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Wednesday, June 21, 2017

California procurement database found to be off base

California Audit Report 2016-124, Department of General Services and California Department of Technology

Among the key findings: General Services does not have complete and accurate contracting data, and it did not implement controls to avoid these shortcomings with its contracting data.
The previous contract and procurement database system used through 2015 had severe limitations—we found many key data entry errors, and more than a third of the contracts and amendments we reviewed were missing from the system, including one with eight amendments worth $163 million.

Of the 27 approved noncompetitive requests we reviewed, nine lacked justification for bypassing the competitive bid process and 14 did not demonstrate that the vendor’s prices were reasonable.
Among the highlights of the report:

• General Services and Technology did not provide adequate oversight of the billions of dollars state agencies awarded through noncompetitive contracts from fiscal years 2011–12 through 2015–16.
vices did not ensure that a statewide contract database contained complete and accurate information about the State’s contracts for use by key decision makers.

• Although General Services transitioned to the new Financial Information System for California (FI$Cal) as its statewide contract database, it is unclear if FI$Cal will fully solve the State’s lack of comprehensive contracting data.

• Neither General Services nor Technology has established formal plans to regularly analyze the new FI$Cal data to identify instances of abuse or misuse of statewide noncompetitive procurements.

• General Services and Technology approved noncompetitive requests that lacked adequate justification for bypassing the competitive bid process, such as demonstrating that it conducted market research to substantiate that no competition existed.

• Nine of the 27 noncompetitive requests we reviewed could have been avoided if the agencies had engaged in sufficient planning.

• Although both General Services and Technology have enforcement mechanisms, they rarely employed them, allowing agencies to continue inappropriately using noncompetitive requests.
Billions in no-bid contracts mismanaged, state auditor says, By Adam Ashton (Excerpts; read full report at the link)
It didn’t take long for the cost of a technology contract in California’s unemployment office to increase twelvefold.

Two changes to the contract – added without bidding – swelled the deal to $8 million within a year. Then, the Employment Development Department submitted a request to add another $2 million worth of work to the arrangement without soliciting new bids from other companies.

That project is one of nine that State Auditor Elaine Howle highlighted in a new report released on Tuesday that urges California government to be more cautious in awarding high-value contracts without seeking competitive bids.

The report estimates that the state spent $44 billion on noncompetitive contracts worth $1 million or more between 2011 and 2016, a substantial sum that auditors said underscored the need for better management.

“The sheer magnitude of the value of the state’s noncompetitive contracts during this period emphasizes the importance of ensuring that the state provides adequate oversight of agencies’ contracting practices,” the report says.

State rules allow departments to award contracts without bidding in emergencies and under other special circumstances. But Howle’s auditors found that the state departments in charge of monitoring spending – the Department of General Services and the Department of Technology – have missed opportunities to challenge requests for noncompetitive contracts, failed to ensure that contract databases have accurate information and rarely disciplined other government agencies for misusing noncompetitive contracts.

The audits were based in part on a sampling of 27 noncompetitive contracts that state departments awarded over five years. Nine of them should have gone out to bid, auditors wrote.

Examples included:

▪ A $3 million contract extension that the California High-Speed Rail Authority presented just 17 days before its existing contract was scheduled to expire. High-Speed Rail did not describe why the vendor it chose had unique services that merited a noncompetitive contract.

▪ An $835 million noncompetitive contract amendment in 2013 for the company that manages Medi-Cal dental benefits. It was the seventh amendment to the original contract.

▪ A $75.5 million noncompetitive contract extension at the Department of Motor Vehicles on top of what was a $62.8 million for work on the state’s driver’s license production system.

▪ A fourth amendment to a Cal Fire aviation contract that was worth $27.8 million.

One $163 million contract that was missing from databases highlighted shortcomings in the state’s accounting system. It was the eighth change to a contract from the Department of Developmental Services, and no one entered it in the program the Department of General Services uses to follow spending.

State government is in the midst of a major overhaul of its accounting system with departments gradually adopting a new program called the Financial Information System for California (FI$Cal). When it’s in full use, the Department of General Services and the Department of Technology should be able to follow instantly any contract awarded by a state entity.

Until then, different state departments are using a hybrid system for accounting. Most use the system that FI$Cal is replacing; about a third of them use FI$Cal.

Howle’s office says it’s too early to tell whether FI$Cal will work as intended. “It is unclear if FI$Cal will fully solve the state’s lack of comprehensive contracting data,” auditors wrote.

Read more here: http://www.sacbee.com/news/politics-government/the-state-worker/article157239494.html#storylink=cpy

Procurement controversy du jour: Newport News airport audit investigation gets off the ground

State, federal agents interview employees at Newport News airport (Excerpted; read article at link)
Sandy Wanner, the Newport News/Williamsburg International Airport's acting executive director, said three investigators — special agents with the state police's criminal investigations division, the Internal Revenue Service and U.S. Department of Transportation's Office of Inspector General — met with five employees over the course of the day. Last week, Wanner said, the investigator with the Department of Transportation Inspector General's Office asked for copies of the airport's annual audit reports going back to 2009. Those are the annual audits performed by an outside accounting firm, Dixon Hughes Goodman LLC, of Newport News.

The moves come in the wake of a scathing Virginia Department of Transportation audit report that detailed widespread issues with airport spending — including a loan guarantee to a startup airline that ultimately cost $4.5 million in taxpayer money. The airport and its financial practices have been under scrutiny since early this year, when the Daily Press reported that in 2014, the Peninsula Airport Commission quietly guaranteed a line of credit of up to $5 million from TowneBank for startup airline People Express.

After People Express quickly collapsed and defaulted on its loan, the commission paid off the $4.5 million debt using $3.5 million in state airport construction grants, $300,000 in federal grant money, and $700,000 from a regional marketing group funded by local city councils and county boards.

The Virginia Department of Transportation — which vowed to cut off future construction grants to the airport — launched a comprehensive audit that found the commission had improperly used state taxpayer money to guarantee the loan.

Moreover, Attorney General Mark Herring issued a formal opinion declaring the loan guarantee illegal under a provision of the state constitution that generally bars public bodies statewide from lending their credit to private interests.

The state auditors also found that airport executives routinely used commission money for personal expenses, skirted procurement rules, and worked to shield the loan from public scrutiny.

They found that Ken Spirito, the airport's executive director at the time of the loan, also authorized some airport employees to charge up to $2,400 for gasoline on their airport credit cards without requiring it to be tied to business travel. According to the audit report, Spirito directed the airport accounting department not to treat the gas allowance as taxable income.

The audit report quotes a passage from the letter of dismissal that the airport commission sent to Spirito: "These payments actually are compensation to each employee receiving free gas, not fuel expense. According(ly), you have hidden employee compensation in the fuel expense account, also exposing these employees and the PAC to back taxes, additional filing obligations, and possible interest and penalties."

As controversy swirled around the loan guarantee and improper spending, the commission and city have seen major shake-ups.

On March 2, Newport News City Manager Jim Bourey — who voted for the loan agreement as an airport commissioner — resigned as an airport board member, then stepped down as city manager a few days later.

Also on March 2, the commission fired its longtime legal counsel, Herbert V. Kelly Jr., who had assured commissioners the loan guaranty was legal. The job serving as the airport's lawyer had been in Kelly's family for decades, with the airport terminal named after Kelly's father, Herbert V. Kelly Sr.

The Newport News City Council later removed longtime airport commission member Aubrey Fitzgerald as a board member.

Finally, on May 15, the Peninsula Airport Commission fired Spirito after auditors reported he had used commission money to pay for personal expenses — including car repairs for himself and Jessica Wharton, the airport's marketing and public relations director.
Other reading: No love for tennis coach

Sunday, June 11, 2017

Procurement controversy du jour - PI seeks to expand emergency procurement before and after emergency

New purchase rules eyed during crises
Speaker Pantaleon Alvarez has filed a bill proposing to loosen restrictions on negotiated procurement in cases of “extreme urgency and necessity,” and allow the government to skip public bidding in purchasing cheaper goods. House Bill No. 5521 seeks to amend several provisions of Republic Act No. 9184 or the Government Procurement Reform Act, which was enacted in 2003.

The (current) law considers negotiated procurement and direct contracting as alternative procurement methods to public bidding. The former (negotiated procurement) refers to the method used in extraordinary circumstances such as during the failure of bidding and in times of emergency.

Under Alvarez’ bill, negotiated procurement will be allowed “before, during, or after a calamity.” Currently, this mode is applicable “during a state of calamity,” which requires an actual declaration by the affected government unit.

Alvarez said that current regulations “unduly delay and hamstring the delivery of services” in times of calamity.

The proposed measure also provides for an additional criteria to resort to direct contracting, which currently sees the agency ask for a price quotation from the exclusive supplier of goods of critical or proprietary nature.

Read more: http://newsinfo.inquirer.net/904623/new-purchase-rules-eyed-during-crises#ixzz4jkiZKcEF
Sounds like a step onto a slippery slope to a procurement system without accountability, competition, transparency or integrity, as I've illustrated before: When corners are cut, even for great reasons (e.g., war), the way is opened for fraud. Also, refer to the tags/labels associated with this post, just below.

Tuesday, June 6, 2017

Own up to those mistakes; don't put lipstick on that pig

Jason Miller is an astute federal procurement journalist with Federal News Radio, with a knack for making arcane and difficult matters interesting and graspable. I don't read him regularly, but when I do I wonder why not. (Not enough time in a day comes to mind.)

Jason wrote the following article, and his respect for action of the protagonist in the unfortunate circumstances of the story is palpable, and deserved. You may just want to click the link to the article and get it from the horse's mouth. Or you can stick around with me and my rendition, and be sorry.

What happened in a nutshell is that the Department of Homeland Security solicited, and then cancelled (after protests began), a solicitation for certain technical services, known as "Flexible Agile Support for the Homeland" ('FLASH'). It was framed as a small business set-aside procurement focused on agile development methodologies. (That's another story; read it, too.)

As Jason explained in a prior article, DHS' Procurement Innovation Lab (PIL) set out to get its arms around one of the problems of federal acquisition — the need to close out low-risk, low-dollar contracts. Too often these contracts are forgotten or under prioritized, and a backlog builds up. At DHS, for example, its backlog grew to more than 350,000, and 92 percent of the contracts had been completed more than a year ago. PIL took an innovation risk and re-engineered the business processes a simplified means for contract closeout. (Look, as I said he can explain better than I, so read that article, too.)

To re-engineer the business processes, DHS first created PIL, a cross-functional team of policy, finance, general counsel, contracting and industry and then had to identify the low-risk contracts. It was all about coordinating, good communications and making sure that all the people that could be involved and are looking at the process to collaboratively understand what to do and all the appropriate steps to do it. PIL completed nine projects and is working on others.

One of the PIL's biggest experiments was FLASH.   As Soraya Correa, the chief procurement officer at DHS, described it, FLASH was meant to take care of "contracts that are typically small dollar value, generally firm fixed price, no activity over the last 12-to-24 months, final goods and services have been delivered so we know they are probably ready for close out. What we are doing is a streamlined approach trying to close them in one fell swoop.”

Correa explained, “Everything we’ve done on FLASH has been very different from what we’ve done in the past. Start with our industry day where our communications were more of a discussion where we provided the ability to do speed teaming or speed dating, but also an opportunity for vendors to meet with government officials and ask questions,” she said. “We also had experts in various business areas like small business, digital services and others so industry could come up to speed on what we were doing in those areas. It was a very interactive day that focused a little more on the business processes around bidding as opposed to focusing on the requirements that would be contained in the solicitation.”

DHS evaluated contractors based on a technical challenge where the bidders had to present to the agency how they would go through an agile development process. Correa said the bidders then had 4-to-6 hours to actually complete and then did a presentation. DHS received 114 proposals.

Now, flash forward a bit to last month when Jason reported "DHS cancels $1.5B contract for agile services".
DHS has been working on the multiple award vehicle for the better part of a year. The goal of FLASH was to give department components access to innovative methods and industry best practices to acquire agile design and development support services. DHS said in the solicitation it was seeking to develop an acquisition contract that includes the concepts from the U.S. Digital Services Playbook such as user-centered design, dev/ops, automated testing and agile. DHS’s Procurement Innovation Lab (PIL) was running FLASH.

But since November when DHS awarded FLASH to 13 companies, it faced an uphill battle to get the contract off the ground. Eight vendors who didn’t make the cut submitted protests to GAO. DHS decided to take corrective action instead of letting GAO decide the protests and reopened bidding.

Then in early March, DHS announced 11 new winners under the FLASH contract, and 12 unsuccessful bidders protested to GAO again.

The decision to cancel FLASH comes as more and more agencies are developing contract vehicles to buy agile services. Along with the DHS, the General Services Administration’s 18F organization also struggled to award and ultimately cancelled the second and third contracts under its agile blanket purchase agreement. 18F awarded 16 vendors a spot in part one of its agile BPA in August 2015.

It’s unclear what comes next for FLASH — whether DHS will try again with a new procurement or give up entirely on a separate contract vehicle for agile services and rely on an existing one like EAGLE II.
So, now for the denouement:

DHS’ internal assessment of its $1.5B agile contract: ‘significant errors and missteps’
If the Homeland Security Department’s decision to cancel its $1.5 billion contract for agile services wasn’t shocking enough, the details of the missteps and problems the agency detailed in its “motion to dismiss” left long-time federal procurement attorneys and vendors with their collective mouths agape.

“DHS has determined that cancellation of the FLASH solicitation, HSHQDC-16-R-00118, is the only viable option to address the many issues that DHS has identified as problems with the requirement and the record,” DHS lawyers wrote to GAO in the document, which Federal News Radio obtained. “The integrity of the procurement process will be served by this cancellation.”

Barbara Kinosky, managing partner with Centre Law and Consulting LLC, said she was “floored” by DHS’s honesty and the level of detail it provided.

“They did everything but name names,” she said. “It is absolutely draconian to cancel the contract at this point. It means it is so flawed that they couldn’t tweak this, or conversely they decided not to let all the protestors on to the vehicle. I suspect the whole methodology was flawed and even if they tweaked the evaluation factors it was still susceptive (sic) to more protests.”

In the motion to dismiss, DHS said the problems with FLASH ranged from the evaluation criteria and adjectival ratings to the price evaluations and best value tradeoffs to lacking the expertise in agile software services to do a proper evaluation.

“DHS has also determined that the evaluation of the offerors may have resulted in unequal treatment of offerors’ weaknesses and risks. This is partially due to the adjectival ratings that were used, but also due to the evaluation process used to evaluate and assess offerors during the technical challenge exercises,” DHS stated in its motion.

“DHS has identified issues in the price evaluation report (PER) and best value tradeoff analysis (BVTA) which do not adequately support its award decisions. The methodology by which the price evaluation team evaluated price realism is not identified in the PER. Nor is it evident in the PER itself what DHS reviewed and evaluated to determine whether prices were reasonable and realistic.”

Christoph Mlinarchik, a government contracts expert and owner of Christoph LLC, a consulting firm, said DHS’s self-assessment of the FLASH procurement resulted in a firm vote of “no confidence” due to a “comedy of errors: poorly executed technical challenge evaluations, sparse price analysis, inadequate tradeoff analysis and more.”

“The most glaring admission by DHS is that critical documents were altered after award, like the technical evaluation report and best value tradeoff analysis. These critical documents were changed after submission to the GAO as part of the official record– a flagrant foul that undermines the bid protest system,” Mlinarchik said. “In summary, DHS rolled over, showed its belly, and provided ample reasons that the FLASH procurement was a total failure.

This does not look good for DHS, but it shows courage in admitting fault and starting from scratch instead of putting lipstick on a pig.”

The decision to cancel FLASH left vendors both relieved and in disbelief. One industry source, who requested anonymity for fear of retaliation from DHS, said it was a painful process from the beginning.

As Soraya Correa, DHS chief procurement officer, said in December in a NextGov article after the initial set of protests delayed FLASH:

“We’ve got to start getting rid of that fear,” Correa said. “We’ve got to start making it OK to sometimes make a mistake, as long as you’re making an intelligent mistake. It’s OK to take a few chances, and you know what? Every now and then, we’re going to stub our toe.”

Monday, June 5, 2017

No emergency, just a desire to act quickly, like business

The procurement issues here raise issues of noncompetitive acquisitions, the requirement to obtain a fair and reasonable price before acquiring anything, even by sole source, and the contrast between government acquisition and private business. Government contracting requires market research to have independent knowledge of source alternatives in the market, prices and costs, as part of the acquisition process before a selection process is even chosen.

The governance policies of government acquisition are intended to assure transparency and the pursuit of effective competition within the free enterprise system. It is meant to avoid the secretive and arbitrary selection of colleagues and strong-arm "horse trading" linked to matters far afield from the instant acquisition that is the norm in private business ("you scratch my back and I'll scratch yours").

Government procurement is concerned with public confidence, fair and equitable treatment of market participants, maximization of public funds, and safeguards to establish and maintain a contracting system of integrity with accountability to the public. It's not meant to trade products or services for votes or favors or other "godfather offers".

In these respects, government procurement is intentionally designed to be the antithesis of private business, especially private business whose only concern is the welfare of the business owner. Not that there is anything wrong with that in the context of people betting their own money in their own smoke-filled rooms or out on the golf course or the box seat of some entertainment venue. 

But, private business has no concern about other people's money, whereas government must be concerned with other people's money or face a fractious public, as well as a mutinous supply of vendors. 
 
Again, I advise readers of articles I present to read the articles themselves, at the link provided. I omit, rearrange, slice, dice, paraphrase, editorialize and generally use the general fact situation of articles to provide teachable moments concerning procurement practice and principle. My version may or may not reflect the article's author's intent, and likely do not to my re-working of the following story, so read the original; click the link at the title.


No competition, no cost estimate as Kansas City firm picked for coveted VA contract McClatchy Washington Bureau
The federal government typically awards contracts to private companies after a competitive bidding process in order to keep costs low and avoid conflicts of interest. “When you have competitive bidding it prevents government officials from throwing contracts to their friends or keeping them from people they don’t like,” said Richard Painter, chairman of the board of Citizens for Responsibility and Ethics in Washington, a nonpartisan watchdog group.

But, the Trump administration picked Kansas City-based Cerner Corp. for a coveted contract to modernize veterans health records, and there will be no competition for the taxpayer-funded project. Cerner partnered with defense technology contractor Leidos, Accenture Federal Services and Intermountain Healthcare in its bid for the $4.3 billion, 10-year defense contract. Other health IT companies didn’t have a chance.

VA Secretary David Shulkin told reporters his decision to waive competition and acquire Cerner’s software directly was motivated by President Donald Trump’s desire to act quickly. “From the outset that when the president selected me to be secretary, he made clear to me that he expected us to act with faster decisions, to act like business, and to really make sure that we are really doing the right thing to change veterans’ health care. And that's exactly what we’re trying to do today,” Shulkin said.

Shulkin said there was a “public interest exception” to allow awarding the Cerner contract without a “full and open competition.” The VA still must draw up a justification for waiving open and public competition, and Tester’s office will be following up with VA for those documents, said his spokesman, Dave Kuntz.

Sen. Jon Tester of Montana, the top Democrat on Senate’s Veterans Affairs Committee, was supportive of Shulkin’s announcement but his spokesman said he has some questions and concerns about timing and costs that the secretary did not answer. Neither Cerner nor the Department of Veterans Affairs could say how much the contract will cost, however.

“The challenge here is that by giving up competition, the VA has given up all control to the company” when it comes to price, said Phillip Carter, a senior fellow at the Center for a New American Security who teaches government contracts law at Georgetown University Law Center. “At the end of the day ... they’re probably going to pay whatever Cerner asks,” Carter said.

The new VA health records system won’t be identical to the Defense Department’s, but its core will be Cerner’s Millennium software, Shulkin said on Monday. He said Cerner’s work on the Pentagon’s system, now known as MHS Genesis, pushed his decision in Cerner’s favor. Adoption of the same system “will ultimately result in all patient data residing in one common system,” the secretary said.
To me, adopting a system that will ultimately result in "all data residing in one common" (but proprietary) software will assure everyone else will become locked out. There are historical precedents, such as Motorola's lock on emergency radio systems, and Microsoft's lock on desktop software systems. See, Sure, Kid, first one's free.


The US government has been trying hard to break free of such locks.  This procurement seems to also go against the US Government's Federal Source Code Policy: Achieving Efficiency, Transparency, and Innovation through Reusable and Open Source Software:
When Federal agencies are unable to identify an existing Federal or commercial software solution that satisfies their specific needs, they may choose to develop a custom software solution on their own or pay for its development. When agencies procure custom-developed source code, however, they do not necessarily make their new code (source code or code) broadly available for Federal Government-wide reuse.

Even when agencies are in a position to make their source code available on a Government-wide basis, they do not make such code available to other agencies in a consistent manner. In some cases, agencies may even have difficulty establishing that the software was produced in the performance of a Federal Government contract.
These challenges may result in duplicative acquisitions for substantially similar code and an inefficient use of taxpayer dollars.

This policy seeks to address these challenges by ensuring that new custom-developed Federal source code be made broadly available for reuse across the Federal Government. This is consistent with the Digital Government Strategy’s “Shared Platform” approach, which enables Federal employees to work together—both within and across agencies—to reduce costs, streamline development, apply uniform standards, and ensure consistency in creating and delivering information. Enhanced reuse of custom-developed code across the Federal Government can have significant benefits for American taxpayers, including decreasing duplicative costs for the same code and reducing Federal vendor lock-in.
Note also the internationally informed Open Source for Government component of the Open Spouse Initiative.

Other article(s) on this topic: VA to dump Vista for DOD's electronic health record system











Monday, May 29, 2017

Late paying government brings out the worst in vendors

$2.4M state warehouse lease renews procurement questions
Controversy surrounding a former furniture store in Springfield highlights the problems of a state lease procurement system dogged by bureaucracy, reliance on old-fashioned paper files and a state unable to pay its bills.

Climate Controlled Holdings LLC of Chicago bought an abandoned furniture store and refurbished it to meet the needs in the City of Springfield for a climate controlled warehouse for the Illinois Department of Human Services records. Although the details of the contracting process are fuzzy in this article, it appears Climate Controlled Holdings ended up with a five year lease worth $2.4 million. Climate Controlled Holdings and the five-year, $2.4 million lease since have become the focus of controversy over political influence in state leases, bureaucracy, reliance on paper records in a digital age, and the difficulty of determining whether the state is getting its money’s worth from public documents in private storage.

Allegations of improper political connections were raised in April when Champaign-based WCIA-TV reported on links between Springfield businessman Bill Cellini and Climate Controlled Holdings. Cellini has been dubbed “The King of Clout” for extensive business and political ties to state government through the years. He served about nine months of a one-year, one-day prison sentence on a 2011 federal corruption conviction for a failed attempt to shake down a Hollywood film producer for a $1.5 million contribution to the campaign of former Gov. Rod Blagojevich.

The Champaign station also highlighted the longtime Cellini friendship with Springfield businessman Frank Vala, who is chairman of the Illinois Procurement Policy Board. That board, which reviews state leases, allowed the South Grand Avenue lease to be approved in January without a vote. Secretary of State’s records show Climate Controlled Holdings agent Thomas Storniolo is also the agent for multiple Cellini-controlled New Frontier Management companies with Cellini’s children, William Jr. and Claudia, listed as presidents. But it was part-ownership in Climate Controlled Holdings by Claudia Cellini’s husband, Raffi Vartnaian, that raised questions of political influence and the Valla friendship with Cellini. Climate Controlled Holdings submitted the only bids for the lease through two separate companies.

Vala did not return messages, but Hurwitz said on behalf of the building partnership that the lease has been unfairly portrayed in media accounts and by state lawmakers. In addition to the $575,000 purchase price, she said the partnership invested approximately $1.25 million – a figure confirmed by state records -- to bring the building up to specifications required by the state, including construction of a loading dock, legal services, new lighting, security, new heating and air conditioning, roof work and electrical upgrades.
The partnership also is responsible for monthly management fees, property taxes, maintenance, insurance and other operational costs.

Hurwitz also said she learned of the state request for storage space thorough regular public notices sent out by the Department of Central Management Services, the state agency in charge of state buildings. “We did everything by the book and by the law, and we won the bid,” Hurwitz said.

“It’s an OK deal, if the state pays us,” Hurwitz said.

Hurwitz said there is reluctance among developers to take on the risk of state leases when Illinois is months behind in payments on dozens of local buildings, but that such deals remain attractive at a time when the commercial-leasing market continues to struggle.

“We went to another developer in town, but he turned it down because he was not willing to risk money on a state lease,” said Hurwitz, who added that the deal keeps the building on property tax rolls. Property taxes total just over $33,800 for 2017, according to county records.

Former state Sen. Susan Garrett, now chairwoman of the Illinois Campaign for Political Reform, said the state still needs stricter disclosure rules on companies involved in state leases. “It appears as if they’re shell companies,” Garrett said. “There are just so many loopholes there that allow this to happen.”

Ed Bedore has been a member of the Policy Procurement Board for 19 years, including when the Barney’s building lease was approved without a vote in January. Bedore said he understood at the time there had been two competitive bids, rather than separate bids from the same company.

He said he recently toured the facility and found it only about 40 percent to 50 percent full, though state officials indicate additional files would be moved to the site. In addition to questioning storage of public records in private buildings when so many state properties are vacant, Bedore said he has been pushing for years for the state to begin moving away from paper documents to digital records.

“We’re not in the 21st century, we’re not even in the 20th century, we’re in the 19th century,” said Bedore, who added that the transition could be done gradually to minimize costs.

Central Management Services Acting Director Mike Hoffman, who has insisted rules were followed on the Barney’s building lease, said after a legislative hearing on Thursday that it is common to receive only one or two bids on state leases, given the complexity of the process. He added that the bureaucracy often limits bids to companies that know how to work the system.

In an understatement, “The state also is not making payments,” Hoffman added, “and a limited number of people are willing to go through that process.”
Just a quick reminder: I edit, slice and dice articles discussed here for didactic focus and emphasis and personal viewpoint, so you absolutely must read the article at its source via the link in the title.

There is no point, though, in full disclosures, published notices and much of the effort involved in trying to "foster" competition, as the ABA Model Procurement Code requires (as does Guam's, which follows in the footsteps of the MPC: 5 GCA § 5001(b)(6)), if the government does not timely pay its vendors.

Slow and other delinquent payments, or even nonpayment, is the single most salient factor in dissuading vendors to bid. the fewer vendors there are who are willing to do business with the government, the higher prices will be. The more often government business is done with the same "boys' club", the more they will take advantage. The fewer competitive bidders there are, the less effective the policing of the procurement process is, because the only real time policing of the process is through a fair and expeditious protest system.

Government can do a lot to improve its systems to achieve lower costs.  But before fussing around with all the bureaucratic rigmarole, first pay the vendors promptly. That will save you more money in the long run than all that other distraction.

Friday, May 26, 2017

Cooperative roofing spoofing?

Price gouging on school projects must stop by Helene Hardy Pierce. ( Helene Hardy Pierce is vice president of the board of the Coalition for Procurement Reform.)
School districts in Pennsylvania have been victims of a very expensive waste of taxpayer money for the past decade or more. This is a national problem, and it is very serious in Pennsylvania.

Certainly they can save money when they use cooperative purchasing for items like pencils and computers. But since at least 2005, our schools have lost millions of dollars when they purchased roofing through this kind of system. Like their counterparts across the commonwealth, Lancaster-area school districts have overpaid for roofing projects.

How is it that school districts have been paying twice as much they should for roofing projects?

A survey by Ducker Worldwide found that Pennsylvania schools that purchased roofs through the Association of Educational Purchasing Agencies drastically overpaid for roofing projects. According to the Ducker study, from 2005 to 2010, schools spent $100 million more than they would have spent through public competitive bidding. You can find the survey, as well as studies in other states, at bit.ly/ProcurementSurvey.

This wasted money could have purchased 33 million school lunches for low-income students, or 100,000 school computers.

Pennsylvania in not alone. These anti-competitive, wasteful practices have been uncovered in many states, including Maryland, New Jersey, California, Texas, Indiana, Massachusetts, Virginia and others.

Pennsylvania is one of 23 states that contract for roofing projects through AEPA, which funnels the projects through Tremco, a national roofing contractor. Tremco’s parent company, RPM International Inc., recently settled for $65 million a lawsuit that charged it defrauded the General Services Administration and other government entities by overcharging for roofing contracts as far back as 2002.

Separately, Slippery Rock School District brought a defective materials suit against Weather Technologies, a Tremco company that sold material to the district through AEPA cooperative purchasing.

It’s unfortunate that a process that allows the manufacturer to act as designer, contractor and installer was allowed to exist. It not only led to wasteful spending, it also disregarded quality and best practices.

Fortunately, the kind of oversight needed is being advanced in Harrisburg. Republican state Rep. Kerry Benninghoff, of Centre County, has introduced legislation in both the House and Senate to reform this process.

Once passed, it will be a new day in Pennsylvania for roofing contractors, who will compete openly and honestly for roofing projects, and our taxpayers will support fair prices for quality work.
The Coalition for Procurement Reform provides a list of audits and studies relating to cooperative procurement at this link

For the record, I make no endorsement of or objection to the work of the Coalition; I know nothing of them or their work and have not taken any time to review their materials. Maybe I'll get around to it some day. Maybe you might, too.

And whilst on the subject of cooperative purchasing vs procurement (aren't we?), there is a recent appellate decision which, though fairly deep in the weeds for a novice, goes to some lengths to distinguish, under federal law but using common concepts, cooperative agreements from procurement agreements.  Hymas v. US, 810 F. 3d 1312 - Court of Appeals, Federal Circuit 2016  The antagonist and loser in that case has just recently hit another roadblock before the GAO