials declined requests for an interview, but in a written statement the company said: "Invoices [of] all of our subcontractors and vendors have been paid or are under review, and we are working diligently to ensure that our client gets the best possible prices."

Pearson Government Solutions is a subsidiary of Pearson Inc., a provider of applications, services and technologies for education, commercial and government customers based in Eden Prairie, Minn. Pearson Inc. is part of Pearson plc, the British media and education company.

The contract to provide a new screener work force for TSA was awarded in March 2002 to Pearson and had an estimated value of $103.4 million.

The company's original directive was to locate and hire about 30,000 screeners in nine months, a far larger task than any other similar assignment undertaken by any company for a federal agency.

"In order to accomplish this monumental task, we supported TSA by bringing on board nearly 300 subcontractors and vendors, including many hotels, convention centers and security firms," the Pearson statement said.

TSA spokesman Brian Turmail said in early January that Pearson had been paid in full "for all its services for which they requested reimbursement and submitted documentation," except for its work in December, for which documentation had not yet been received. "For those items for which they were unable to provide documentation, we asked them simply to document it, and we'll take a look at paying it," Turmail said.

As for Pearson's payments to its subcontractors, "any bills submitted for work performed by subcontractors would come through NCS Pearson," Turmail said. "If they've given it to us and documented it, then we've paid it."

Scott MacCulloch, president and owner of Gargoyle Protection Consulting Group LLC in Alexandria, Va., said Pearson did not pay its invoices for months. As a subcontractor to Pearson on the TSA project, Gargoyle provided security personnel at assessment centers and job fairs around the country to control the flow of applicants and protect computer workstations set up for processing them.

After all the assignments were completed and the project came to an end, Pearson had a serious outstanding balance for the last three months of work, MacCulloch said.

"They offered us 50 cents on the dollar, and they owed us about a million bucks," MacCulloch said. "We're very small, and our cash flow is critical. We pretty much had to settle." The two companies agreed to a payout that came to about 75 cents on the dollar, he said.

MacCulloch said Pearson never challenged his company's billings or questioned its performance. He said Pearson officials told him the reason they couldn't pay him in full was that the government had not paid Pearson as much money for the contract as it had expected.

"Our position was that [Pearson] should have paid us anyhow. We did the work, and our contract was not with TSA but with Pearson," MacCulloch said.

A Pearson spokeswoman said the company could not comment on whether it had negotiated a less-than-full payment to one or more of its subcontractors.

Another subcontractor also alleged that it had problems on the contract.

"We had the worst time getting paid," said Terri Powers, owner and executive finance officer of Lender Protective Services Inc., a small San Antonio security firm. "The contract was restructured five times to meet their needs. We finally got it signed the day after we completed our services."

Powers said the contract was signed by an official of TSA, not NCS Pearson.

Lender provided protective services to Pearson screening centers from the middle of July through Sept. 30, 2002, despite not having a contract in place. This was the first time that Lender had worked on a federal assignment, she said.

"Everybody was gung ho, everybody was happy they were doing something to help on terrorism," Powers said. "I would submit things to them in accordance with our first agreement. Everything was acceptable until it got up to Pearson headquarters."

Then orders would come back saying the paperwork had to be changed. This happened repeatedly, Powers said. Pearson managers did not challenge the company's performance or argue over the hours that Lender billed, they simply dragged their heels over processing payments, she said.

Both Powers and MacCulloch alleged that numerous other subcontractors had similar problems, from other security firms to hotels that provided space for the assessment centers to health care providers.

Washington Technology attempted to contact some of the companies identified, but telephone calls were not returned.

Industry observers said that while it is not uncommon for prime contractors and subcontractors to disagree over terms of performance, it is extremely rare for the dispute to become public.

"You always want to have a good relationship with your subcontractors, especially where their performance is vital," said one expert who asked for anonymity. "But there are situations in complex contracts where the parties have differences. Typically, those differences get resolved through negotiation under the terms of the subcontract. ... It is a little unusual for a subcontractor to take its differences with the prime contractor to the press. Any time you resort to embarrassing your prime, it's pretty unusual."

Steve Charles, executive vice president and cofounder of the ImmixGroup Inc., a McLean, Va., consulting company that advises companies on how to enter the federal space, said disputes can get nasty.

"Contracting with the government is not fun and games," Charles said. "Sometimes it happens to the primes, and they end up screwing their subs. And if the subs don't have the resources [for a court fight], they're out of luck. It's not necessarily who's right legally, it's who has the deep pockets."

For the TSA project, Pearson established a process for sifting through millions of potential applicants to help the new TSA fill its need for airport screeners. More than 2 million applications were submitted online, and Pearson call centers handled 2.7 million phone calls. Pearson set up 150 assessment centers around the country, where 335,000 prospects were assessed.

Pearson's previous experience in large work force mobilization had been a federal contract to hire one-third of the temporary workers needed to conduct the 2000 census.

Mac Curtis, president of Pearson Government Solutions, told Washington Technology in March 2002 that the census project at its peak required the company to interview somewhere between 13,000 and 16,000 people in order to hire between 3,500 and 4,000 contract employees

In its statement to Washington Technology, Pearson said that it must follow government procedures in paying subcontractor invoices.

"It is important to remember that, as reimbursable costs under Pearson's contract with TSA and in accordance with government procurement policies, all of the invoices provided by our subcontractors have to be carefully reviewed prior to payment," the statement said. *

Staff Writer Patience Wait can be reached at pwait@postnewsweektech.com.

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