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Tuesday, November 28, 2017

The limits of procurement law - agency authoriity

This GAO decision is a short example of the limits of procurement law, or government contracting as the feds say. Procurement law is not part of the common law, it is statutorily imposed by the legislature, with regulations made by the executive branch, to allow the executive branch to acquire stuff to meet its operational and other legislatively allowed needs.

NB: I take liberties when presenting material in this blawg. You must read the source material at the link and not rely on this, or other, post(s) for information that comes from the horse's mouth. Some have characterized this matter as coming from the other end.

Matter of: A-Z Cleaning Solutions
DIGEST: The United States Mint, a federal agency within the Department of the Treasury, is not subject to the Government Accountability Office’s bid protest jurisdiction under the Competition in Contracting Act of 1984, because the Mint is statutorily exempt from all federal procurement laws and regulations.

A-Z Cleaning Solutions, of Pittsburg, California, protests the award of a contract to Clean Solutions Services, Inc., of San Francisco, California, under a solicitation issued by the Department of the Treasury, United States Mint for janitorial and laundry services in San Francisco. The protester contends that the agency erred in its evaluation of proposals and in its best-value tradeoff decision.

The United States Mint, an agency within the United States Department of the Treasury, asserts that it is statutorily exempt from our bid protest jurisdiction, and therefore this protest should be dismissed. We agree. We dismiss the protest for lack of jurisdiction.

Under the Competition in Contracting Act of 1984 (CICA), our Office has jurisdiction to resolve bid protests concerning solicitations and contract awards that are issued “by a Federal agency.” CICA provides that the term “Federal agency” has the meaning given in statute that defines the term “Federal agency” as including any “executive agency,” which is defined as any executive department or independent establishment in the executive branch of the government.” The Mint, as part of the Department of the Treasury, is an executive agency that otherwise would be subject to our bid protest jurisdiction under CICA.

In 1996, however, Congress established the United States Mint Public Enterprise Fund (USMPEF) to finance the programs and operations of the Mint. Of note, the establishing legislation for the USMPEF included the following proviso: “Provided further, That provisions of law governing procurement or public contracts shall not be applicable to the procurement of goods or services necessary for carrying out Mint programs and operations.” The same provision defines Mint programs and operations as follows:
(1) the activities concerning, and assets utilized in, the production, administration, distribution, marketing, purchase, sale, and management of coinage, numismatic items, the protection and safeguarding of Mint assets and those non-Mint assets in the custody of the Mint, and the Fund; and (2) includes capital, personnel salaries and compensation, functions relating to operations, marketing, distribution, promotion, advertising, official reception and representation, the acquisition or replacement of equipment, the renovation or modernization of facilities, and the construction or acquisition of new buildings.
The provision further contemplates that all receipts from Mint operations and programs be deposited in the USMPEF, and that all expenses incurred for operations and programs of the Mint that the Secretary of the Treasury determines to be ordinary and reasonable incidents of Mint operations and programs be paid out of the USMPEF. As a result of these provisions, the agency represents that the Mint is entirely funded by and operates within the USMPEF.

Because the establishing legislation provides that federal procurement laws and regulations do not apply to the procurement of goods or services necessary for carrying out the Mint’s operations and programs, and those operations and programs are defined broadly enough to encompass substantially all of the Mint’s activities, we conclude that the Mint is not subject to the terms of CICA. Furthermore, because the bid protest jurisdiction of our Office derives from CICA, we must conclude that the Mint is not subject to that jurisdiction.

Our Office reached a similar conclusion when considering whether our bid protest jurisdiction extended to the United States Postal Service (USPS). The USPS is an independent establishment of the executive branch, and thus it is a federal agency, like the Mint, that would otherwise be subject to our bid protest jurisdiction. However, by law, the USPS is expressly exempted from any “Federal law dealing with public or Federal contracts.”

Similarly, the Presidio Trust, a wholly-owned government corporation, would otherwise be subject to our jurisdiction, but is statutorily exempt from all federal procurement laws and regulations but for certain enumerated exceptions, which do not include CICA.
Thus, for an instrumentality of the executive branch to be free from the procurement requirements imposed on the executive branch by the legislature, the instrumentality must be given express leave by the legislature. 

We have seen on Guam, for instance, the Mayor's Council of Guam create a non-profit organization to take responsibility for operating the annual Liberation Day Carnival and festivities for the sole purpose of doing so without restrictions imposed by the procurement law. This case illustrates the wishful thinking of such action.

Smack-down of Forestry Service over claim an unduly restrictive specification was reasonable for its needs

This GAO decision is Matter of: Global SuperTanker Services, LLC, File: B-414987; B-414987.2.

This post will be brief, while the decision itself is extensive. Extensive in its unrelenting smack-down of an agency trying to defend a specification the decision hails as "a post hoc attempt to justify" an unreasonable restriction on competition. "[T]he agency’s decision to restrict those assets at this time does not withstand logical scrutiny.

If you ever want to see what a comprehensive, almost frolicking, dismantling of lumbering argument looks like, this will give you an entertaining read. Clearly, the Forest Service was unable to see the forest for its own trees.

With references to past performance

This GAO decision is interesting in that, factually, it arises in connection with a solicitation conducted in Malawi. Its official government website on my Google search suggests the site might be hacked. The CIA World Factbook describes Malawi's economy as ranking "among the world's most densely populated and least developed countries. The country’s economic performance has historically been constrained by policy inconsistency, macroeconomic instability, limited connectivity to the region and the world, poor infrastructure, rampant corruption, high population growth, and poor health and education outcomes that limit labor productivity. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations." In other words, there is likely not a deep history and trained understanding of the niceties of the procurement norms we are accustomed to.

Such as the role of past performance in evaluating bidder responsibility or bid responsiveness. The decision involves many issues, but this post is limited to the past performance controversy, because I suspect Malawians may not be alone in the failure, seen in this decision, to appreciate the past performance evaluation. It is not a "tick the box" evaluation, though it often seems that way.

The usual caveats apply: I take terrible liberties with the presentation of source material, so you are admonished to go to the source at the links.

Matter of: Fattani Offset Printers
On June 23, 2017, the United States Agency for International Development (the agency) issued an RFP for printing, binding, and distribution services to be performed pursuant to a fixed-price contract over a two-year period. The RFP specified, among other matters, that “[t]he purpose of this contract is printing, binding, and distribution of 773,025 English Standard Four Learners’ Books (LBs) and 6,000 Stock Management Cards.” Fattani Offset Printers, of Blantyre, Malawi, protests the award of a contract to Kris Offset & Screen Printers, Ltd., also of Blantyre, Malawi, alleging the agency unreasonably evaluated its proposal.

Award would be made on a best-value tradeoff basis considering two evaluation factors, technical and price. RFP at 50. For the technical factor, the RFP divided a total of 100 points between technical understanding and past performance, with 85 points allocated to technical understanding and 15 points to past performance. Fattani, low offeror, was awarded 35 out of 100 points. Kris Offset was awarded 92 points, and the contract.

GAO considered all of the firm’s allegations and found no basis to sustain the protest, noting at the outset that, in reviewing protests challenging an agency’s evaluation of proposals, our Office does not reevaluate proposals or substitute our judgment for that of the agency; rather, we review the record to determine whether the agency’s evaluation was reasonable and consistent with the solicitation’s evaluation criteria, as well as applicable statutes and regulations.

Past Performance

The RFP instructed offerors to provide a list of at least five organizations to serve as past performance references. For each organization, offerors were instructed to provide a contact name, address, telephone number, description of the work performed, and date of performance. The RFP also stated that proposals would be evaluated based on successful completion of previous similar projects.

Fattani provided reference letters from five different organizations. Each reference letter provided a positive review of Fattani’s performance. The record shows that the agency contacted three of Fattani’s references, and it also contacted references outside of Fattani’s listed references. Following its review, the agency assigned Fattani’s proposal two weaknesses and several significant weaknesses. Chief among the agency’s concerns was that Fattani had received negative past performance evaluations. The agency also determined that Fattani had not performed any projects of similar size and complexity (i.e., contracts of $5 million in value with distributions to over 5,500 outlets). The agency assigned Fattani’s past performance proposal only 5 out of a total of 15 points.

Fattani asserts that the agency’s evaluation was unreasonable because the RFP did not expressly permit the agency to seek additional past performance references. Additionally or alternatively, Fattani contends that the agency improperly determined that none of Fattani’s past performance references were of similar size and complexity.

In light of the RFP’s stated evaluation criteria, we find that the agency reasonably evaluated Fattani’s past performance references. Contrary to Fattani’s view, our cases explain that an agency is generally not precluded from considering any relevant past performance information, regardless of its source. Consequently, the agency acted reasonably when it solicited additional past performance references beyond those listed in Fattani’s proposal, notwithstanding the fact that the solicitation did not specify that the agency could seek alternate past performance information sources. Furthermore, GAO’s in camera review of the record reveals that Fattani received negative reviews of its performance from some of its listed references and other entities the agency had contacted.

As to Fattani’s alternate allegation, we find that the agency reasonably evaluated Fattani’s past performance references for similar size and complexity. Of Fattani’s five references, only one adequately describes the performance, and that job was not similar in size or complexity to the instant contract. That job required distribution to only 90 stores, while the instant contract requires distribution to over 5,500 outlets. Thus, Fattani’s past performance proposal did not demonstrate that it had successfully completed previous similar projects. Accordingly, based on the record before us, we find that the agency reasonably evaluated Fattani’s proposal under the past performance factor.

The protest is denied.

The laborious SAGA of the US Navy's BOSS contract on Guam

This post is a follow-up to a prior post almost 3 years ago, Protest of Navy's BOSS contract on Guam upheld.

Note: As always, I take considerable liberties with the source documents when presenting them here. For instance, critical citations are often omitted, parts are re-arranged and/or paraphrased, etc. Read the source at the link if accuracy, completeness and fidelity is important to you. (If it is not important to you, reconsider wandering around the web without an escort.)

Before the GAO in re Matter of: Fluor Federal Solutions, LLC, File: B-410486.9, January 18, 2017
DIGEST: Fluor maintains that the agency misevaluated proposals and made an unreasonable source selection decision. Protest challenging agency’s evaluation of staffing and resources proposals is sustained where record shows that agency evaluated the protester’s and awardee’s proposals disparately in a manner that prejudiced the protester. We sustain the protest.

This is our third occasion to consider the propriety of the Navy’s actions in connection with this acquisition. In a prior decision, we sustained a protest filed by Fluor relating to the agency’s evaluation of proposals and conduct of discussions in connection with this acquisition. We recommended that the agency reopen discussions with the offerors, solicit, obtain and evaluate revised proposals, and make a new source selection decision.

The Navy implemented our recommended corrective action and again selected DZSP for contract award. Fluor filed a second protest challenging the agency’s selection of DZSP in the wake of the agency’s corrective action. After full development of the record in that case, we conducted an outcome prediction alternative dispute resolution (ADR) procedure at the request of the Navy. We advised the parties that the agency’s evaluation of DZSP’s proposed cost in the area of its exempt employee compensation (discussed in detail below) appeared to have overlooked certain significant features of DZSP’s proposed costs. As a result, the GAO attorney advised that our Office likely would sustain the protest. The agency advised our Office that it intended to take corrective action to address the concerns we identified, and on that basis we dismissed Fluor’s second protest as academic.

After dismissal of Fluor’s second protest, the agency engaged in limited discussions with the protester and DZSP and solicited, obtained and evaluated revised proposals. The agency again selected DZSP for award, and the current protest followed.

The RFP advised offerors that the agency would make award on a best-value basis, considering cost and several non-cost evaluation factors. The non-cost factors were as follows: past performance, occupational safety, staffing and resources, technical approach, and small business utilization. For cost evaluation purposes, the RFP advised offerors that the agency would evaluate proposals for completeness, reasonableness, balance, and realism. The RFP stated that the agency would assign past performance examples relevancy ratings of very relevant, relevant, somewhat relevant or not relevant, and would assign each offeror’s past performance a confidence rating of substantial confidence, satisfactory confidence, limited confidence, no confidence or unknown confidence. Finally, the RFP stated that past performance was approximately equal in importance to the other four non-cost evaluation factors combined, and that all five non-cost factors, when combined, were approximately equal in importance to cost.

DZSP had proposed 113 exempt labor categories, and claimed that it was escalating the direct rates of compensation for these employees by [deleted] percent for each year of contract performance. A careful examination of the record showed, however, that in addition to applying an escalation factor of [deleted] percent, DZSP also was applying what it termed a “decrement factor” of [deleted] percent to these same rates of compensation. The net result of these calculations was that, rather than escalating its direct labor by [deleted] percent per year, DZSP actually was reducing the rates of compensation for these employees by [deleted] percent during each year of contract performance. The contemporaneous record showed that the agency failed to recognize this decrease in DZSP’s proposed compensation, and that its cost realism evaluation failed to take it into account.

The record further showed that Fluor had been found technically superior to DZSP under the non-cost evaluation factors. While both firms received the highest ratings (substantial confidence and outstanding) under the past performance, occupational safety, staffing and resources, and small business utilization factors, Fluor’s proposal received an outstanding rating under the technical approach factor, while DZSP’s proposal was assigned a rating of good under that factor.

The agency’s selection of DZSP’s lower-rated proposal was based on its conclusion that it represented a savings of approximately $6.9 million over the life of the contract. However, we concluded, based on the error associated with the agency’s failure to recognize DZSP’s decrease in its exempt employee compensation, that this apparent cost savings was largely non-existent. We therefore concluded that the agency’s source selection decision was not reasonable.

Subsequently, the agency elected to allow Fluor and DZSP to make limited revisions to their proposals.
Both firms revised their proposals and the agency reevaluated them on the basis of those revisions. The agency made no changes to the adjectival ratings assigned to the offerors’ non-cost proposals (Fluor was again found superior under the technical approach factor). Both firms revised their proposed costs: Fluor proposed a total cost of $494,519,656, and DZSP proposed a total cost of $491,894,166. The agency made no adjustments to either firm’s proposed cost for purposes of evaluating realism. On the basis of these evaluation results, the agency again made award to DZSP, concluding that, although Fluor’s proposal was technically superior, it did not merit the approximately $2.6 million cost premium.

The focus of Fluor’s latest protest centers on a change in the proposed approach to managing and compensating its exempt personnel that DZSP introduced in response to the agency’s latest round of discussions. The agency had provided DZSP a discussion question relating to the fact that, in its earlier proposal, it had offered to reduce its exempt employees’ compensation by a net factor of [deleted] percent during each year of contract performance. The agency advised DZSP that such an approach was not considered by the government to be reasonable or realistic because it implied that every exempt position would be replaced with a new hire at a lower rate of compensation for each year of contract performance.

In response to the agency’s discussion question, DZSP essentially introduced an entirely new approach to how it would manage and compensate its exempt employees. In effect, DZSP’s new approach was that it would replace incumbent workers at a rate of [deleted] percent of its exempt workforce per year and hire new, lower paid, employees in their place. These new employees would be paid [deleted] percent of the hourly rates identified in DZSP’s proposal. The employees that were not replaced in a particular contract year would be given a [deleted] percent escalation to their hourly rates of compensation (until such time as they were replaced), and this would result in [deleted] hourly rates of compensation that would [deleted] over the life of the contract.

Fluor raises various challenges to the agency’s evaluation of DZSP’s proposed approach to maintaining [deleted] wage rates for its exempt employees. Among other arguments, Fluor alleges that the agency engaged in disparate treatment in connection with evaluating its proposal and DZSP’s proposal in the area of staff recruitment and retention.

For the reasons discussed below, we agree with the protester that the agency evaluated the two proposals disparately in connection with the question of recruitment and retention of staff. It is axiomatic that agencies are required to evaluate proposals on a common basis and in accordance with the terms of the RFP; agencies may not properly engage in disparate treatment of offerors in the evaluation of proposals.

Under the express terms of the RFP, the agency was required to evaluate the adequacy of the offerors’ staffing approach as it related to the recruitment and retention of staff.

The record shows that Fluor’s staffing approach for exempt employees involved recruitment of 95 percent of the incumbent staff. Fluor represented to the agency that it was confident in its ability to do this based on the wage rates it was proposing. Of significance, Fluor specifically represented that, in the event it was unable to attract the incumbent staff with the rates of compensation it was proposing, Fluor proposed to [deleted] for exempt employees. Notwithstanding this representation in the Fluor proposal, the record shows that the agency’s evaluators and source selection authority expressed a concern that Fluor would be unable to recruit the incumbent exempt employees at the wage rates it had proposed. The agency’s technical evaluators questioned Fluor’s ability to recruit the incumbent exempt staff based on the wage rates it had proposed, and suggested that Fluor’s approach could result in employee morale and retention issues. The agency’s cost evaluators echoed these same concerns.

In contrast, the evaluators did not give meaningful consideration to similar implications of DZSP’s proposed approach described above, or how it would impact the firm’s retention of employees, as required by the RFP. In this connection, the evaluators gave no consideration to the fact that DZSP expressly proposed to replace its incumbent staff at a rate of [deleted] percent per year for each year of the 8-year potential life of this contract. The agency technical evaluators confined their observations to consideration of whether or not it was realistic for DZSP to replace its existing, incumbent exempt employees, and concluded that it was “very realistic” for DZSP to do so because approximately [deleted] percent of DZSP’s overall workforce was comprised of an aging population. In addition, the technical evaluators observed only that DZSP’s claimed 95 percent retention rate for its exempt employees would “not be applicable” to future contract periods, but did not criticize the firm’s proposal for this reason. The cost evaluators, for their part, did not give consideration to DZSP’s proposed plan to replace its exempt workforce, and instead confined their observations to whether or not DZSP’s proposed rates of compensation were reasonable and realistic.

In addition to these inconsistencies, the agency’s source selection authority (SSA) specifically found the DZSP proposal superior to the Fluor proposal in the area of employee retention and used that as a discriminator for making her selection decision. In fact, she apparently was unaware of DZSPs’ proposed approach of essentially replacing its exempt workforce more than once over the life of the contract.

In sum, the record shows that the agency evaluated the offerors disparately under the staffing and resources factor, criticizing Fluor’s proposed approach as possibly involving a risk that it would not be able to recruit the incumbent workforce, while at the same time failing to meaningfully consider whether a similar risk was raised by DZSP’s proposed approach of repeatedly replacing its exempt employee workforce over the life of the contract. In light of these considerations, we sustain Fluor’s protest.

We recommend that the agency reevaluate proposals in a manner that is consistent with this decision and make a new source selection decision after performing that reevaluation. Should the agency conclude that DZSP is no longer in line for award, we further recommend that the agency terminate DZSP’s contract for the convenience of the government, and make award to Fluor, if otherwise proper.

Monday, November 27, 2017

When all salient factors are rated similarly for best value, there is no prejudice to rejected offeror; But...

In a best value photo finish, when a protesting offeror’s past performance evaluation factor was recognized by the agency as more advantageous than the others, there is a reasonable possibility that the protester was prejudiced by award being made to another offeror. Thus, the protest was valid.

The following GAO decision is instructive for its discussion of the means for evaluating technical factors, past performance factors and price factor trade-offs. It is particularly instructive for dealing with photo finishes. As always, I take great liberty in presenting cases and articles, so this is not an official recitation. If you need that, go to the link.

Matter of: SITEC Consulting, LLC; VariQ Corporation; Logistics Systems, Inc.
1. Protests challenging the agency’s evaluation of technical proposals are denied where the evaluations were reasonable, performed in accordance with the solicitation evaluation criteria, and equal.

2. Protests challenging the agency’s failure to conduct an adequate risk assessment of the awardee’s price are actually challenges that the agency failed to perform a price realism analysis and, where the solicitation did not provide for a price realism analysis, such challenges are without merit.

3. Protest challenging the agency’s evaluation of past performance is sustained where the agency concedes errors in its past performance evaluation and the record establishes that one protester was prejudiced.
Under the terms of the RFQ, award was to be made to the firm whose proposal represented the best value to the government, considering technical approach, past performance, and price. Technical approach was more important than past performance. Those two factors, when combined, were significantly more important than price.

With respect to past performance, the RFQ advised offerors that the government would evaluate “relevant past performance.” Relevant is defined as “similar to the IT services in the PWS and similar in nature, scope, size and complexity to the required services.”

Past performance was to be rated based on a stepped adjectival rating scale from “Significant Confidence” (highest) to “Confidence” to “Neutral” to “No Confidence” (lowest). Each rating was defined, for instance: ‘Confidence’ shows “the Vendor’s past performance record indicates the Vendor should be able to successfully perform the required effort. Some Government intervention is expected to be required in achieving the required level of performance.” The next lowest rating, ‘Neutral’, shows “the Vendor has no relevant performance record. A thorough search was unable to identify any relevant past performance information. This is a neutral rating. It does not hinder or help the Vendor.”

In the Technical evaluation, one offeror (the highest price) was rated a notch above the other three offerors, who all received the same rating. In Past Performance evaluation, the agency rated all offerors equally, as “Confidence”. In the result, award was made to CWS, the second lowest price offeror. VariQ protested. It asserted that the agency deviated from the past performance evaluation criteria specified in the solicitation and should have been rated higher than its given rating.

Here, the agency ultimately admitted the substance of the protested error. A review of the agency’s own evaluation of past performance information supplied by CWS, SITEC, and LSI supports a past performance rating of neutral for each of those offerors. The agency determined that while LSI and CWS had some past performance that was similar in scope, it was smaller in size. The agency also determined that SITEC had past performance that was narrower in scope than the current requirement. However, in all cases, because the agency did not find any negative past performance, it assigned each of those offerors a confidence rating. The agency conceded that neutral is the appropriate past performance rating for all of the offerors except VariQ.

But, the agency asserted that the errors in the past performance evaluation did not prejudice the protester, and that even if the other three vendors had been given a “Neutral” rating for past performance, the source selection authority (SSA) could not have used that as a discriminator due to the fact that a “Neutral” rating can neither hinder nor help the vendor. In effect, the agency said that the hierarchy of the four rating levels specified in the solicitation was neutralized by the description of one of them.

But the agency had chosen a “best value” method of source selection, and that entails a trade-off of the various stated factors according to their relative ratings. The agency’s assertion that the SSA could not have considered VariQ’s past performance confidence rating in VariQ’s favor in its tradeoff decision, because the other offerors’ proposals were rated neutral, is inconsistent with prior decisions of this Office. Although agencies may not rate an offeror that lacks relevant past performance favorably or unfavorably with regard to past performance standing alone, an agency may, in a price/technical tradeoff, determine that a high past performance rating is worth more than a neutral past performance rating.

Competitive prejudice is an essential element of a viable protest; where the protester fails to demonstrate that, but for the agency’s actions, it would have had a substantial chance of receiving the award, there is no basis for finding prejudice, and our Office will not sustain the protest. However, GAO will “resolve doubts regarding prejudice in favor of the protester; a reasonable possibility of prejudice is sufficient to sustain a protest.”

Here, the RFQ stated that the technical factor is more important than the past performance factor and that those two factors combined are significantly more important than price. The record shows that there are variances behind the technical factor ratings, the offeror’s prices are clustered relatively closely together, and, as the agency has now stated, VariQ’s proposal is the only one to have a past performance rating of confidence rather than neutral.

Under these circumstances
, we find a reasonable possibility that the protester was prejudiced. Consequently, we sustain VariQ’s challenge to the agency’s past performance evaluation.
FURTHER READING: GAO Makes Rare Finding of Error in Past Performance Evaluation, and Underscores Incumbents Are Not Automatically Entitled to Highest Technical Rating

Wednesday, August 23, 2017

The ethics of paperwork

Illinois, USA

Note: As I so often warn, I slice and dice and paraphrase and omit articles to my end an didactic idiosyncrasies. Therefore, don't take my word for the renditions of articles here. If you need to know the actual intent and full context of the authors of articles presented in this blawg, read the source at the links.

Procurement changes welcome
Gov. Bruce Rauner signed bipartisan legislation last week that should make it easier for the state to make required purchases at lower costs for taxpayers. S.B. 8 has particularly positive ramifications for public universities throughout Illinois.

The legislation is intended to make the procurement process more efficient and transparent by undoing restrictive rules that were put into place after the scandals of the administrations of former Govs. Rod Blagojevich and George Ryan. They created bureaucratic nightmares, the undoing of which Rauner said will "make it easier for small and midsize businesses to bid on contracts." It also will make it easier for public entities to accept the lowest bid. That may seem like common sense, but in Illinois, it's revolutionary political reform.

Killeen cited several problems UI officials endured under the old rules that he expects to be addressed by the new law. He said that "our libraries will be able to purchase academic journals that are staples throughout higher education without going through unnecessary and time-consuming procurement reviews" and "will avert delays that have slowed research and frustrated top faculty, threatening to chase them and their nearly $1 billion in annual research funding to states with "less-cumbersome" procurement guidelines. "For instance, our chemistry and biology researchers will be able to order a specialized microscope that is available from just a single source without jumping through hoops to attract other vendors that don't exist," Killeen said.

The goal of limiting public corruption under the old approach was well intended. Given the criminal instincts that pervade government in this state, they can hardly be ignored. But there are limits to what bureaucratic rules can achieve in pursuit of the noble but challenging goal of legislating honesty. They can become counter-productive when they have the effect of paralyzing the process — in this case, the procurement process.
Governor Signs Procurement Reform Bill
Rauner said the bill isn’t perfect, but it will make the procurement process easier for both vendors and state agencies like universities. “And, based upon the estimates I’ve heard, this can save the university tens of millions of dollars every year.” And Rauner says the savings will be even greater for other state agencies, from Central Management Services to the state prison system. Rauner said that his administration estimated that procurement reform would, in time, save the state $250 million to $300 million a year.

“This bill will allow us to save hundreds of millions of dollars every year”, the governor said. “This is big stuff, and it’s wonderful. This is major progress for the people of Illinois.”

Prof. Jeffrey Moore, said he welcomed the measure. Moore said Illinois’ complicated procurement rules have made it difficult for researchers to obtain vital but obscure equipment and parts at good prices, because many suppliers find them too complicated to bother with. He gave the example of a researcher who was seeking a part that was made by only one small company. “And this particular company, which is a small company and doesn’t have a lot of business, but is the only maker of this research part, was not willing to learn the process of our complicated system and chose not to participate in the bidding process”, said Moore, “which meant that the researcher was not able to do the research that they needed to do, because they couldn’t get this part.”

Gov. Rauner said it’s difficult to regulate ethics, and the result is often a surplus of paperwork. He said his own administration supported a different approach.

“We’ve made an effort to try to encourage ethical behavior”, said Rauner, “and encourage good government, but try to also balance that with making government efficient and effective and transparent.”
The devil is always in the detail. There will never be a one-size-fits-all-perfectly procurement system for all time. It's a balancing process. Every procurement change involves a rebalance of crucial principles, for better or worse. You can never finally have it the way you'll always be happy with it. In other words, it's a politician's dream come true: a never-ending dream of posture and headline. As Prof. Steven Schooner of the George Washington University Law School tells us in his procurement Desiderata, the choices we make in procurement reform involve trade-offs of critical governance principles.
It is difficult to articulate objectives for a procurement system. There are many options, and most are contradictory.

Critics of the U.S. system suggest that, historically, efficiency was not a fundamental goal of the procurement process and, arguably, our system is designed to thwart efficiency. A procurement system is efficient when it spends the least amount of resources in the process of purchasing what is needed. If your buyers are overworked, however, such a system becomes more expensive, because your buyers fail to obtain the best prices. Unfortunately, the pursuit of best value typically requires greater buyer resources, from market research to negotiation.

Ultimately, each government must decide how much discretion or flexibility it wishes to delegate to its buyers. For each individual transaction, greater buyer flexibility should result in higher customer satisfaction and better value for money. For all of your transactions, taking a systemic view, broad delegations of discretion or flexibility may reduce transparency and competition. Accordingly, this discretion may entail a lack of control that may threaten public confidence in your procurement system.

No system can achieve all of these goals. Nor can a state expect that its objectives for its system will remain constant over time. Determining which goals are most important is a daunting, ever-evolving challenge.

Because no system can achieve all of the goals here (or the many not discussed), your desiderata entails important tradeoffs. There are significant transactional, economic, and social costs associated with maximizing transparency, integrity, and competition. Nonetheless, the author believes these costs are an excellent long-term investment.

Three “pillars”, in my opinion, underlie the United States procurement system: system transparency; procurement integrity; and competition. In the United States, we believe that, as a general rule, our government enjoys access to the best contractors, lowest prices, most advanced technology, favourable contract terms and conditions, and the highest quality goods and services. We think this is so because our system, for the most part, encourages participation by the widest possible pools of potential competitors; it consistently demonstrates that competitors will be impartially considered for award of our contracts; and it treats all contractors in a manner that balances appropriate risks with meaningful profit incentives and rewards.

Alternatives to competitive bidding, designed to save time or money, reduced accountability

New Mexico, USA

Audit: State contracts lack competition
New Mexico state procurement rules designed to ensure competition on contracts for goods and services are being circumvented unnecessarily amid exemptions that cover $6.5 billion in spending each year, the State Auditor’s Office said Tuesday. A special audit by the office of State Auditor Tim Keller found some state agencies used emergency exemptions in ways not permitted by law and that sole source contracting remains common.... New Mexico spends between $10 billion $13 billion in state funds and federal aid each year on procuring goods and services.

Health care contracts signed by the Human Services Department accounted for the bulk of exemptions to the state procurement code — more than $5 million in the fiscal year ending in June 2016.

State Auditor Tim Keller said current alternatives to competitive bidding were designed to save the state time or money, but have ended up reducing accountability in government and fairness to outside businesses. The audit also found limited oversight of political campaign contributions from contractors hired by the state.

The report recommends reforms to rein in exemptions to competitive bidding and to streamline contract approvals under a single procurement oversight authority. Agencies typically spend over six months to approve a contract, making it more likely that agencies will look for short-cuts, the audit stated.

In a letter to Keller, Department of Finance and Administration Secretary Duffy Rodriguez called the methodology behind the audit “questionable” and described as conjecture concerns about the general overuse of non-competitive procurement. Keller said, “We’re supposed to protect against pay-to-play and fraud, waste and abuse, and also I think just be accountable for where those dollars are going. What our audit showed is that, by and large, for billions of dollars, we are not doing that in one way or another. We’re either violating our own laws or we’re not tracking the data.”

Auditor’s report reveals state overreliance on no-bid contracts
The study, to be formally released Tuesday, found state agencies, in violation of the government procurement law, used emergency exemptions from purchasing rules when there was no urgency to bypass the competitive bidding process.

The Auditor’s Office reviewed 11 small contracts, too. Less oversight is required for purchases of less than $60,000 in many cases, but the report found a state agency amending small contracts several times to include much larger sums.

The report examined 13 larger sole-source contracts and found 10 did not meet the state’s rules for such purchases. The State Auditor’s Office said agencies are skipping the competitive bidding process out of convenience and based on assumptions about price. The report also examined 14 emergency purchases and found only three fit the definition of an emergency; an agency said it needed to fix what the report described as a contamination issue even though the agency had learned of the issue one year earlier.

State Auditor Tim Keller said the study’s findings show a government too reliant on contracts that are not put out to bid, as well as a purchasing system that is complex, decentralized and rife with loopholes. “The spirit of procurement is to safeguard tax dollar funded contracting from fraud, waste and abuse,” Keller said in a statement. “Strong directive executive leadership and a reworking of the law to make bidding more effective and efficient would have a game-changing impact on creating local jobs, cutting red tape, and providing essential services to New Mexicans at the best value.”

The biggest share of state spending outside the usual purchasing process goes to goods and services that are bought by one state agency from another or from a local government. Those purchases are usually exempt from competitive bidding. And certain health care spending, a major expense for the state, also falls under what is known as “sole source procurement,” which is when an agency gives the contract to one company without competitive bids.

State agencies can buy goods and services from private companies without a competitive, open bidding process only when one company sells a particular product or an emergency requires officials to move quicker than the time it takes for competitive bids. However, agencies must make an effort to find other vendors and detail the reasons for an emergency. The state’s rules warn that agencies are not supposed to bypass the usual purchasing process because staff believes one particular option is best or the least expensive.

The report raised concerns that the General Services Department and the Department of Finance and Administration “do not always provide adequate scrutiny.” As a result, the report said, agencies can get away with no-bid contracts that do not meet the state’s rules.

The State Auditor’s Office suggested consolidating oversight of the purchasing process, which the Legislative Finance Committee has long recommended. The report also called for additional training of all state personnel involved in procurement and suggested legislators comprehensively review the exemptions and exceptions in the state’s purchasing law.

Sen. Sander Rue, R-Albuquerque, has sponsored legislation reforming the procurement process but said lawmakers may need to revisit the language of the current rules. Rue said the state should open up the process even further by, for example, making public how officials choose winning contracts.

“The more transparent and open procurement is,” he said, “the less you are to have mistakes, errors and perhaps mischief.”
Note: New Mexico is one of a couple of dozen states, including the Territory of Guam, that use the principals and are guided by the processes of the ABA Model Procurement Code.