The scientists, who spoke on condition of anonymity, told the Los Angeles Times that in 2007, Homeland Security installed new components called "multiplex" assays for BioWatch that triggered false alarms at testing labs.
The aim in using the new assays was to reduce personnel costs and enable faster detection of a biological attack by screening for multiple pathogens at the same time.
After scientists voiced concern, Homeland Security ordered secret testing that concluded the multiplex assays were unsuitable.
It turned out the assays could not distinguish between the bacterium that causes a potentially deadly condition known as rabbit fever and similar but benign organisms called "near neighbors" that are abundant in outdoor environments, the scientists told the Times.
In late 2009, Homeland Security officials removed the new assays and returned to using the kits that searched for pathogens one at a time.
Some of the scientists familiar with BioWatch said the multiplex assays were put into use without adequate testing.
The federal official who oversaw installation of the components was shifted to a position with no responsibility for BioWatch and the entire episode was kept out of public view, the newspaper said.
Homeland Security has opened an internal investigation.