IT contractor caught charging Uncle Sam expert rates for newbies, agrees to pay back $6m in settlement

An IT contractor has agreed to pay back $6m to the US federal government for charging expert IT rates while sending newbies. Information Innovators Inc, also known as Triple-I and formerly Creative Computing Solutions Inc (CCSi) will cough up the cash after overbilling the Department of Homeland Security and its Immigration …

[Doctor Syntax]

"as ever, the deal comes with no admitting of wrongdoing"

Of course not. How on Earth could anyone ever think Standard Industry Practice could be wrong?

[Persona]

It is as you say Standard Industry Practice. I remember Anderson doing just this 25 years ago. They got in the door with a handful of good people, specified up a project and pulled in dozens of clueless newbie colleagues charged at the same eye watering rate. The good team would then move on to fleece the next client leaving the dregs or Androids as we called them behind.

[Anonymous Coward]

And our Indian cousins are now faithfully carrying forward that tradition.

[Alan Brown]

I think mumbai initiated the practice.

Relatives in IT were railing back in 1981 about attitudes of "Why write 5 lines when 12 pages will do?" from contract programmers brought in from outfits who'd initially supplied people of godlike abilities

[Doctor Syntax]

Years ago the IR as they then were, predecessors of HMRC, obviously decided that they weren't going to let that game be played on them and inserted a "key man" clause in a standard contract for provision of services (note the plural - a contract of service, singular, is an employment contract, for services in the plural is a commercial B2B contract). This allowed them to specify that the supplier could not substitute part of the team without agreement from themselves as client. A sample contract was posted on their site. Under IR35, of course, such a clause is deemed to make the contract one of service. Somewhere along the line that standard contract get quietly removed from the site.

[gumbril]

I never liked key man clauses, the problem I found is that the good people may want to develop - that's how they got good in the first place, and if you have someone locked in, they can in the end just jump ship from that company if required, but they'll also be annoyed.

I find it better to make your place somewhere that the good people want to work at, they may be outsourced, but regular visits (with goodies) pre-covid, interesting work where possible (so first refusal on projects), positive feedback, smashing out with a cc as long as your arm, moving them onshore, all sorts of things, and some long conversations with the Delivery Manager offshore so they understand they play ball on the longer objectives, we won't be looking to beat the crap out of them should something dumb happen short term, which it invariably does, a lot.

[Doctor Syntax]

The key man clause is nothing to do with the supplier retaining or developing staff. It's all to do with the client protecting themselves against a supplier who might want to pull a bait and switch.

[macjules]

"Standard Industry Practice"

Par for the course. Supply x number of developers for a contract and slip in 20% as trainees, but charge full whack for them and dare the client to argue against the "mentoring and training" clause in the supply contract.

[Eclectic Man]

Unheard of

"It is, of course, completely unheard of for an IT consultancy company to bump up its prices and bill for work that junior staff have done at senior staff rates."

Hahahahahahahahahahhahahahaha

Hahahahahahahahahahhahahahaha

Hahahahahahahahahahhahahahaha

Oh dearie me.

<Dries eyes>

Hahahahahahahahahahhahahahaha

When I were a lad, government demanded a discounted rate for each grade of consultant, and the company had to show its charge out rates for each level of consultant and each type of customer* to prove they were getting a discount.

*(Finance 'industry', corporate, commercial, charity and government as I recall.)

[Mike 137]

"Consultancies" v. independents

The individual independent consultant can't get away falsifying their expertise as they stand or fall on the basis of their personal reputation from past work. The larger the "consultancy" the more immune they seem to be from the consequences of poor performance and dodgy practices. So it's great that this one has been taken to task. But incidentally, this poses the question - why is HMRC so keen on wiping out the individual independent consultants? Could the large consultancies have applied some pressure here?

[Antron Argaiv]

Re: "Consultancies" v. independents

Could the large consultancies have applied some pressure here?

Well, large consultancies certainly have the ability to dispense large amounts of cash, an ability generally not found in one-person operations.

"Hmmm...what's this bulky envelope doing in my pocket?"

[fwthinks]

Re: "Consultancies" v. independents

Agreed that It's more difficult for independent consultants, but not impossible. You only need to know slightly more than the person you are working for, to give the impression of extensive knowledge and experience.

For some consultants, I have wondered how they manage to keep getting contracts, but then again hiring is typically done by managers who often don't have a clue.

[Brad Ackerman]

Re: "Consultancies" v. independents

Winning government contracts is a complicated skill set, and is totally orthogonal to the services a contractor provides. In Usonia the federal government (which I worked for for fifteen-ish years) has procedures for scoring bids on past performance, but in practice it never happens; actual malicious behaviour by government officers does happen but isn't the main contributor to waste.

What actually is (not an exhaustive list):

• The experience necessary to evaluate technical factors is limited in government because the overwhelming majority of positions that would allow one to develop such expertise are contractor
• Congress wants to minimize the on-paper headcount of the federal government
• DoJ rarely pursues serious penalties

In this case, the settlement only required the alleged offender to pay restitution and 1x damages. Assuming that it was just the immediate management at the contractor who were scamming the government, prosecuting them (civil or criminal) in their personal capacity would be the bare minimum; if upper management is witting of the fraud, the company needs to permanently lose its facility security clearance and said management needs their personnel clearances revoked.

Icon because it's the only way to be sure.

[Doctor Syntax]

Re: "Consultancies" v. independents

"why is HMRC so keen on wiping out the individual independent consultants?"

Because their tax system is modelled on their world, a world of what the Japanese call the salaryman. It's a system devised by salaried employees for salaried employees. The notion that anyone would work - and prefer to work - on their own as a business, accepting the risks of trading as a business other than buying and selling things is beyond their comprehension. They can probably grasp that the solo plumber or sparky etc. who comes to fix things for them at home is doing that, otherwise they'd have to accept all the complications of being employers themselves but that's an exception.

[Anonymous Coward]

Re: "Consultancies" v. independents

supplied some sweet lubrication

[Anonymous Coward]

But.... isn't that basically any outsourcing contract signed ever?

I have had the dubious misfortune of seeing this from the inside. Assimilated into an outsourcing outfit, watched the true techies get side-lined and let go (too expensive), and watched trainees come in and.... well, we all know the rest of the story.

The saddest thing is to hear a customer come up with: "We're moving to another, cheaper provider. We know its going to be shit, but right now its shit AND expensive".

[Anonymous Coward]

Working with outsourcers

I was talking to a friend in purchasing a couple of years back, they know these companies are crap, but, they're cheap. You give them a process and an SLA and if they don't meet SLA, then you claw back the funds from the next invoice. Do that a couple of times and they pay attention.

Is stuff going to break that is their fault? Absolutely, but that's when they bring in a high end contractor at 10x the price of the outsourcer to fix the issue and they don't have to pay the contractor the rest of the time. They take some of the money they've saved from outsourcing to pay for those contractors as and when the outsourcers screw up.

[tip pc]

Re: Working with outsourcers

“ Is stuff going to break that is their fault? Absolutely, but that's when they bring in a high end contractor at 10x the price of the outsourcer to fix the issue and they don't have to pay the contractor the rest of the time. They take some of the money they've saved from outsourcing to pay for those contractors as and when the outsourcers screw up.”

Most outsourced arrangements I’ve seen the outsourcing company owns the infrastructure and config. Not sure they’d accept the customer doing stuff on their kit without their permission. They are more likely to hire that expensive consultant, add on their fee and charge the customers for the luxury of fixing their solution. If they are not doing that the outsourcer is not doing their job right.

[David Neil]

Re: Working with outsourcers

"You give them a process and an SLA and if they don't meet SLA, then you claw back the funds from the next invoice. "

I've been involved in multiple discussion where that was mooted and then almost immediately ruled out because the vendor were actually bigger than the customer, and the customer didn't want to poison the ongoing relationship.

A couple of low level lads on a helpdesk might get shouted at, but any chance of enforcing a contract?

Nope.

[Doctor Syntax]

Re: Working with outsourcers

Select the size of the provider carefully. Big enough to do the job but small enough to ensure they need you as a customer.

[Anonymous Coward]

If you want to make yourself un-popular, ask for written reasons why outsourcing will be a cost-saving since the new provider will be expecting to make a profit from what they are charging. Been an observer of this a few times now (a couple where I was far too close to the centre) and it has never yet resulted in an improved support model, not even while the Primary team are in place until they can recruit enough school-leavers to fill the seats

[disgruntled yank]

Guilty as charged, your honor!

When I worked for a government contractor (US civil agency), on a couple of occasions we had to write up the people we proposed to put on the contract. I followed the job descriptions, and wrote up people who were pretty good at clearing paper jams as if they were the greatest thing since Donald Knuth. (Well, OK, implied that they possessed technical skills they had never manifested.) In at least one case, the contracting office knew exactly who we were offering and made no objection.

[Adelio]

As everyone else has said.

"But I thought all companies do that"!

[Nightkiller]

The consultancy did this to avoid having to use H1B workers.

[Anonymous Coward]

They didn't pay off the right people and so are being made an example of?

[Anonymous Coward]

Been there done that

I did US government consulting with KPMG {then Peat Marwick) and later Anderson Consulting (then Arthur Anderson). Both claimed I had extensive experience that I didn't have and were never called on it.

Many years later I ended up on the government side.with the EPA managing IT projects. I saw the same thing with my contractors.

We were fortunate to have government employees who had the technical skill to write RFPs including the evaluation criteria.

BUT

The government has to outsource because the Federal IT workforce has been cut to the point where they couldn't do the work if they wanted to (and the workers do want to but management and Congress don't). So we get contractors.

Evaluation of a contracting company's performance was limited to the references they gave you (no searching ElReg for horror stories). Evaluation of personnel was limited to resumes they gave you (goddess forbid we interview them before the award). While we could (and sometimes did) suggest to a contractor that one of their employees was not up to the job, that was only done when we wanted him off the contract. We were not allowed to say that he had been over billed. The official and legal attitude was that the government was contracting with a company and that the company was responsible for personnel.

I strongly suspect that DHS might have used some of its intelligence services to provide the research that allowed this case. They're one of the Agencies you don't want to piss off.

[Potemkine!]

Come on!

for charging expert IT rates while sending newbies.

That's the standard way of doing things for IT services companies.

[TheMeerkat]

There is a reason why pair programming is popular among consultancies. It gives you an ability to charge for incompetents without been caught out provided you pair them with someone average.