Four years ago, a top Department of Homeland Security scientist reported a potential breakthrough in the government’s race to detect deadly pathogens spread by bioterrorists or nature — germs that could cause calamitous infections.

A Silicon Valley company called NVS Technologies appeared on track to build a portable device that would swiftly and accurately analyze air samples from sensors deployed nationwide, and determine whether they contained anthrax spores or other lethal germs.

“NVS has done a tremendous job in fulfilling our requirements,’’ Segaran Pillai, Homeland Security’s chief medical and science advisor, wrote in a seven-page internal report dated June 13, 2013. He recommended continued funding for NVS “to ensure a successful outcome for the Nation.’’

But the promising project was abruptly halted in February 2014 — six months before NVS engineers were due to deliver prototypes. A new acting division director at Homeland Security terminated the NVS contract for “convenience,” a legal term that gives the government broad leeway in oversight of its contracts.


More than three years later, Homeland Security has yet to find a reliable way to quickly detect biowarfare agents and the cause of unusual disease outbreaks, a key vulnerability in the defenses hastily erected after the terrorist attacks of 2001.

The contract dispute with NVS now is headed to court. A three-day trial is scheduled to start on Sept. 12 in Washington before an administrative law judge of the U.S. Civilian Board of Contract Appeals. A decision may not be issued for weeks.

A company typically faces a heavy legal burden to prove a federal contract termination was made in bad faith.

But the case highlights a far larger problem: how the government’s costly campaign to block the threat of bioterrorism has yet to produce a dependable solution. And although the path to innovation is lined with unmet promises, the NVS case remains a puzzle.


A review by the Los Angeles Times of government documents and sworn testimony, and interviews with senior scientists and present and former government officials, show the proposed NVS technology — a 10-pound, touch-screen device costing about $15,000 apiece — had won uncommon praise from scientific experts at federal agencies in line to use it.

“I couldn’t believe that they would terminate this contract, considering how far along the technology was,’’ said Stephen A. Morse, a microbiologist who monitored the NVS project for the federal Centers for Disease Control and Prevention.

The CDC, Morse said in an interview, hoped to use the NVS device to detect bioterrorism and “causative agents’’ of respiratory tract infections. “I think it had tremendous potential,” he said.


Shutting down the project “betrayed the nation,’’ said the NVS chief executive, Hans Fuernkranz, a molecular biologist who has developed widely used tools for analyzing genetic materials. “I’m absolutely flabbergasted at what happened.’’

A lawyer for NVS Technologies, James S. DelSordo, argued in a pretrial brief that the government owes NVS $286 million for lost sales and related costs.

The company, he wrote, was victimized by government “mismanagement and a campaign to harm its business which culminated in the inappropriate termination of the contract.’’

A government lawyer, Christopher M. Kovach, countered that “there exists no evidence’’ that Homeland Security “possessed an intent to injure’’ NVS. The official who terminated the contract “decided to prioritize” other research and development efforts, Kovach wrote.


Homeland Security also lodged a counterclaim, seeking $606,771 that it says it overpaid NVS.

The case stems back to the widespread fear that erupted after several anthrax-laced letters sent through the U.S. mail killed five Americans shortly after the 2001 terrorist attacks.

In response, President George W. Bush authorized ambitious efforts to prevent biological attacks that could cause mass casualties.

The CDC began to stockpile therapeutics for rapid deployment against likely bioagents. And in his 2003 State of the Union address, Bush announced deployment of “the nation’s first early-warning network of sensors to detect biological attack.’’


All told, the various federal efforts have cost about $21 billion so far — but with mixed results.

By early 2010, for instance, it was clear to government scientists that the nationwide system for swiftly and reliably detecting a bioterrorism attack — called BioWatch — was not working as promised.

BioWatch, which had cost nearly $1 billion to install and operate by then, took up to 36 hours to gather and analyze potential pathogens. Worse, its sensors had falsely warned of dozens of germ attacks in major cities — including at the Democratic National Convention in Denver in 2008.

So Homeland Security looked for ways to improve BioWatch. In April 2010, it awarded a contract, initially worth up to $18.3 million, to NVS Technologies, based in Menlo Park, Calif.


The NVS device was designed for public health labs that used the BioWatch data, as well as for hospitals and doctors’ offices. Instead of 36 hours, the device was supposed to identify a germ in less than an hour.

According to the company, material from a BioWatch air filter or a patient’s throat swab would be injected into a sample port in the NVS device. It then would purify the sample and analyze its genetic material for dozens of potential pathogens.

Pillai and his colleagues at Homeland Security, who were overseeing the NVS contract, teamed with scientists from other agencies seeking biodetection technology — including the Secret Service, the Food and Drug Administration and the CDC.

In June 2013, the director of Pillai’s division expanded the contract to $23.4 million. Prototypes were supposed to be ready the following summer for advanced testing at three government laboratories.


Sally A. Hojvat, the FDA division director who could ultimately decide whether to grant regulatory clearance for the NVS device, was enthusiastic.

“We strongly believe the government must take the initiative to make this happen if we plan to have a highly robust diagnostics and surveillance program to capture a potential biological attack early and also to support the clinical intervention/mitigation and save lives,’’ she wrote in a Dec. 4, 2013, e-mail to Pillai.

But Donald Woodbury, who had been put in charge of Pillai’s division in September 2013, was unpersuaded.

Woodbury had spent much of his career at the Defense Advanced Research Projects Agency, which developed stealth technology and other sophisticated tools for the Pentagon. He voiced doubt about the NVS technology and canceled the contract.


The termination drew scrutiny from House Energy and Commerce Committee staff and from Homeland Security’s inspector general. In meetings with them, Woodbury defended his decision, saying the government could find suitable commercial technology.

In a February 2015 report, Inspector General John Roth rejected Woodbury’s arguments. “We did not identify evidence to substantiate any of the concerns,” he wrote.

A month later, an assistant inspector general, Mark Bell, requested in a two-page memo that colleagues conduct a deeper investigation. Woodbury’s actions were “questionable because numerous” federal experts believed the NVS device “was meeting its milestones to provide a very promising piece of equipment,” he wrote.

Woodbury defended his actions as proper. He said in a pretrial affidavit that he had opposed the “public health’’ aspect of the NVS project and that it “did not represent the best use’’ of taxpayer money.


Woodbury conceded in separate deposition testimony that Pillai, a microbiologist, “had the greatest expertise,’’ but said they disagreed about the merits of the technology. The contract was awarded before he took charge and “all I could do was fix it,’’ he said.

Woodbury retired from Homeland Security at the end of 2016. “I think that I acted appropriately as a steward of government resources,” he told The Times this week regarding the NVS project.

Without the federal contract, NVS abandoned work on the technology and laid off all 35 of its employees in 2014, Fuernkranz said in an interview. He now works as a consultant to venture capital firms.

And BioWatch, the nation’s dubious sentry for bioterrorism, remains unchanged — slow and unreliable at a cost of about $80 million a year.


david.willman@latimes.com

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