House of cards

Inadequate systems, low bandwidth could hinder Interior Department's ERP project

BearingPoint's financial compass still askew

BearingPoint Inc.'s fight with the Interior Department isn't the only battle the company has on its hands. Creditors also are breathing down its neck.

But the company won a reprieve of sorts when it announced Nov. 3 that it reached an agreement with a majority of its bondholders that resolved concerns that BearingPoint is in default.

The agreement means that BearingPoint will pay a higher interest rate and has to make timely filings with the Securities and Exchange Commission. The company has struggled to make its filings for the past two years, and has not yet filed its 10-K report, the official annual business and financial report public companies must submit to SEC, for 2005.

Company officials said they plan to make the 10-K filing by Thanksgiving, and conduct its annual shareholders' meeting in December.

A New York state court ruled in September that, because BearingPoint had not filed its 2005 annual report, it was in default of several of its bonds. The company is appealing that decision.

The agreement reached with its bondholders is contingent on the New York lawsuit being dropped by the bondholders who sued the company.

The company also said it amended a $150 million credit facility to extend deadlines for filing its SEC reports for 2005.

In addition to the financial struggles, BearingPoint recently learned that it will have to compete to continue providing the General Services Administration with Homeland Security Presidential Directive-12 services.

GSA announced Nov. 1 that was not exercising its option to extend the $104 million contract and will recompete the work. The agency said the decision was not related to BearingPoint's performance.

Instead, GSA wants to hold another competition because of changes in the marketplace for HSPD-12 products and services. ? Nick Wakeman

The Interior Department's troubled project to build an enterprise resource planning system faces a series of stumbling blocks, including limited bandwidth among some of its geographically dispersed offices, a ragtag menagerie of legacy systems and a pending lawsuit from its previous contractor.

Agency officials and vendor sources said the Interior Department's long-running Financial Business Modernization System (FBMS) project is at risk of turning into a fiasco unless the initiative is improved.

Additionally, the agency faces litigation from BearingPoint Inc. of McLean, Va., the systems integrator it ousted last year after about two years of work.

Interior Department officials plan to deploy the FBMS core system at two bureaus Nov. 13, the Office of Surface Mining and the Minerals Management Service. And while officials expect those implementations will go well, they are concerned about what happens when the system is expanded.

FBMS relies on enterprise resource planning software from SAP America Inc. of Newtown Square, Pa. The Interior Department plans to roll out the core financial system, as well as its other integrated administrative tools designed to replace its diverse array of legacy applications.

Lack of standard

Hope Mentore-Smith, deputy CIO and chief technology officer of the Fish and Wildlife Service, described some of the problems during a recent lunch meeting of the Industry Advisory Council of Washington.

Chief technology officers in the agency's bureaus had been working closely with the FBMS project management office "to identify some of the technical challenges that we may have" in deploying FBMS, she said.

The Interior Department is still "a very decentralized organization. We don't have a lot of standard configurations in our bureaus for the workstations that we need to use this application. We all have different infrastructure in our bureaus to use this application," Mentore-Smith said.

The range of technologies at different offices is quite broad.

"I've got people on satellite, I've got people on dial-up. So if they need to use this application, there are going to be some real, real challenges there," she said.
That disparity makes it difficult to use applications such as FBMS.

The Interior Department has been working with the FBMS office "to try to alleviate some of the pain that some of the bureaus will be going through, as far as the technical implementation of it," she said.

Department IT officials would have to work with their colleagues and tell them that they need to use FBMS, she said. She advised that they tell their colleagues that FBMS is "a reality. Don't put your head in the sand. If you need to use it, you have to upgrade the network. If you don't need to use it, fine. You can stay on dial-up. But if you need to use it, you have to make a conscious decision to budget for it."

After the event, Interior Department officials, speaking on condition of anonymity, confirmed that the agency faces problems in deploying FBMS because of bandwidth and infrastructure issues.

An industry specialist in ERP projects noted that there is nothing unique about the Interior Department's implementation of the SAP system.

"If someone is concerned about a new solution taxing their infrastructure, they should have thought about that beforehand," the specialist said.

The Interior Department's IT infrastructure is a collection of systems and products, and the SAP implementation will reduce costs, the industry source said.

The department needs an enterprise architecture that is not so much a plan on paper, but a reality, the source said.

More problems

Internal resistance to implementing the unified financial system is intensified by the fact that the Interior Department has a geographically distributed workforce that views IT mandates from headquarters with resentment and suspicion, the source said.

FBMS also faces a legal tangle resulting from the Interior Department's decision in mid-2005 to fire BearingPoint, the systems integrator that had been implementing the SAP software. BearingPoint has sued the agency over that decision, the company said Oct. 30.

A BearingPoint spokesman declined to elaborate on the grounds for or status of the lawsuit, but noted that his company is continuing to work with the agency via its National Business Center.

Agency spokeswoman Joan Moody said the Interior Department had no comment about the litigation.

After the Interior Department fired BearingPoint, the agency conducted a competitive procurement to recruit a new systems integrator for FBMS. It chose IBM Corp. under a contract for one year and five one-year options that could be worth about $100 million.

Industry analysts suggested that the Interior Department could not have terminated BearingPoint's contract on the grounds of "convenience," because if it had, it could not have immediately sought to recruit a replacement.

The analysts noted that it is very likely in this case that the Interior Department terminated the contract for "default," and that BearingPoint's litigation is a means of clearing its reputation in the field of providing systems integration services for ERP projects.

Wilson P. Dizard III is a staff writer with Government Computer News. He can be reached at

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