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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

Thursday, May 18, 2017

War (good God): What is it good for? In Nigeria, the elite and Boko Haram, it seems

Or so the following article would have us believe. I use this as though it is thoroughly hpothetical to illustrate that, in times of strife, whether ma-nmade or natural, attention is more attracted to the strife, not the money trail. 

The only defense for such diversion of attention is transparency and accountability in as near real time as possible. A trained and trustworthy professional bureaucracy is critical. 

It is obviously most useful to elect and appoint honest leaders who put good governance and the welfare of the led before their own interests.

Nigeria's Political Elites Hid Behind Military to Steal Billions of Dollars - Report
Corrupt officials over the years exploited the excessive secrecy of the country's defence budget to rip off the nation, says the report released Thursday in Abuja by Transparency International Defence And Security. The 15-years-old war against Boko Haram insurgency has helped pushed up Nigeria's defence budget and corresponding increase in corruption within the sector, the report said. The Areport has highlighted how Nigeria's political elites for years hid under the cover of the country's military to steal billions of dollars that would have been channeled into improving the living conditions of the citizens.

The report, which was prepared in partnership with the Civil Society Legislative Advocacy Centre, CISLAC, is titled, Weaponising Transparency: Defence Procurement Reform As a Counterterrorism Strategy in Nigeria. Corruption in the defence sector, according to the report, is a major threat to Nigeria's internal security and political stability. "Largely unaddressed, it has weakened Nigerian counterterrorism capacity whilst strengthening Boko Haram," it said.

The report repeatedly mentioned a former National Security Adviser, NSA, Sambo Dasuki's case as an example of how the country's defence sector leaves room for exploitation. Mr. Dasuki is currently standing trial for allegedly mismanaging funds meant for the procurement of weapons to prosecute the war against Boko Haram.

The report also mentioned former President Goodluck Jonathan and the late military dictator, Sani Abacha, as some of the nation's leaders who profited from the inherent weakness in the sector.

According to the report, the stealing is usually done through inflating of procurement contract values and creating of "phantom" defence contracts. "Such contracts are used as a vehicle for money laundering: facilitated via weak or corrupted Nigerian banks, illicit financial flows are often hidden in property in the UK, United States, South Africa and Dubai," the report says.

The stealing is done with the active connivance of the country's military leaders. "With oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats," says the report.

"Former military chiefs have stolen as much as US $15 billion - a sum equivalent to half of Nigeria's foreign currency reserves - through fraudulent arms procurement deals."

All is not lost. The report acknowledged President Muhammadu Buhari administration's effort to tackle corruption in the country's defence sector. But it warned that, "Only a holistic reform agenda can deliver the deep, systemic changes and improvements in transparency and accountability needed to prevent the next US $15 billion quietly leaving Nigeria through the back door".

"Since coming to power in May 2015, President Buhari has taken some bold action in tackling defence sector corruption. Central to his approach have been two ad hoc, temporary audit committees: one investigating spending by the Office of the National Security Adviser and one investigating defence arms and equipment procurement.

"Taking on the defence establishment was a significant move: the evidence uncovered by these probes revealed that several of the country's former military chiefs, using dozens of companies, together stole as much as US $15 billion.

"President Buhari's anti-corruption drive is a rare example of senior Nigerian defence and security officials being exposed to criminal investigation. By signalling that military impunity is not without limit, it is undoubtedly a positive step forward," it said.

State governors in Nigeria are also known to have used the secretive "security votes" as an avenue to steal public funds, the report said.

The report recommends a unified anti-corruption strategy for the defence sector, the extension of public access to defence and security information, and the monitoring of confidential procurements as some of the ways of tackling the problem. Other recommendations include the sharpening of international focus on fighting corruption in Nigeria, plucking off money laundering loopholes in banks, the extension of whistle-blower protection to cover the defence sector, and regulation of secretive security votes.

"Declassifying how the security vote funds have been spent, after a two-year information embargo, could also enable citizen oversight," the report said.

Katherine Dixon, Director Transparency International Defence and Security, called for a quick action against corruption in the Nigeria's defence sector. "Corruption in Nigeria is not just a problem for Nigerians, but a concern for all of those looking to tackle violent extremism around the world.

"Entering into blind defence deals that ignore the rampant corruption in Nigeria's defence sector means international partners could inadvertently be giving rise to Boko Haram. Likewise, the doors to allow corrupt officials to launder their ill-gotten gains out of Nigeria should be slammed shut, through the active denial of visas and other domestic legislation that targets corrupt money. With Buhari's first term soon to end, the international community may soon find itself without a Presidential ally in this fight - now is the time to act," Ms. Dixon said.

Wednesday, May 10, 2017

Government gets spanked for hitting a "new record"

There have been (at least) a couple of of good reviews of a recent decision of the Court of Federal Claims in the case Gallup, Inc. v USA.   In that case, the government got caught out making up an entry for the procurement record in the course of a procurement protest; in effect, attempting to create a new record.

Tch tch.

The court was, shall we say, livid:
The Contracting Officer, Ms. Julia A. DeLoach, signed the Memorandum for Record. While the document itself contains no date, the Index identifies June 24, 2016 as the date of creation for the Memorandum of Record. The Market Analysis contains an undated chart which summarizes the USSOCOM evaluation team’s comments on each RFI response. Pursuant to normal Court procedures, the Administrative Record also contains a “Certification of Contracting Office” signed by Ms. DeLoach affirming that “after careful review, the following documents constitute the record of administrative actions . . . .”

The Government notified the Court that on March 23, 2017 the Government learned the Memorandum for Record “had been prepared on or about December 15, 2016, i.e., after the agency had proceeded with the procurement. In order to “uncover the nature of the inaccuracy present in the administrative record and determine whether any action should be taken by this Court”, the Court issued an Order retaining the March 30, 2017 hearing date, and requiring “all those individuals who assisted in the production of the administrative record” to attend the hearing.

At the hearing, the Court questioned Ms. DeLoach while she was under oath. She further testified that she personally compiled the Administrative Record in this case without any assistance, including choosing the June 24, 2016 date for the Memorandum for Record in the Index, and signed the Certification of Contracting Office. Ms. DeLoach confirmed that the chart accompanying the Memorandum for Record was created on June 24, 2016 and that it accurately represents the contemporaneous comments of the USSOCOM evaluation team. When presented with the Memorandum for Record and asked to explain why she created the document, Ms. DeLoach responded:
[W]hen I received the pre-filing notice about December 13th, I said, uh-oh, if [Gallup] really file[s], I need to make sure my record [is] in good shape. […] I realized I had the [chart] with nothing that consolidated that or nothing that summarized that and I prepared the [Memorandum for Record] at that time, sir. I now know that [] was a huge mistake and I am deeply sorry that this has come to this. . . . [T]he timing was wrong.
Ms. DeLoach confirmed that the GRAP acquisition was already “underway” when she created the Memorandum for Record.

On March 30, 2017, immediately following the hearing, the Court issued an Order to Show Cause stating that “the Court contemplates the imposition of sanctions against the government and ordered the Government to explain why the Court should not require USSOCOM to pay Gallup’s attorney’s fees and costs associated with the prosecution of this bid protest. Knowingly providing inaccurate information to the Court is certainly grounds for sanctions.

A recent bid protest before this Court, Coastal Environmental Group Inc. v. United States, presents nearly identical facts to those here and further supports the imposition of sanctions in this case. An EPA official included a backdated document in the administrative record in order to “make it appear to anyone who read the document that she prepared and signed the document ten months earlier than she actually did.” The official then “attempted to cure her oversight by preparing . . . a Determination and Findings document.” Accordingly, Judge Margaret Sweeney of this Court imposed sanctions.

In this case, Ms. DeLoach also realized her record was incomplete and attempted to “cure her oversight” by preparing a Memorandum for Record nearly six months after USSOCOM made its set-aside decision.

The Court held a telephonic status conference at the request of the parties during which counsel for the Government indicated (and confirmed in writing the same day) that the parties had “reached an agreement in principle for USSOCOM to pay Gallup’s attorney fees and litigation costs . . . as contemplated by the Court’s order.” In addition, the Government noted that USSOCOM will:
issue guidance to its contracting staff emphasizing the importance of completeness, accuracy, and integrity in preparing records and accompanying certifications [and] is in the process of planning a training session . . . that will focus on issues of accuracy and ethics in preparing and certifying administrative records.
Therefore, the Government does not dispute the appropriateness of sanctions in this case.

The integrity of the administrative record, upon which nearly every bid protest is resolved, is foundational to a fair and equitable procurement process. While the Government has accepted responsibility for its misconduct, the importance of preventing a corrupted record cannot be overstated. The Court encourages USSOCOM to take all reasonable steps to ensure that its contracting office appreciates the necessity of conducting a well-documented, well-reasoned procurement and producing a meticulous and accurate record for review.

The Court will not tolerate agency deception in the creation of the administrative record.
The two reviews mentioned above are:
Government “Misconduct” in Preparing the Administrative Record Warrants Sanctions, and
Fed. Claims Warns SOCOM Over $45M Contract 'Misconduct'
It might be noted that Guam procurement law, consistent with the ABA Model Procurement Code, requires that "No procurement award shall be made unless the responsible procurement officer certifies in writing under penalty of perjury that he has maintained the record required by § 5249 of this Chapter and that it is complete and available for public inspection. The certificate is itself a part of the record." (5 GCA § 5250)

Monday, May 8, 2017

Georgia city is living in a material world

'Cause everybody's living in a material world
And I am a material girl
You know that we are living in a material world
And I am a material girl
Living in a material world
And I am a material girl
You know that we are living in a material world
And I am a material girl
-- Madonna, Material Girl (Source)

Again, the articles, cases and other materials cited in this blog are usually sliced and diced by me to render a teaching moment, not news. I omit parts, paraphrase and make other distortions and edits to suit the goal of this blog, to provide fact-based lessons concerning government contracting, what those of us in local government operating under the ABA Model Procurement Code call procurement. 

Please, click the article's title link and read the original article at the link for clarity and full understanding of the intent of the author of the article cited.

Bid defects pricey for taxpayers
A paperwork error may have cost Augusta taxpayers $1.3 million dollars. At issue before the Augusta Commission for two weeks has been a Butler, Ga., utility construction contractor’s challenge of being disqualified from a job moving massive amounts of earth at the city landfill for a paperwork error.

Angela Peed Lance told commissioners Tuesday that her father, Peed Bros. Inc. chairman Lester Peed, had signed a return mail receipt on the second addendum to the landfill bid package. The firm incorporated the addendum’s minor changes into its bid total, Lance said. “We did price it correctly; we failed to acknowledge in the bid addendum No. 2,” she said.

Peed’s base bid of $3.8 million was substantially lower than the next lowest, Cooper Barnette and Page, which bid $5.2 million. But Peed did not get the bid, and the City paid the next higher bidder another $1.3 million for the job.

The defects Procurement Director Geri Sams pointed to in disqualifying Peed were two: On a form signed by Lester Peed, a checkbox indicating receipt of each addenda was missing a check mark, and a bid bond form acknowledging receipt of each addenda hadn’t been dated. Sams told commissioners Peed’s lower bid stood apart from the “cluster” of higher bids, making it suspect and susceptible to change orders.

The omissions come despite compliance director Kellie Irving’s assertion that vendors are given detailed information during pre-bid meetings about the requirement, and the office makes itself available to answer any questions.

City officials maintain a decade-old strict “materiality” provision remains the best way for Augusta to avoid liability, whether it saves taxpayers or not. The city procurement department has historically been the target of litigation, including a spate of suits filed after the city made “materiality” a requirement of bids. The requirement means a bid can be disqualified for the slightest technical error, whether in the number of copies provided, a missing seal or blank or a notarization error.

Suits filed in 2008 and 2009 alleged the procurement office wasn’t holding firms to the same standards and some vendors were allowed to correct errors. Augusta lawyer Robert Mullins wrote a 2013 law journal article claiming the provision wasn’t truly objective and could be used to throw any vendor out.

More recently, the commission upheld a protest by a vendor who didn’t certify a good-faith effort to use a local small business to install office furniture. The same omission is costly to taxpayers in a bid award going before a city committee Tuesday.

Augusta procurement has streamlined several processes in recent years to make doing business with the city easier, but protects the city through its strict application of the rules, Environmental Services Director Mark Johnson said. “Procurement is consistent in how they applied the rules,” Johnson said. “That limits our liability and legal exposure.”

Commissioner Marion Williams said vendors should expect to go through multiple hoops to do business with the city, but added loopholes allow some existing contractors to bypass the procurement process altogether. “When you come to the government, you’ve got to go through a process because it’s taxpayers’ money,” Williams said.
I have to say, this is a rather blinkered way to conduct procurement. You have to stay on track, but you can take off the blinkers and still have a fair race.

The ABA Model Code and its regulations do not penalize every little error. Rather, errors are analyzed in terms of, first, when in the solicitation process did the error occur, second, how "big" they are, and, third, whether the error resulted in prejudice to other bidders. Only "big" errors that cause prejudice to other bidders are material enough to cause a bid to be rejected, on the basis that the bid is nonresponsive to the solicitation.

Guam regulations track the ABA Model Code. It's provision concerning "Mistakes" is found in 2 GAR § 3109(m), with particular reference to this situation in 3109(m)(B)(4). The General Rule for all mistakes is
Correction or withdrawal of a bid because of an inadvertent, nonjudgmental mistakes in
the bid requires careful consideration to protect the integrity of the competitive bidding system, and to assure fairness. If the mistake is attributable to an error in judgment, the bid may not be corrected. Bid correction or withdrawal by reason of a nonjudgmental mistake is permissible, but only to the extent it is not contrary to the interest of the territory or the fair treatment of other bidders.
The rule for Mistakes Discovered After Opening but Before Award, which is the situation in this article, is
Minor informalities are matters of form, rather than substance evident from the bid document, or insignificant mistakes that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible. The Procurement Officer shall waive such informalities or allow the bidder to correct them depending on which is in the best interest of the territory.

Examples include the failure of a bidder to: ... (3) acknowledge receipt of an amendment to the Invitation for Bids; but only if: (i) it is clear from the bid that the bidder received the amendment and intended to be bound by its terms; or (ii) the amendment involved had a negligible effect on price, quantity, quality, or delivery.
Not every little nonconformity is fatal to a bid. Only material nonconformities require a bid to be rejected. The government should not be boxed into paying a higher price to a bidder who was not prejudiced by the negligible error -- which is an error in which the effect on price, quantity, quality, delivery, or contractual conditions is negligible. 


In this regard, it is important to distinguish between contractual conditions and solicitation instructions. The requirement to acknowledge amendments is not exactly a contractual condition as an bid instruction. 

There are instances in which failure to acknowledge an amendment can result in a bidder's refusal to sign an awarded contract on the basis that the bidder never saw or agreed to the amended provision, to be sure. But not every failure to acknowledge can lead to that result if there are other facts or circumstances which would refute the refusal of a bidder to contract.

For more posts on this topic, click the "materiality" and "mistakes" and "bidder prejudice" label at the end of this post or in the header of the blog.

If you are living in an immaterial world, you don't sweat the small stuff.

Wednesday, May 3, 2017

Foreseeability and time to plan before acting vitiates emergency procurement

Homelessness, like poverty, is always with us. It is a perennial issue of municipal governance and a cold, hard reality. There are social service agencies who are expected to deal with social issues. Such issues are not emergencies in and of themselves, even when they turn from invisible to visible. 

Turning a blind eye to a known problem is simply a failure to attend to a responsibility; suddenly having eyes wide open is incentive to deal with the problem, but it's not an emergency. It's something you chose, or "prioritized", to do nothing about, and now you feel compelled by headlines to do something about it.  

Urgency is not emergency when it comes to playing fast and loose with public money by doing an end around normal prudent procurement procedures. 

Tacoma considers declaring homeless state of emergency
The Tacoma City mayor proposed declaring a state of emergency on homelessness in the city.

“It is something that is happening in every single neighborhood, and the reality of homeless is, it’s not a new issue” said Tacoma Mayor Marilyn Strickland, "but it becomes a new issue when it becomes visible."

“This is going to require us to take an approach we haven’t taken before," said Strickland. “We want to form a cross function team to explore what it takes to declare an emergency. We may have the ability to waive procurement rules.”
Tacoma’s homelessness crisis needs an emergency solution, mayor says
The homelessness issue in Tacoma, the county and the region is well-documented. It’s rare a few days go by lately that homelessness goes without mention in local media.

“Our goal here is to make sure that no one who’s in Tacoma has to sleep on a street, in a park, beneath an overpass or outside, and the message we want to send is help is available,” Strickland said Tuesday.

“Now we have to figure out what that means, because the questions we have to answer for folks if we’re clearing out encampments is where do I go then? We have to have an answer to where do I go and we don’t have that answer right now, and we know it’s a very complicated, complex problem.”

While that means getting homeless people access to medical care, food, housing services and emergency shelter, the mayor said, it also means the city needs to enforce against illegal activities that are taking place, such as blatant and public drug use. Pauli said the city wants to find an approach that will also mitigate the impacts of homelessness on residents and neighbors.

The city will have to explore some potential new ways to address homelessness, she said, and short-term solutions could range from tent cities, to adding more affordable housing, and creating emergency shelters. Declaring an emergency would allow the city to fast track some of its processes in getting those plans into place, Strickland said.
The city obviously has seen this issue growing, and has had plenty of time to plan for a solution. And they are still perplexed as to what the solution will be. They hope to avoid planning by cutting spending corners while they are still trying to understand the problem: "we don’t have that answer right now, and we know it’s a very complicated, complex problem."  

Good luck with that.  Hurry up and do something is a political response, not a responsible management response.

Urgency is not an emergency when it comes to procurement. Procurement starts with identifying a particular need, and planning to acquire and mobilize a solution to address the need. Failure to plan and act in a timely manner is never an excuse to cut corners with government spending. 

Emergency procurement trades off good governance procedures for immediate action in the face of genuine disasters.  Graft, waste and excessive costs are the typical result of emergency procurements even when the emergency is genuine (think Hurricane Katrina), and should be avoided unless uniquely necessary.

Guam law allows emergency procurement, but it is defined and conditions are put on it. Not every so-called "emergency" qualifies for the expedited emergency procurement process. The definition is particularly pertinent to this case study:
Emergency means a condition posing an imminent threat to public health, welfare, or safety which could not have been foreseen through the use of reasonable and prudent management procedures, and which cannot be addressed by other procurement methods of source selection. (5 Guam Code Annotated § 5030(x))

BUT WAIT, THERE'S MORE:  Friday, May 5, from Guam

The Pacific Daily News has a similar tale to tell in an article and its editorial. But, there seem to be more than a few in the government and media who "get it". 

In the face of student protests and other bad publicity, while one member of the Board of Education wants the Governor to issue an emergency declaration to fix a long-standing maintenance problem at a local high school, the PDN editorial board stands calmly and responsibly in favor of doing "the procurement process correctly.... That's where lawmakers and the administration need to focus their efforts." 

At last, there are responsible adults engaging in the problem solving.

Emergency declaration for Sanchez High eyed to get $1M for 2-year plan
The facilities at Simon Sanchez High School are in such poor condition the school will need an extra $1 million during the next couple of years to make necessary repairs and to ensure there are enough classrooms for students, according to education officials.

Maria Gutierrez, vice chairwoman of the Guam Education Board, said asking the governor for an emergency declaration is among the options to avoid double sessions at Simon Sanchez next school year. Double sessions mean students would attend school in two shifts.

Sen. Joe San Agustin, chairman of the legislative committee on education, asked for a two-year interim plan for Sanchez High, including funding requirements. The education board said it will be presenting the plan to San Agustin shortly. Ada said he hopes senators will introduce separate legislation to help repair the school.

On Monday, the public auditor is scheduled to hold a hearing on Core Tech’s procurement appeal of the request for proposals to rebuild the campus.
OUR VIEW: Speed up construction of new Simon Sanchez High
The school has been in a state of disrepair for years. It was shut down temporarily in 2013 because of safety issues. Just two years later, there were health and safety violations that should have closed it again, but Public Health said it would work with the school system to keep it open. The following year, some of the needed improvements still weren’t made.

There’s $100 million set aside to rebuild Sanchez High, and to make repairs at other public schools. But procurement protests and problems have repeatedly stalled the project.

Now senators want a two-year plan from the Guam Department of Education that addresses structural problems at the school. Sen. Joe San Agustin said the Legislature will help identify funding sources for repairs, but needs cost estimates.

“We would want DOE to give us an estimate of how much they would need for temporary repairs so that students and teachers can still use Simon Sanchez safely, while procurement is still ongoing,” he said.

But the money for a new Sanchez High is there. What’s needed is for GovGuam to do the procurement process correctly, so there are no further protests and the project can proceed. That’s where lawmakers and the administration need to focus their efforts.









Friday, April 21, 2017

The anti-competitive multiplier effect of having no effective scope of contract change limitations

Canberra outsourcing deal quadruples to $390 million
The Australian Department of Agriculture signed a technology support deal with EDS in 2009 for $96 million. Since then, EDS has been acquired by HP Australia, and HP has twisted and turned and split and merged to become HPE , HP Inc, or DXC Australia.

The comprehensive managed services arrangement runs the gamut of IT services. When Agriculture took the work to market back in August 2008, it envisioned the contract would cover managed desktop, desktop LAN, midrange, storage area networks, helpdesk, Macs, and project services.

Work orders signed in December last year have now taken the value of the deal to over $390 million, more than four times its original value. And this figure is likely to keep growing until 2022 when the present iteration of the deal expires, at which point it will be 13 years old.

Despite a recent clause added to the deal which allows the department to take it back to market at any time it wants “if the performance of the services does not meet clearly defined and agreed requirements or if the value for money requirement is no longer being met”, a spokesperson for the department told iTnews there were no foreseeable plans to market-test the nearly $400 million deal.

The Department of Finance confirmed that the Commonwealth procurement rules don’t place any cap on the number or value of amendments that can be applied to a federal government contract.

"In order to ensure transparency in government procurement activities, entities are required to report contract amendments and variations on AusTender, including any increases to the total contract value," Finance said. Since 2009, Agriculture has published 227 such variations on the procurement website.

The rules also dictate “any variation to a procurement contract should not significantly change the scope of the contract”.

The procurement rules do, further, insist that “officials must achieve value for money in procurement”.

Agriculture insists it is doing so - even in the absence of any real competition. It called in procurement consultants, who calculated it would cost the agency more to run a new approach to market than it stood to save.

“The review found that the third party service provider was delivering the services to the expected level for a price that was market competitive at that time," a spokesperson said.

IT outsourcing has long been a point of controversy in Canberra, where the cost of running complex and highly regulated multi-year procurement programs often convinces agencies to stay with the same supplier for many years.

In 2015 the Department of Health switched to Datacom after 15 years with IBM.

And the Department of Defence continues to insist it is too busy to refresh its paired distributed computing deals with Unisys and Fujitsu, which are nearing the 20-year mark.
In the US, the concept of scope of the contract is taken a bit more strictly. While not necessarily determinate, a "large" price increase raises the suspicion of a change beyond the scope of the contract.

Plus, the scope of the contract is examined in the context of the contract's intent as the time it was solicited, not during some evolutionary period of the services actually performed. A comparison of the actual services presently being rendered in comparison to those actually solicited in the original contract may reveal a change in the nature, scope and character of the service of such magnitude that the government, and taxpayers, would be better served if it went back out to bid.

Also, in a rapidly changing time of technology, when the field of competition could be expected to provide newer technology at more competitive rates, the change in the field of competition can also influence what is meant by a "significant" change in the scope of the contract.

Too often, the cozy arrangements with an incumbent and a procurement staff not wanting to be bothered to "foster effective competition", as the American Bar Association Model Procurement Code mandates, results in situations like this, where there is rampant contract price inflation. No appraisal (which is what the third party review was in reality) is as tell-worthy as good old-fashioned competition. A dozen expert opinions of a horse will not tell a winner from a loser better than the race.

Contract administrators must not only monitor the services rendered and paid for, they must also monitor the services contracted.

Wednesday, April 19, 2017

The lowest what?

Bid awards are meant to go to the lowest responsive bid from a responsible bidder, right?

Lowest what?

Too often, the assumption, therefore the focus, is on price: the sticker price. Lowest price wins, right?

But from the phrase "sticker price", we also get the phrase "sticker shock".

Sticker shock is what County Officials are coming to terms with as they near completion of a new 22-story Superior Courts building in downtown San Diego, California. Here's the story from the San Diego Union Tribune:

COSTLY ADD-ON AT NEW COURTHOUSE
The new building downtown county courthouse, designed with 71 courtrooms, will consolidate operations at the 1960s-era downtown criminal courthouse on Broadway, Family Court on Cedar Street and the Madge Bradley Building on Ash Street. The 110 deputies and community services officers working at those three locations will be transferred to the new courthouse.

It will cost an extra $3.3 million a year in staffing to resolve security risks caused by the design of the $555 million downtown county courthouse set to open this summer, county officials say.

They point, in part, to a cost-cutting decision not to build a $25 million tunnel under Union Street that would have allowed deputies to escort inmates directly from the Central Jail to the new Superior Courts building.

“This design difference imposes a measurable and higher level of security costs,” said a 2016 report by Sheriff Bill Gore and Helen Robbins-Meyer, the county’s chief administrative officer.

The San Diego County Sheriff’s Department provides deputies and community services officers as security at the region’s courthouses. The department said it needed 33 more positions on top of the 110 originally planned in order to safely move prisoners in and out of the new 22-story building, and to respond to any courtroom emergencies.

The tunnel from Central Jail to the new courthouse was part of the original construction plan, and Keim said the sheriff continues working with state and local leaders to get it built.

Without the tunnel, the plan is to bus jail inmates two blocks to a controlled entryway at the courthouse called a sally-port. Gore says the buses require extra supervision, as do extra holding cells added to the courthouse design.

Gore’s report, submitted to the state Department of Finance, said the new courthouse’s high-rise configuration “significantly affects the ability of deputies to respond to security issues, dangerous incidents or emergencies.”

He noted that a 2015 study showed an average of 16 such incidents per week at the current courthouse.

There will be up to four criminal trial courtrooms on each of 11 floors in the new building. The sheriff wants roving deputies available to run up or down stairwells to assist courtroom bailiffs in any emergencies. Using an elevator might actually be slower if deputies on multiple floors stop it to get on board, the report says.

Other “rovers” would keep an eye on large public spaces, including the lobby and food court. More deputies also are needed to run the five weapons-screening stations at the entrance.

Two felony arraignment courtrooms pose added concerns: They are on the first floor near the exit doors. That proximity, the sheriff’s report says, “presents an increased security risk for a successful escape of in-custody prisoners charged with serious felony crimes.”

The sheriff has asked the state to cover the $3.3 million estimated annual cost of hiring 30 more deputies and community service officers, and three sergeants.

San Diego County spokesman Michael Workman said, “We need $3 million. If that doesn’t happen, we’ll have to determine what to do. It would probably have to come out of (the sheriff’s) budget.”
So, to save the upfront price to construct the tunnel by $25 million in fixed today's dollars, the taxpayers (of either the State of the County) will have to shell out over $3 million a year in servicing expenses, which tend to escalate over time -- for the lifetime of the complex.

Such a deal to get a lower bid price! In just eight years that $25 Million up front price will look a bargain, but the court will be doing 8 years to life (cycle).

This is an example of contemplating bid prices on sticker prices. That is not the model used, however, in the ABA Model Procurement Code, nor the Guam procurement law and regulations, which are founded on the ABA Model Code.

Whatever the colloquial use of "lowest price" may describe the Model law and regulation require a more holistic analysis. It requires "bids will be evaluated to determine which bidder offers the lowest cost". Moreover, "Only objectively measurable criteria which are set forth in the Invitation for Bids shall be applied in determining the lowest bidder. Examples of such criteria include, but are not limited to, transportation cost, and ownership or life cycle cost formulas." (See, Guam regulation 2 GAR 3109(n)(4))

Nobody likes sticker shock. In a $555 million procurement, that is a rookie mistake.