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Carolab Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-21-04 01:44 AM
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92. Bearing Point & Accenture

Posted on Wed, Jul. 28, 2004


Tech office is taken to task


TALLAHASSEE - A scathing state audit slams Gov. Jeb Bush's technology office for violating state purchasing laws when it handed out more than $300 million worth of high-tech contracts last year, including work to the same company the state hired to build a controversial central voter database.

Florida chose Accenture and BearingPoint to take over various high-tech duties, including the operation of the state's website. Both companies have high-powered lobbyists with long-standing ties to Bush and the Republican Party of Florida. Accenture has gotten paid nearly $2 million to build a database meant to help weed out dead people and felons from the voting rolls, but the accuracy of the list has come under fire in recent weeks.

A 20-page report from the state's auditor general lists numerous examples of state officials failing to follow rules and laws when it awarded a series of contracts to the two companies. The audit flatly states the state technology office ``could not demonstrate it had ensured fair and open competition for all vendors.''

Auditors looking at the deals say that the technology office never justified the initial bid to vendors, that final evaluation criteria was not consistently applied to all vendors, and that Accenture did not address all the bid requirements.

The audit says that the technology office can't prove the most qualified vendors were awarded contracts. It also states that Accenture and BearingPoint have been given work not even included in the initial bid and that the state can't prove that the privatization effort will yield savings to taxpayers.


BearingPoint: Why Did Its Boss Bug Out?
Business Week Online
By Louis Lavelle
Monday, November 15, 2004 (Originally Published: 11/12/2004)

Warning signs showed up when KPMG Consulting went public four years ago. Its bread-and-butter business -- the integration of big-company computer systems -- was showing signs of a slowdown. But for the company now known as BearingPoint (BE), it wasn't the worst of times, either. In the post-9/11 world, CEO Randolph C. Blazer had managed to build a large and growing business providing technology services for government agencies.

Alas, that government business continues to be one of BearingPoint's few bright spots -- and on Nov. 10, Blazer paid the price. Amid signs of growing board dissatisfaction with his performance, he resigned without explanation, handing the reins temporarily to board member Roderick C. McGeary, 53, while the board seeks a permanent successor.

Repeated efforts to reach Blazer to comment for this story were unsuccessful. McGeary, in a statement, credited Blazer with leading the BearingPoint through a period of growth, referring to its $1 billion purchase of European consultancies in fiscal 2003.

FALLING MARGINS. Why such impatience with Blazer? As the consulting industry crawled through a two-year downturn, BearingPoint has been unable to cut costs or raise prices. High taxes and expensive subcontractors have kept costs up, while increased competition from offshore technology services companies such as Infosys Technologies (INFY) and Tata Consultancy Services has diminished its pricing power.

Result: Operating margins are now hovering at 4.5%, down from a previous five-year average of 7.4%. BearingPoint's stock was off about 11% for the year before Blazer called it quits, a drop steeper than the 4% decrease for the Russell 1000 Technology Index as whole.

After the news broke of his departure, BearingPoint stock jumped 9% on Nov. 11, to close at $9.81. Indeed, the announcement came as a bit of a surprise. Last week, the company reported third-quarter profits of $11.9 million on revenues of $840.9 million, below analyst estimates. But revenues were up 13% year-over-year. BearingPoint said fourth-quarter net income would be 9 cents to 11 cents per share on sales of $850 million to $870 million, guidance it reiterated on Nov. 10.

CENTER OF A STORM. That continued earnings strength is due in large part to BearingPoint's growing public-sector business, which now accounts for 40% of revenues and 55% of gross profit. While revenues from federal, state, and local government agencies declined 8% in the third quarter -- due in large part to the temporary suspension of its work promoting economic reform in post-war Iraq -- analysts say the sector represents one of the few consistently bright spots among BearingPoint's eight lines of business.

But the sector is now at the center of a storm in Florida that some analysts worry may eventually scare away new government clients.

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