U.S. House members Wednesday accused IBM and other IT vendors of breaking the rules in a much-criticized program designed to help schools and libraries purchase Internet equipment.

Lawmakers and E-Rate investigators have alleged widespread fraud and abuse in the E-Rate program, which was established by Congress in 1996. Critics of the program accuse schools and IT vendors of circumventing competitive bidding requirements, charging E-Rate for equipment that is not allowed to be funded and asking for millions of dollars worth of equipment that schools didn't need. The program, with an annual budget of $2.25 billion, is designed to help schools purchase technology equipment, such as broadband modems and routers.

Investigators told the subcommittee about 35 E-Rate investigations are under way.

An IBM "scheme," as Representative Peter Deutsch called it, was a major topic of questioning during a hearing on the E-Rate program before the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations. Deutsch (D-Fla.) other lawmakers and E-Rate program officials accused IBM of circumventing competitive bidding requirements by signing consulting contracts with about nine school districts before the schools had decided what equipment they would apply to receive funding for.

"A program that serves such an important role has been derailed by incompetent administration, greedy vendors and, in some cases, ill-prepared local school officials," Deutsch said.

IBM denied it has broken E-Rate rules. In the early stages of the program, the FCC asked vendors to help school districts take advantage of the program, and IBM's continued consulting role does not circumvent bidding rules, said Christopher Caine, vice president of government programs for IBM.

For multimillion-dollar technology projects, consulting expertise can help move projects forward in a cost-effective way, Caine told the subcommittee. "It is important the schools get the right technical and project management help," he said.

In the case of an IBM contract with the El Paso Independent School District in Texas, which came under fire during the hearing, IBM's expertise helped the projects come in "on time and on budget," Caine said. IBM was selected as a consultant after a two-step bidding process, he said.

The IDG News Service is a Network World affiliate.