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Wednesday, June 30, 2010

The difference between public and private work

IG: Former postal marketing exec misused staff, contractors
The U.S. Postal Service's former top marketing executive repeatedly used government staff — and at least two business associates he hired with sole-source contracts — to manage his personal finances and outside business interests, according to a new report.

Bernstock told OIG investigators that in June 2009 — about a year after Bernstock joined the Postal Service — he told Postal Service general counsel Mary AnneGibbons that his staff sometimes worked on his personal business, which he thought was allowed.

Gibbons told him using postal staff to conduct his private business was "inappropriate."

"Gibbons physically ‘covered her ears' and was adamant that ‘she didn't want to talk about the past … do not do it,' " the report quoted Bernstock as saying.

"He said that was when he first appreciated the difference between working for the government and working in the private sector."

Among other findings by the OIG:

• Bernstock conducted negotiations with Costco to allow the company to sell Christmas stamps in bulk while owning $30,000 in the company's stock. Postal rules require an official owning more than $15,000 in stock in a company to recuse himself from any Postal Service dealings with that company.

• Bernstock failed to tell the Postal Service about several companies on whose boards he sat, and he used his office, computer and telephone to participate in teleconferences and meetings for several private companies on whose boards he serves.

• Bernstock tried to hire an unnamed postal staffer as a private employee to handle his personal affairs, but the agency's legal department advised against it. So Bernstock got that staffer a $10,000 annual retention bonus for the rest of his postal career, even though he admitted that staffer was not planning to leave the Postal Service.

• Between June 2008 and February 2010, one or more unnamed postal staffers sent or received 1,422 e-mails regarding Bernstock's outside businesses or from his tax accountant and financial adviser.

• An unnamed postal staffer created documents that supported an Ohio barbeque restaurant chain called City Barbeque, of which Bernstock is a co-owner. A postal staffer also e-mailed Bernstock's personal financial adviser to wire Bernstock money as a down payment to invest in the restaurant.

• Contractors Kimberly Wolfson and Lynne Alvarez, to whom Bernstock steered separate sole-source contracts in 2008, also sent one or more postal staffers e-mails with personal business documents related to City Barbeque and the convenience store chain The Pantry. Bernstock serves on the board of directors for The Pantry.

Postal Service spokeswoman Joanne Veto said the agency has tightened rules on noncompetitive contracting in response to the IG's investigation:

• Most postal executives no longer can approve their own department's sole-source contracts worth more than $1 million. Those deals now must be approved by Vice President for Supply Management Susan Brownell. Under the old rules, all noncompetitive contracts worth more than $250,000 had to be approved by the vice president of the organization requesting the contract, which allowed Bernstock to steer contracts to former business associates and approve the deals with little outside oversight.

• Contracting officers also must make sure that all necessary reviews and approvals, price determinations and supplier evaluations are documented and included in the contract file. The IG report found that many of Bernstock's sole-source contracts lacked documents explaining why they needed to be awarded noncompetitively.

• And Veto said the new rules "make clear that contracting officers, managers and executives avoid a professional conflict of interest or the appearance of a potential conflict of interest when considering sole-source contracts."

COMMENTARY: The ABA Model Procurement Code, and Guam law, contain provisions dealing with Ethics in Public Contracting, which note that public employment is a public trust and prohibit certain dealings involving conflicts of interest, among other things. See Guam Code Annotated Article 11, Chpt 5, Title 5, 5 GCA § 5601 et seq.

Of course, having the rules and paying attention to them are separate matters. There must be effective enforcement provisions and actions or they are worthless.

Monday, June 28, 2010

Effective procurement requires effective staffing

USAF Helps The Army Hit The Target
By the end of 2003, it was clear that bribery, and corruption in general, were going to be the biggest threat to stability and the introduction of democracy in Iraq. Massive dishonesty is a problem throughout the region

For example, captured Iraqi oil ministry documents revealed a pattern of international bribery, from the 1991 Gulf War until the 2003 invasion, involving millions of barrels of Iraqi oil (worth over $100 million). This was paid, in return for support for Saddam Hussein, to 46 organizations and individuals.

The recipients included prominent Arab families, religious organizations, politicians and political parties in Egypt, Jordan, Syria, the United Arab Emirates, Turkey, Sudan, China, Austria, France and several other countries.

Some of the organizations named, included the Russian Orthodox Church, the Russian Communist Party, India's Congress Party and the Palestinian Liberation Organization.

Buying kind words is nothing new, but in a democracy, you're expected to be open about it. In the United States, lobbyists have to register with the government, and payments from foreign governments reported. In the Middle East, you give, or take, the money, do the job, and keep quiet about it. This was not unique to Iraq, after U.S. forces got into Afghanistan in late 2001, they captured Taliban records revealing that even these Holy Warriors had big problems with corruption.

Within Iraq, American civil affairs troops, and soldiers in general, constantly come up against Iraqis who offered to bribe them for special treatment. It's unnerving for Americans to encounter such a pervasively corrupt atmosphere. The Iraqis take it for granted that the rules are for fools and that you buy your way to success, and screw those who can't.

There were also problems with corruption among Kuwaiti government officials, who apparently demanded, and got, kickbacks from the American firms doing reconstruction work in Iraq. The corruption was not only pervasive, but often a major obstruction to getting anything done.

This was especially true in Kuwait, which was a U.S. ally, and not under the control of the American military, as was the case in Iraq. Thus Kuwaiti suppliers could sometimes threaten to hold up vital military operations unless a bribe was paid, The only choice was to pay, or delay (and have the State Department or senior U.S. military officials go through the Kuwaiti government to apply pressure to the obstructive supplier.)

There was a body of knowledge in the American military contracting community that U.S. Army officials could use to get around a lot of these problems. But the army didn't have it

So, following the example of the U.S. Air Force, the U.S. Army established a "Contracting Command" and staffed it with contracting professionals, to handle the larger volumes of contract personnel and organizations hired for the war on terror. Iraq, in particular, was a struggle. There were nearly 200,000 contractor personnel in Iraq (including Kuwait) and Afghanistan, during peak operations. This was an unprecedented contracting situation for the American military.

Iraq was what broke the army's existing contracting capability. Before the 2003 invasion of Iraq, the army had one base in Kuwait (through which most army troops pass, on their way to Iraq), and contracting officers there handled $150 million worth of business a year. By 2007, there were eight bases in Kuwait, and a billion dollars a year in contracts to deal with. Since 2003, over 800,000 U.S. Army troops have passed through Kuwait, on their way to Iraq, where tens of billions in contracts have been issued, and often not administered well.

The army got lots of help from the air force, which sent many of its contracting officers to help out.
In the air force, contracting is a career path, and the air force people really knew their stuff. The army could see that after a few years, when they measured rate of contracts with problems, and found it was much lower for air force personnel than for army contracting officers.
It was only two years ago that the Army Contracting Command was established, with a strength of over 4,000 personnel, including 400 military and 1,100 civilian personnel specializing in contracting. The rest were existing acquisition people, who will benefit from having their own command and career path. The command is led by a Major (two star) General, and will take at least five years to come near the level of effectiveness the air force already enjoys in this area.

Sunday, June 27, 2010

Determining responsibility by algorithm

Old movies, such as the Jimmy Stewart, "It's a Wonderful Life", give the impression that in the olden days, to get a loan from your bank, you didn't have to submit any paper work. The banker knew you or he didn't. If he knew you were responsible, you could get a loan, and if not, you didn't.

I'm old enough to remember days similar to that. To do business with a bank, you got to know the banker. Banks in those days spoke about "relationship" banking. For the most part, those days have gone the way of black and white film. Today, regardless whether you know the local banker, you have to fill in all the forms and tick all the boxes for the far-away clerks, accountants and regulators.

In large procurement regimes, unlike Guam and other municipalities, where generally the contractors tend to be local and known, the matter of determining contractor responsibility has less informal and more tick the box. In large procurement regimes, it would be rare for the government to have the circumstances where it could dispense with an inquiry into contractor responsibility.

Smaller procurement regimes, however, might often be able to avail of the Comment to ABA Model Procurement Code § 3-401, which says, "the inquiry is not required in every case. The extent to which a review or investigations should be conducted will depend on ... the bidder's or offeror's past record of contract performance in the public and private sectors."

The US Federal government procurement regime has gotten so huge and impersonal that it often cannot even determine responsibility despite all the boxes that get ticked, and believe me it requires a heap of box ticking.

So now it is turning to the associative reasoning and crowd computing of algorithms used by marketing, debt collection and terrorist tracking agencies to evaluate whether a named contractor is responsible, because the named contractor does not always belie the past record of performance of the real contractor.

The new high-tech weapons against fraud
When a federal agency checks the General Services Administration's list of suspended or debarred contractors to prevent those companies from getting government work, it's only uncovering one piece of the puzzle.

A company can change names and owners, acquire a new business registration number through the Data Universal Numbering System — DUNS, for short — and appear to the agency as an entirely new business.

"If you get debarred from federal service, all you've got to do is ask your wife to open a company, get a new DUNS number and you're back in business," said Douglas Hassebrock, assistant director of investigations at the Recovery Accountability and Transparency Board, at a government conference in April. The board is responsible for ensuring that Recovery Act money is spent properly.

The Recovery Board knew it needed to close such loopholes to prevent fraud, waste and abuse as the government paid out $275 billion in contracts, grants and loans through the Recovery Act, which Congress passed in early 2009 to help stimulate the economy.

It turned to a software platform from Palantir Technologies, based in Palo Alto, Calif., to help accomplish the task. The software tool analyzes information contained on various government-maintained databases — GSA's list of suspended or debarred contractors, the Treasury Department's financial crimes network and other law enforcement records — along with open-source data such as newspaper articles, lawsuits and other public documents.

By viewing these data in a more holistic way, analysts at the Recovery Board can draw connections between individuals and companies that might not be apparent otherwise.

Similar tools are used by intelligence agencies to track terrorists and by credit card companies for fraud detection and prevention. But this is the first time a federal agency has deployed such a tool to track government spending, said Earl Devaney, chairman of the Recovery Board.

"These are tools that the IG community has never used before and quite frankly, they're using it now and I think they would all say to their great benefit," Devaney said in an interview
.

Procurement issues with construction build up in Nigeria

Guam is not the only place in the world experiencing an aberrational (compared to world growth elsewhere) construction boom.

Grappling with the rising cost of government contracts
Despite the prevailing global economic recession, the construction industry in Nigeria is currently one of the fastest growing industries in the world, according to the latest 10- year forecast from Global Construction Perspectives and Oxford Economics.

The report, which named Nigeria as ” global hotspot from now till 2020” says the current level of growth in the nation‘s construction industry is even faster than that of India, reflecting increased wealth and urbanisation resulting from the massive oil-generated revenue.

However, experts say that the much expected growth in the construction industry may be hampered by the rising cost of contracts , especially in the public sector . This is against the backdrop of the fact that the government controls over 80 per cent of construction activities in Nigeria.

The Federal Executive Council , two weeks ago, lamented that construction and procurement contracts in Nigeria were between 20 to 30 per cent higher than what obtained in other parts of the world. Consequently, it had set up set up a committee to identify the cause of this anomaly and make recommendations to the government for necessary action.

Stakeholders in the public and private sectors, have, however, pointed accusing fingers at the government, saying that it, directly or indirectly, contributes in no small measure to the rising cost of contract, as well as numerous scams that have become the trademark of most of the contracts that have been awarded by the government in the recent past.

In a letter to President Goodluck Jonathan, dated June 22, 2010, the NSE President, Engr. Olumuyiwa Ajibola, had blamed high cost of construction projects and procurement in Nigeria on inadequate time for planning, feasibility studies and designs and adoption of wrong procedures during the tender and contract award processes.

Other factors listed by the NSE include, ”Reliance on foreign construction companies which have high overhead costs; and uncertainty concerning availability of contracts; high cost of transportation and haulage, unstable and inconsistent government policies, delay in payment; multiple taxations, cost of construction materials; high cost of labour; and corruption.

According to the NSE, ”The current practice of procurement in Nigeria does not allow for adequate time for technical input, feasibility studies and designs. This is partly due to the directive of the government to procure infrastructure using inadequate in-house technical capacity, given the magnitude and the number of projects being procured at the same time.

“In many cases, the multinational contractors are engaged to perform the design and the construction, on the basis of inadequate preliminary documentation. This has the potential of increasing project costs. The best industry practice is to separate planning and design from construction, and assign adequate time for the former before going to tender, and commencing the construction.”

Another problem is the fact that when the government is conceiving a project, they do not do it according to the budget.

The National President, Federation of Construction Industry, Mr. Mobolaji Williams, stressed that the government does not carry out adequate research on the cost estimate of projects before awarding contracts.

He said,” The government does not usually carry out the necessary survey concerning the cost elements of infrastructure before contracts are awarded. Even when a tender has been given, all the tender documents should be made available to avoid manipulation”

In order to address this problem, he suggested that, ”The Federal Government should apply best practices during infrastructural procurement by the engaging qualified and registered indigenous consultants for all technical projects.

He added that ”Cultivating and nurturing indigenous capacity is the surest way of reducing cost of projects on both the short and long run. The government should , through deliberate policies, facilitate the building of capacities and access to funding by indigenous construction

Thursday, June 17, 2010

Goverrnment not most favored customer of Oracle

The US Federal Government has an expedited procurement scheme for certain commonly acquired products and services. It's like an online warehouse of goods and services offered by various pre-approved contracts and contractors.

It's called the GSA Supply Schedule or the Federal Supply Schedule Program. The online website for the FSSP is here.

The idea behind the program is that GSA (Government Services Agency) negotiates with contractors who apply to offer their goods and services. If approved, prices and terms are agreed, and any government agency (including many non-Federal "agencies") can purchase from any approved contractor without any other formal procurement methodology: the policy of competition is negated by the theory that the government, using its huge bargaining position, can get best available prices under the program without the need of competitive bids.

Key to making that theory effective is the additional requirement that contractors must agree to sell to the government on a "most favored customer" pricing basis.

The following InformationWeek.com article illustrates how the program is meant to work, and sometimes may not.

It also introduces the ancient common law "Qui Tam" remedy, a creature of US procurement law called the False Claims Act , going back to the US Civil War time.

Suit Alleges Oracle Bilked Feds Out Of Millions

The federal government has joined a lawsuit against Oracle that had been filed on its behalf, claiming that the software company bilked it out of "tens of millions of dollars."

The lawsuit, initially filed by former Oracle contract specialist Paul Frascella in May 2007, was under seal until recently, when the United States moved to intervene in the case.

Frascella brought the suit under the False Claims Act, which allows private citizens to sue a company on behalf of the federal government, and he's seeking 25% of all damages.

According to the complaint, federal regulations require that General Services Administration contractors negotiating Multiple Award Schedule contracts, which allow agencies to buy products from the GSA schedule without having to jump through some of the typical government procurement hoops, "obtain the best price given to the most favored customer" in order to decide whether to accept solicitations.

In addition, Frascella's complaint details a number of schemes he says were designed to give commercial customers deeper discounts than the government.

The suit accuses Oracle of using a "scheme to defraud the United States by failing to disclose deep discounts" that it offered to its most favored commercial customers, which, the suit says, ultimately lead to tens of millions of dollars worth of overcharges.


SEE also: Northrop Grumman settles whistleblower case

Sunday, June 13, 2010

HUBbub over US Federal social preference programs

"Hubbub" -- a confused noise of many voices.

Uncertainty looms over procurement parity dispute
For the past several months, Small Business Administration officials have lobbied lawmakers to support legislation that would place contractors in the 8(a) and service-disabled veteran-owned small business programs on equal footing with companies located in Historically Underutilized Business Zones. The 8(a) designation refers to businesses owned by socially or economically disadvantaged individuals; HUBZone firms are located in low-income neighborhoods.

The three programs were thrown into a state of uncertainty after the Government Accountability Office ruled in May 2009 that HUBZone firms are legally at the top of the small business pecking order. The Office of Management and Budget and Justice Department disagree with that decision and have directed agencies to disregard it.

The result is contracting officers don't know how to proceed, said Joe Jordan, associate administrator of SBA's Office of Government Contracting and Business Development.

The Air Force recently followed OMB's directive, telling GAO that it was ignoring its ruling in a second HUBZone protest case filed by DGR Associates Inc. "Contracting officers are not to provide a priority to HUBZones," Air Force officials told agency attorneys, according to correspondence Government Executive obtained.

GAO, meanwhile, essentially has wiped its hands of the dispute, stating it would no longer waste time and resources resolving similar HUBZone protests. "We will decide future protests raising the issue here in an expedited and summary manner, in the interest of reducing the costs associated with filing and pursuing such protests," wrote Lynn Gibson, GAO's acting general counsel in the DGR protest decision.

While legislation remains in doubt, the dispute does appear to be reaching a judicial conclusion. The U.S. Court of Appeals for the Federal Circuit will soon hear Justice's appeal of the Mission Critical Systems case. And, unlike the Court of Federal Claims, the Appeals Court ruling has precedential effect, meaning its decision would apply to future HUBZone priority cases.

SEE PRIOR POST:
US Court of Claims rules HUBZone preference trumps Section 8(a) preference

Friday, June 11, 2010

Proprietary products vs competition

Proprietary products, by their nature, can lead to monopolized purchasing, which is obviously the antithesis of competition. They don't have to do so, however, when properly managed.

First, it must be remembered that proprietary products may compete against other products in a given market, in which case the proprietary product may be a distinguishing factor but not necessarily an essential feature of a product.

Automobiles, for instance, are distinguished by their proprietary designs, but that is not the essential feature governments look for when purchasing them. In cases like this, proprietary features should not be considered as a factor in product/service selection.

In other cases a proprietary feature may be embedded in a product to perform a functional task. If the task it performs does not significantly affect the functionality of the product, again, it should not be considered as an essential specification.

Other proprietary products can effectively monopolize a market, to some degree or other. In that case, much closer scrutiny of the truly essential features of a government's need must be articulated to encourage the entrance of competitive forces. Sometimes, the monopolizer must be taken head on, as the following story about IT technology illustrates.

EU Commissioner Warns IT Buyers Against Vendor Lock-in

European Commissioner Neelie Kroes warned governments and businesses to avoid vendors that try to lock them in with proprietary technology.

"Public and private procurers of technology should be smart and build their systems as much as possible on standards that everybody can use and implement without constraints," she said, adding that this is good for the bottom line because it promotes competition between suppliers and prevents vendor lock-in.

She asked vendors to act now to make their products interoperable with those of their competitors, and not to wait for a court to force them.

Now European Commissioner for the Digital Agenda, in her previous role as Competition Commissioner Kroes won a long antitrust battle against Microsoft over its failure to help competitors develop software that could interoperate with its Windows server products.

However, Kroes said, "Complex antitrust investigations followed by court proceedings are perhaps not the only way to increase interoperability."

Instead, the Commission is looking for other ways of making it more profitable for companies to license the information their competitors need to make interoperable systems, and less profitable to withhold that information.

"Any such initiative would probably be limited to certain types of IT products. And it would likely involve some form of pricing constraints," she said.

The European Interoperability Framework V.2 builds on an earlier set of rules and guidelines for cost-effective public sector procurement of IT systems. Kroes hopes that it will help public authorities avoid the dangers of long-term lock-in.

"It would also ensure competition between suppliers for follow-up contracts and for services. Governments should still be able to choose closed, proprietary products, she said, "but on the basis of a clear justification, rather than because it was the easy option."

By making it easier for industry groups to have their standards recognized, she said, "We want to make standard-setting more efficient, not more burdensome.'

Kroes also promised to help government IT buyers identify their real needs, so that they can specify products without reference to particular brands or suppliers.

"The skills of public authorities vary greatly when it comes to this aspect of procurement," she said. "Many authorities have found themselves unintentionally locked into proprietary technology for decades. [...] This is a waste of public money that most public bodies can no longer afford."

That waste can also directly affect businesses and citizens when public authorities' decisions force them to buy specific products to access a public service, rather than any product compliant with an applicable standard, she said. Examples include schools insisting on the use of a specific word processing system, or tax departments' online forms requiring a specific Web browser.

Wednesday, June 9, 2010

The National Procurement Fraud Task Force strikes again

I have reported previously on actions taken by the National Procurement Fraud Task Force to weed out unscrupulous activities in US Federal government contracting.

Procurement systems must be accountable and policed to maintain their integrity. This post presents another article about other actions brought by the Task Force.


Two Military Officials, Two Contractors and Contracting Company Indicted for Alleged Roles in Bribery and Money Laundering Scheme Related to DOD Contract in Afghanistan
Two U.S. military officials deployed to Bagram Airfield, Afghanistan, two Department of Defense (DOD) contractors and a contracting company were charged late yesterday for their roles in an alleged bribery and money laundering scheme related to the award of a DOD trucking services contract in Afghanistan, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Florence Nakakuni for the District of Hawaii.

An indictment is merely an allegation and each defendant is presumed innocent unless proven guilty in a court of law.

According to an indictment returned on June 8, 2010, in U.S. District Court for the District of Hawaii, retired U.S. Army Sgt. Charles O. Finch, 44, of Hawaii, accepted a $50,000 bribe in the fall of 2004 to influence the award of a DOD trucking contract to AZ Corporation, an Afghan contracting company. The indictment alleges that the owners of AZ Corporation, brothers Assad John Ramin, 40, and Tahir Ramin, 32, both of Pennsylvania, offered the bribe to Finch. According to the indictment, the bribe was paid through the business account of Finch's roommate at Bagram, 1st Sgt. Gary M. Canteen, 41, of Delaware, to disguise the nature and source of the payment. Canteen allegedly passed on a portion of the funds to Finch. According to the indictment, shortly after the money was delivered to Canteen, Finch recommended the award of the contract to AZ Corporation, which was awarded the contract.

Finch was arrested this morning in Hawaii and is expected to make his initial appearance later today in U.S. District Court for the District of Hawaii.

Each individual faces a maximum sentence of 15 years in prison and a fine of $250,000 or three times the value of the bribe for the bribery charge; a maximum of five years in prison and a fine of $250,000 for the bribery conspiracy charge; and a maximum of 20 years in prison and a fine of $500,000 or twice the value of the laundered funds for each of the money laundering and money laundering conspiracy charges. AZ Corporation faces a fine of up to $500,000 for the bribery and conspiracy charges and $500,000 for the money laundering and money laundering conspiracy charges.

John Ramin, Tahir Ramin and AZ Corporation were also charged in August 2008 and June 2009 in the Northern District of Illinois with bribery, conspiracy to commit bribery and mail fraud related to the procurement and delivery of concrete bunkers and barriers at Bagram Airfield. John Ramin, Tahir Ramin and AZ Corporation are scheduled to begin trial on these charges on Aug. 16, 2010. Three former military officials have pleaded guilty in the Northern District of Illinois to receiving bribes from the Ramins and AZ Corporation.

Pentagon looking for a few good procurement officers

Pentagon procurement officer describes overhaul in contracting
the Pentagon's deputy assistant secretary for procurement, Edward M. Harringto, helps oversee how the Army spends more than $132 billion annually, buying a range of items and services: from complex computer software to run electronics programs, to setting dining tents for soldiers in deserts, to buying armored tanks, ammunition and weapons from contractors.

Its "Contractors on the Battlefield" chart outlines the number of contractors compared with the number of soldiers since the American Revolution. Back then, the ratio of contractors to soldiers was 1:6. World War I, 1:20. Vietnam, 1:6. Gulf War, 1:60. Iraq, 1:1. Afghanistan, 2:1.

The office estimates that as the workload has increased 1,000 percent since 1987, the government's contracting workforce has decreased by 25 percent.

Harrington said the biggest challenge we have is restoring the contracting workforce. Building both the numbers of the workforce back as well as advancing their skills. As the contracting dollars have gone up, the government's contracting workforce has gone down. That left us with a relatively minimal staff of senior contracting experts.

Contracting is a practice, a profession. It is similar to law or engineering, where you develop your expertise and skills over a number of years. . . . It takes time to get the training as well as to get the experience with all of the various contracting regulations. Those mid- and senior-level individuals are essential to coaching, counseling and mentoring our entry-level people coming onboard.

We do regular ethics training with our contracting workforce. We focus on procurement integrity and ensuring that we have no undue influence on the process or the people in the process. Are we absolutely perfect? No. It is a matter of daily oversight on our part.

We have a five-year plan to insource a lot of our contracting manpower. We'll add about 4,100 people to our acquisition workforce.

It will be from engineers, to testers, to cost analyzers, to quality assurance personnel -- many of whom are currently contractors.

There's tremendous opportunity to grow. We have a career path, and it is a good, steady job.

COMMENT: Building a quality procurement system is like building a quality hotel. You can have the best design, plans, specifications, tools, material and equipment, but without the skilled workforce all you have is a pile of rubble.

Monday, June 7, 2010

Procurement reform -- Philippines

Public bidding and executive agreements
Government procurement is notoriously prone to corruption. In order to curb this, various statutes requiring public bidding have, from as early as the 1900s, been enacted, amended and supplemented. The latest incarnation of such legislation (after more than 100 years) is Republic Act 9184 or the Government Procurement Reform Act (GPRA).

The state policy is essentially the same: public bidding is required for all government contracts. It is meant to ensure that the government and, more important, the public, get value for their money and obtain goods and services at the most advantageous terms. It is designed to afford greater transparency, competition and accountability in the process of selection and award of contracts.

The general rule requiring the conduct of public bidding is subject only to very limited and well-defined exceptions under GPRA (Article XVI) and other laws. More often than not, resort to these exceptions results in controversy or dispute.

Possibly the most contentious exception to public bidding, of late, has been the exemption given under Section 4 of the GPRA to “treaties or international or executive agreements.” This provision, in effect, allows procurement and infrastructure projects undertaken pursuant to such agreements, if their terms so provide, to be excluded from the coverage of the GPRA and be exempted from the requirement of public bidding.

The Department of Justice (DOJ), taking its cue from Supreme Ccourt rulings, seems liberal in its construction of what constitute “executive agreements.” In its Opinion 46, s. 2007, reiterated in DOJ Opinion 33, s. 2009, it found its way clear to allowing the designation of a contractor without public bidding by echoing the justification that “executive agreements involving infrastructure projects to be funded by a foreign- lending institution do not fall within the scope of RA 9184.”

But what is an “executive agreement?”

A treaty is an international agreement that requires legislative ratification after executive concurrence. Upon ratification by the Senate, it acquires the status of law and may as such amend or repeal prior laws.

An executive agreement, on the other hand, while entered into by the Executive branch of government, does not require ratification by the Senate. It has the force and effect of law but must comply or remain consistent with stated policies in law. It cannot alter or work to amend or repeal prior laws.

The GPRA is categorical in its policy: all procurement shall be done through competitive bidding, subject only to defined exceptions. The exceptions do not include purchases from foreign suppliers handpicked or controlled by foreign governments. Since the executive agreement, as written, cannot alter the stated policy of or exclusions under the law, it cannot exempt the supply contract from the requirement of public tender.

The author of this report, Atty. Manuel L. Manaligod Jr. is a senior partner at CVCLAW-Villaraza Cruz Marcelo & Angangco (web site: www.cvclaw.com).

Procurement controversies -- Atlanta, Georgia schools

Atlanta schools defy bid rules on wireless contracts
the district’s solicitation for bids copied most of its specifications from the catalog of the wireless equipment manufacturer that later was part of the winning proposal.

a contract for wireless Internet equipment — worth as much as $10.5 million over five years — suggests the district is again disregarding local and federal mandates on fair and competitive bidding.

School district officials awarded the work to a company with the fifth-lowest bid and the third-highest overall ranking

School district officials dispute that problems existed in the contracting process.

The district decided last year to rip out old wireless technology in nearly 100 schools and replace it with new equipment. On Sept. 2, officials issued a request for bids.

Already, however, the district had engaged vendors for some of the work: TIG, based in San Diego with an Atlanta branch, and subcontractor Xirrus, a manufacturer of wireless networking products based in Thousand Oaks, Calif.

Last August, at the district’s request, TIG provided price quotes on installing Xirrus wireless equipment at seven schools and in the central office in downtown Atlanta. On Sept. 4, two days after the bid request went out, the district issued purchase orders agreeing to pay TIG the quoted amount. In October, school officials sent the company a $387,000 check signed by the superintendent.

Executives with TIG did not respond to numerous requests for interviews. A Xirrus spokesman, John Merrill, said: “As far as I know, everything is completely on the up and up. Everything was scrutinized and was fair.”

In its request for proposals, the district said price would account for 40 percent of bidders’ scores when submissions were evaluated. The next two most important categories, methodology and technical responses, would count for 20 percent apiece. The company’s qualifications would be worth 15 percent, and the final 5 percent of the score would be based on “value-added benefits.”

The evaluators gave the highest overall score to AT&T, followed by Smartwave Technologies and TIG.

But the evaluators took another look at the proposals, the district’s documents show. This time, they awarded no points to any bidder for price.

Only then, with cost disregarded, did TIG emerge on top.

Contracts that don’t follow purchasing policy are “of no effect and void,” school board policy says. The board may hold employees who purchase goods or services outside the policy’s bounds personally liable — or discipline or fire them. Board chairwoman LaChandra Butler Burkes did not respond to three phone messages.

For this story, The Atlanta Journal-Constitution reviewed roughly 2,000 pages of documents related to multiple technology contracts, including invoices, purchase orders and court documents, along with records kept by the non-profit that administers the E-rate program for the federal government. The newspaper used the Georgia Open Records Act to obtain documents from the school district.

The AJC also interviewed vendors involved in the bidding process and submitted detailed questions to Atlanta school district officials concerning the bids.