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How STAARS Fell on Alabama

By Bill Britt and Susan Britt
Alabama Political Reporter

The revelation first reported by the Alabama Political Reporter, that a $47-million-dollar software package known as STAARS caused a meltdown in the State’s ability to pay its bills in a timely fashion, or properly process inter-agency payments, leaving hundreds of millions of dollars in a software limbo, has raised questions about how the contract was awarded.

Acting State Finance Director Bill Newton, and his Chief Legal counsel, Richard Cater, have stated STAARS, as supplied by the Canadian software giant, CGI.com, is simply an upgrade of software purchased in 1982. Therefore, they did not have to put it out for bid.

Cater compared STAARS to Microsoft’s operating system upgrade from Windows 7 to Windows 8.

The original 1982 contract, signed by then Gov. Fob James, was for a Local Government Financial System (LGFS) known as “The Package” provided by American Management Systems Incorporated (AMS). AMS was acquired by CGI in 2004.

SEE 1982 CONTRACT

The COBOL-based software license contract was for 15 years, and would expire in 1997, if not renewed. The maintenance agreement was for 12 months with a yearly renewal clause. The contract table of contents shows the State of Alabama signed renewal amendments to the original 1982 maintenance contract until 1994. State records show no amendments were signed for the next 17 years.

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SEE TABLE OF CONTENTS

In November 2012, Amendment 11 was signed by Assistant Finance Director Rex McDowell “extending” the license and maintenance agreement for 15 years, until September 30, 2027.

In the State’s presentation of the STAARS program they say, the software (LGFS), “is no longer maintained or supported by the vendor…[CGI.com].

SEE LICENSE AND MAINTENANCE AGREEMENT

Amendment 12 signed on January 13, 2013, by then Finance Director Marquita Davis, altered the original language of the 1982 license and maintenance agreement, to allow the State to purchase a suite of CGI software, as well as bundled software solutions from other companies.

SEE AMENDMENT 12

Fifteen days later, Gov. Robert Bentley signed the Statement of Work #1(SOW1) that outlined the implementation of STAARS at the State’s Department of Medicaid. No amendment was made to the formal contract for this portion.

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SEE SIGNATURE STATEMENT OF WORK #1

Amendment 13 accompanied by Statement of Work #2 was signed by Bentley on September 2013, authorizing the software implementation agency wide.

SEE SIGNATURE AMENDMENT 13

The original 1982 contract was awarded to AMS/CGI, under a Invitation To Bid (ITB).

Gov. Bob Riley’s legal advisors instructed the committee that eventually approved the STAARS program, that it must follow the same ITB procedures.

During the Gov. Riley administration, the SMART Business Systems Steering committee was selected to carry out the purchase and implementation of a statewide ERP solution. ERP is short for, Enterprise Resource Planning.

A 2008 memo from then State Comptroller Robert L. Childree, Chair of the SMART Business Systems Committee under Gov. Riley, and Finance Director Jim Main, outlined the terms under which the committee was directed to purchase the ERP solution: “The Steering Committee has been advised by legal counsel, that the law in Alabama requires the use of a competitive bid process for the procurement of software when acquiring an ‘off-the-shelf’ product. Since the stated goal for the SMART Business Systems ERP project is the use of a complete off-the-shelf solution, it has become apparent to the Steering Committee that the project must change our approach to accommodate the more complex development of very specific and very detailed specifications before the release of an Invitation To Bid (ITB).”

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SEE MEMO

The goal of the committee was to purchase a “complete off-the-shelf solution,” which Newton and Carter have confirmed, STAARS is an off-the-shelf program.

According to State statute, purchases subject to competitive bidding must be made through the release of an Invitation to Bid (ITB) and the contract or purchase order awarded to the lowest responsible bidder meeting all of the mandatory specifications stated in the ITB.

Cater said the Department of Finance discovered it could purchase STAARS under the existing 1982 contract stating, if it were put out for bid, it would have cost the State over a hundred million dollars.

According to the STAARS presentation documentation, the State purchased CGI Advantage a registered trade-mark product of CGI.com.

STAARS ALM KICKOFF MEETING – APRIL 2014

A STAARS Presentation to Alabama Association of Regulatory Agencies in September 2014, explains why the State was, “implementing a new system,” stating “The State’s current mainframe Central Accounting System was implemented over 25 years ago, [the] Mainframe software platform is no longer maintained or supported by the vendor…[CGI.com]. [The] new system replaces state agency systems with one integrated state of the art [sic] software package.”

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STAARS PRESENTATION TO ASSOC REG AGENCIES – SEPT 2014

The Department of Finance claims CGI Advantage is an upgrade signed under a continuing maintenance contract from 1982.

Unlike a standard upgrade, CGI Powerpoint presentations show that the legacy data would be migrated to a “data warehouse” and not into the new system.

STAARS PRESENTATION TO ALA DEPT OF EXAMINERS OF PUBLIC ACCOUNTS – OCT 2014

The contract executed in 1982 shows yearly signed “amendments” until 1994. Newton and Cater have stated this was a continuing “maintenance” contract.

In 1994, the signing of the contract’s renewal abruptly ended.

The next amendment was signed 17 years later, by Assistant Finance Director Rex McDowell in November 2012, two months before the State signed an agreement for $1.6 million to implement a STAARS’ pilot program at the State offices of Medicaid.

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None of these contracts were brought before the Joint-House Contract Review Committee.

A 2002, Attorney General’s Opinion issued by then AG Bill Pryor found, that software updates have to be bid unless it is custom software and must come before contract review.

“This section expressly provides that any contract, including a contract such as the one being discussed here, which is made without its submission to the Committee, ‘shall be void ab initio,”’ Attorney General Bill Pryor Opinion, December 10, 2002.

SEE ARTICLE

Newton and Cater have repeatedly stated STAARS is not custom software, this is also reflected in STAARS documentation.

The amendment to the contract in 1994 was not given a number as the others, it should have been labeled Amendment 10. The next Amendment signed by McDowell in 2012, is labeled Amendment 11.

Amendment 12 was signed by then Finance Director Marquita Davis on January 15, 2013.  This Amendment alters the language in the maintenance agreement to allow the State to contract to purchase software.

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The next Amendment 13, signed by Gov. Robert Bentley on September 30, 2013, outlining the statement of work and authorizing the implementation of STAARS agency-wide.

The public policy in Alabama as expressed in its Constitution and statutes regarding the expenditure of public funds for goods and services is that everything must be purchased through a competitive bidding process unless expressly exempted by law.

This policy arises from the Constitution in Title 41, Chapter 16, Article II, Code of Alabama. The purpose is not to get the lowest possible price, but to have an open and competitive process that allows any qualified vendor to compete for the business; and, to fight fraud, corruption and political favoritism.

If it were found the STAARS’ contract required a competitive bid, then under Section 41-16-21(c), the contract would be void.

“Void” means there is not and never has been legal authority for the State Comptroller to issue a State warrant to pay for goods or services under such a contract. In such instances, the funds should be recoverable by the Attorney General.

Everyone doing business with the State is presumed to know the laws governing purchasing.

Statements made by Newton and Cater, along with documentation on STAARS, and the Amendments, when viewed along side State statutes governing purchasing such software, presents a trail of yet unanswered questions. Primarily, was the contract entered into in violation of the competitive bidding law, Section 41-16-20, et seq., Code of Alabama 1975; or was it purchased under an exception to that law?

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Susan Britt
Written By

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