Computerized system for grants is at issue

The San Diego Union-Tribune (California)

A contractor that was to provide California’s stem cell institute with a computerized system for processing grants has gone belly up, leaving the institute scrambling to build its system while 232 new grant applications wait to be reviewed.

Zach Hall, institute president, says problem is “not a major issue.” The good news for the institute — and anxious grant applicants — is that it now owns the computer codes that will allow it to construct the same system the defunct Arlington Group, of McLean, Va., had contracted to build before it went bust, said Zach Hall, institute president.

“This has been a hiccup for us in terms of time schedule,” Hall said. “But it’s not a major issue.”

Nonetheless, one consumer advocacy group questioned whether a different procurement procedure could have avoided the problem altogether.

In June, the California Institute for Regenerative Medicine‘s board approved paying $233,474 for the first year of an eight-year contract with the Arlington Group to create a system to manage the hundreds of grant applications expected each year.

Institute administrators had done due diligence on systems offered by five companies and found that numerous major grant-making organizations, including the Howard Hughes Medical Institute and the Bill and Melinda Gates Foundation, were satisfied with Arlington’s offerings, Hall said.

Having a computerized grant management system in place was important for the institute, which expects to receive hundreds of grant applications each year as California scientists vie for a share of the $350 million annually that the institute will distribute.

Institute leaders thought there was ample time to get the system installed before it had to process many grants, because litigation challenging the $3 billion stem cell initiative has tied up its funding.

However, in the interim, Gov. Arnold Schwarzenegger authorized a $150 million loan to the institute so that it could begin to distribute research grants. The institute has since awarded some training grants.

Additionally, it has recently closed its acceptance of applications for its first research grants, which are intended to bring new scientists into the field of embryonic stem cell research.

The applicants, from 36 facilities in California, are vying for part of $24 million that will be divided into 30 grants.

There was no warning that Arlington was about to go out of business, Hall said. Apparently an investor withdrew his money unexpectedly, causing the company to fold, he said.

Before that happened, the institute had paid $108,000 to Arlington, Hall said.

The institute has since contracted with a new company, composed of former Arlington employees, to build the system at a cost equal to what it was to have paid the defunct company, Hall said.

However, an official with the Foundation for Taxpayers and Consumer Rights in Santa Monica questioned whether the institute would have had to scramble if it followed accepted state government procurement procedures.

When the proposal to contract with Arlington was originally brought up with the institute’s oversight board, board member Dr. Claire Pomeroy asked why the institute was not soliciting bids, said John Simpson, of the taxpayers foundation.

“In retrospect, the process might not have prevented this situation, but those essentially sound procurement procedures exist for a reason,” Simpson said. “And (the institute) might have found out about another company that could have been every bit as good as this one, or better.”

Hall and Pomeroy stand by the procedure ultimately used by the institute.

The procedure used was perfectly legal, Hall said. And Pomeroy, dean of the UC Davis Medical School, agreed.

“In general, I think when making a major purchase it is good to (solicit bids) when possible to make sure you hear from all possible vendors,” Pomeroy said.

However, she said, she was satisfied with the purchase of the computer system after Hall explained how very few systems existed to fit the institute’s needs, and that the one chosen was endorsed by highly respected grant organizations.

“In retrospect, I’m not sure if we had gone with (bids) anything would have gone differently,” she said. “This was very unexpected. And from what I understand, the reasons that caused this company to go out of business are not something that would have been disclosed in the (bid) process.”
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Contact the author Terri Somers at: 619-293-2028 or [email protected]