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Sunday, February 28, 2010

Procurement Controversies -- Guam

Camacho: No intent to break law
"Most of the appeals that we've had are based on lack of documentation and lack of an understanding of the procurement process," said Public Auditor Doris Brooks, whose Office of Public Accountability hears government procurement appeals.

Brooks said she would like the government to eliminate the sole-source procurement process entirely. "We use that too much as a crutch," she said. "Just advertise, and if only one bidder responds, so be it." That way everyone will know the job is available, she said.

Mayors’ deals with vendors clipped
VILLAGE mayors are ranting about a letter from the Department of Administration’s Accounting Office restricting them from making direct payments to vendors.

Public law allows the Mayors Council of Guam to make purchases via direct payment for equipment, supplies or services without having to go through the normal government procurement process if the items cost below $500.

Kathrine B. Kakigi of DOA’s Division of Accounts, in a letter to Angel Sablan, the council’s executive director, reminded mayors “that the intentions of using direct payment requests [are] strictly for emergency procurements, court-ordered payments/assignments and humanitarian assistances. It is not intended for continuous rendered by vendors or the individual.”

Joannie Flores, management analyst for DOA division of accounts, said the restriction has been implemented after it was discovered that some mayors were paying the same vendors $499 each day.

Flores said the mayors in question should have used a purchase order for that vendor. “They’re not following the public law,” she said. “We’re trying to correct it. We do accept direct payments on certain items. We understand if it’s for one day, but not if it happens every day.”

She went on to say that some of the direct payments have been going on for at least two years.

Ordot/Chalan Pago mayor Jessy Gogue took offense at DOA’s statements.

“I really take offense when they say that we don’t understand the law. There’s almost an assertion that we’re taking advantage of the law by making direct payments to vendors and we’re asking for reimbursements we personally assumed,” he said.

“I know that there is a law that talks about emergency procurement but we wouldn’t have the need for any emergency procurement if these vendors would accept our purchase orders or direct payments,” Gogue added.

Thursday, February 25, 2010

US Government slow to sanction slack contractors

DHS officials reluctant to debar, suspend contractors, IG reports
Homeland Security Department contracting officials are reluctant to pursue suspension and debarment actions against contractors even when those actions may be warranted, according to a new audit released today by DHS Inspector General Richard Skinner.

“The Department of Homeland Security has suspension and debarment policies and procedures in place. However, the department is reluctant to apply the policies and procedures against poorly performing contractors,” Skinner wrote.

"Department procurement officials characterized the suspension and debarment process as being too resource-intensive, punitive and as negatively impacting the size of the contractor pool. The procurement officials prefer to use other administrative remedies to address poor contractor performance,” the report stated.

But reluctance to pursue suspension and debarment actions could put the government at risk of doing business with poor contractors, Skinner warned.

The IG recommended that DHS develop policies to ensure that contracts that are terminated for cause are evaluated for possible suspension or debarment actions as well as policies to record all pertinent information on contractor performance.

Read the IG report here. It notes:
The Department of Homeland Security spends an estimated 40% of its annual congressional appropriation through contracts and grants. The department’s FY 2009 appropriation was $43 billion, of which an estimated $17 billion is expected to be spent through federal contracts and grants.

Federal Acquisition Regulations (FAR) require agencies to solicit offers from, award contracts to, and consent to subcontracts only with responsible contractors. Suspensions and debarments are discretionary actions that agencies implement to protect the federal government by excluding contractors who commit fraud, behave unethically, or willfully fail to perform or have a history of failure to perform according to the terms of a contract from conducting business with the federal government.

Suspensions are temporary in nature and are used to protect the federal government until investigations and any ensuing legal proceedings that could lead to debarment actions are completed.

Causes for suspension actions include, among others, adequate evidence of the following:
>> Commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public contract or state contract;
>> Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating federal criminal tax laws, or receiving stolen property;
>> Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a government contractor or subcontractor; or
>> Any other cause of so serious or compelling a nature that it affects the present responsibility of a government contractor or subcontractor.

Debarments, on the other hand, generally do not exceed 3 years but can be extended if it is determined that it is in the government’s best interest.

Causes for debarment actions include, among others, the following:
>> Conviction of or civil judgment for fraud, violation of antitrust laws, embezzlement, theft, forgery, bribery, false statements, or other offenses indicating a lack of business integrity;
>> Violation of the terms of a government contract or subcontract so serious as to justify debarment, such as a willful failure to perform in accordance with the terms of one or more contracts or a history of failure to perform, or of unsatisfactory performance of, one or more contracts;
>> Noncompliance with Immigration and Nationality Act employment provisions; or
>> Any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor.

The FAR requires agencies to list all suspended or debarred contractors in the General Services Administration’s Excluded Parties List System.

Tuesday, February 23, 2010

Procurement controversies -- Philippines

Tobacco farmers press charges vs BIR executives
Tobacco farmers in Northern Luzon want four more executives of the Bureau of Internal Revenue (BIR) jailed for favoring a multi-billion peso tax stamp scheme which, they said, could kill the local tobacco industry.

The farmers claimed that this committee set aside “the stringent requirements” of the Build-Operate-Transfer (BOT) Law when it classified the SICPATRACE System as an unsolicited proposal and declared SICPA as an original proponent of the costly tax stamp project.

It will be recalled that a BIR pre-qualification, bidding and awards committee (PBAC) recommended to the BIR management committee to accept SICPA’s proposal despite the company’s failure to meet at least 48 of the 83 technical requirements.

Records show that the management committee approved the costly tax stamp project in October 2008. “Based on the initial evaluation of the documents submitted to our office, the SICPATRACE Project was found to have satisfied the evaluation criteria for pursuing the project as an unsolicited proposal,” the management committee said in a letter.


DISCUSSION

It appears that clear specifications for the build-operate-transfer were put out for tender, by whatever means of bid/proposal procedure contemplated by the BOT law.

It then appears that the bid which came in was non-responsive to those specifications.

It then appears that this non-responsive bid was accepted as an unsolicited proposal.

Now those "appearances" may not be the actual case, but as thus framed, this case presents an interesting hypothetical question for examination of Guam procurement: Can a non-responsive bid nevertheless be accepted as a non-solicited proposal?

For many reasons, I would say, "no", but it is a tantalizing proposition.

Under either an IFB or RFP of source selection, a non-responsive offering should be rejected, and that should not present any controversial comment. But what if, to simply shortcut the acquisition process, the government did in one step what might arguably be done in two steps; that is, why couldn't it simply cancel the first solicitation and at the same time accept an unsolicited proposal?

There are a lot of technical answers to that question, all saying "no", but I presented this case to illustrate the importance of the basic principles of procurement law. And this case illustrates the fundamental proposition that fair and equitable competition is meant to be the keystone of the procurement process, and this situation fails the competitive purpose of procurement.

There can be no shortcuts to achieving an effective government purchase regime when those shortcuts eliminate effective competition. Any concoction or connivance or combination of otherwise acceptable procurement processes which are so organized as to bypass fair and equitable competition must be strictly scrutinized.

Apart from failing the principles of procurement law and the competitive sealed bidding procedures, this scenario would violate the unsolicited proposal provisions of Guam procurement law.

As originally enacted, and as found in the ABA Model Procurement Code, Guam law provided that unsolicited offers were to be treated as a sole source procurement. Sole source is only available if there are no other products or offerors who can provide the supply or service, bearing in mind that the government's needs are intended to be articulated by means of specifications which are intended to be drafted to promote competition.

Thus, assuming the original specifications adequately described the government's needs, and there were other providers that could meet the needs, this scenario would clearly be inconsistent with the sole source procurement rules.

But Guam law has gone further, and the unsolicited proposal provision was revised from the MPC to require that all unsolicited proposals trigger a competitive sealed bid procedure. Acceptance of a non-responsive bid in that event is a clear violation of the law.

Competitive sealed bidding is the preferred and default method of procurement under Guam law. Any exception which swallows that rule must be avoided, and an arrangement whereby a non-responsive bid could be accepted under an unsolicited proposal concept would undermine the entire edifice of the Guam procurement regime.

Thursday, February 11, 2010

US Govt beefing up procurement staff

2011 budget proposes fund to develop acquisition workforce
Civilian agencies will get an additional $25 million in 2011 to boost hiring and development of acquisition professionals, under the White House budget proposal released Monday.

The General Services Administration (GSA) will administer the fund. GSA already administers a $15 million "Acquisition Workforce Training Fund" for civilian agencies, which is financed by fees agencies pay when they use GSA's Multiple Award Schedule contracts, governmentwide acquisition contracts (GWACs) or other multiagency contracts.

US Govt bid protests increase with greater access

GAO: Bid protests jump in 2009
The Government Accountability Office, which decides protests lodged by contractors alleging unfairness in a contract competition, received 1,989 protests in 2009, up from 1,652 protests in 2008, according to the report.

The increase was expected, GAO said, because the right to file protests was extended to a wider group of people and companies in 2008. That year, companies were given the ability to protest not only contract awards, but task order awards given under existing multiple-vendor contracts. In addition, federal employees were granted the ability to protest agency outsourcing decisions. And companies doing business with the Transportation Security Administration also were given the right to protest contract decisions, according to the report. Protests in these three categories accounted for half of the increase.

But even while protests increased in 2009, fewer protests were upheld by GAO last year than in 2008. The agency sustained just 18 percent of protests filed based on their merits — down from 21 percent in 2008. Another 149 cases closed in 2009 were settled through a mediation process known as alternative dispute resolution.

Procurement controversies -- New York State

Federal prosecutors looking into Aqueduct deal

Federal prosecutors have begun a review of the lucrative award to run a sprawling new casino at a downstate racetrack.

Aqueduct Entertainment Group, a consortium of gambling, construction and individuals with Democratic Party ties, was tapped to run a 4,500-slot casino at Aqueduct Racetrack for the next three decades.

In the past week, some of the losing entities have cried foul, claiming the terms of the secretive process kept changing and that AEG won based on political favoritism.

The U.S. Attorney's office in Manhattan this week sent a subpoena to the state Lottery Division, which regulates racetrack casinos and had a vetting role in the Aqueduct process, seeking documents pertaining to a Queens charity. government and industry sources said their probe has widened in the past several days to include the Aqueduct casino deal.

An Assembly official said Assembly Speaker Sheldon Silver continually raised concerns with Governor David A. Paterson about how the process — which changed several times after bids were received — was conducted.

In his letter to NY State Inspector General Joseph Fisch, Silver asked for a review of the process by the state Lottery Division and other agencies in evaluating the casino bids and to determine if state procurement rules were followed.

Wednesday, February 10, 2010

Procurement Controversies -- Guam

Report says procurement broke Guam law
Governor's Chief of Staff George Bamba and government chief procurement officer Claudia Acfalle broke Guam law when they approved a Port Authority of Guam community outreach program, according to the Guam Office of the Attorney General.

The job needed to go through a separate procurement process, the attorney general's office said, and noted the procurement also appears to violate federal grant regulations.

The governor's office should consider taking "appropriate action" against Bamba and Acfalle, according to the attorney general's office, and Bamba should be "admonished" for allowing a contractor to be paid for a service or product that was not delivered.

AG: Bamba should be admonished
While the AG's Office found that there wasn't a conflict of interest that would constitute ethical violations under the procurement law by Bamba or Port General Manager, Glenn Leon Guerrero.

Chief Deputy Attorney General Phil Tydingco determined that the procurement of the Community Outreach Program by the General Services Agency at the direction of Bamba violated Guam law because the acquisition of the program was beyond the scope of the original procurement of the Port Master Plan and should have been a separate procurement of professional services.

The AG's Office has also recommended that the Office of the Governor consider having procurement training for those staff directly involved with procurement.

AG's review of the Port Authority of Guam procurement process

Tuesday, February 9, 2010

Procurement controversies -- Hawaii

Hawaii audit calls for ouster of economic development director
State auditor Marion Higa said the head of the Department of Business, Economic Development and Tourism withheld or misrepresented information that should have been provided to the Legislature and other state agencies. His actions obscured accountability over how federal grant money and money raised from the private sector were spent, she said.

In 2006 the state procurement office found that the Lingle administration did not violate procurement law when it turned to a nonprofit without competitive bidding to handle private sponsorships of the 2005 trade mission. The state attorney general's office found that the administration did not violate any criminal laws.

In April, the state auditor cited the department for a range of procurement errors that were the "direct result of its lack of training, poor management oversight, and a weak control climate."

In June, the city prosecutor declined to file misdemeanor criminal charges in relation to the department's botched award of a hydrogen investment fund contract to the lowest-rated bidder. The prosecutor said he found evidence of "incompetence," but not a crime.

Hawaii Lawmakers Question State’s China Spending
"There's this pattern of simply not knowing the law, not understanding what the rules are," said Kim, D-Kalihi Valley-Halawa, chairwoman of the Ways and Means Committee.

"I know there isn't a pattern. I know why we did what we did at the times that we did it," the Department's director, Ted Liu, said. "We did not intentionally withhold any information or intentionally provide any erroneous information."

State Auditor Marion Higa cited the department last April for procurement errors due to a lack of training and oversight, and Honolulu Prosecutor Peter Carlisle found evidence last June of "incompetence" in Liu's role of handling a hydrogen fund contract that didn't go to the highest-ranked bidder, but Carlisle declined to press misdemeanor criminal charges.

New Procurement Rules - Czech Republic

Czech Republic: changes to public procurement law
From 1 January 2010, the review procedures for awarding public contracts in the Czech Republic have been improved. There are also new measures to make procurement procedures more transparent and less formal.

The changes apply to all public procurement tenders initiated in 2010 and affect contracting authorities, contractors and the competition authority (the Office for the Protection of Competition).

Key changes include:

* the introduction of a black list for businesses providing untrue information or qualification documents to the contracting authority. Blacklisting involves a ban on participating in public tenders for 3 years and a fine of up to CZK 10 million may also be imposed

* the right for the competition authority to prohibit fulfilment of a public contract concluded without a public procurement tender

* the introduction of deadlines in the tender procedure, such as a deadline of five days after the bid submission date for objections against tender rules

* the extension of the right for contracting authorities to clarify information and documents evidencing the necessary qualifications

* the introduction of an appeal procedure after the contract is awarded

For more, contact: CMS Cameron McKenna LLP is a limited liability partnership registered in England and Wales, or click the link to the article above.

Monday, February 8, 2010

BAE settlement

BAE settles with U.S. over bribes to Saudis
BAE Systems has reached a settlement with the U.S. Justice Department over allegations that the company relayed $2 billion in bribes to Saudi princes in the 1990s. The company also agreed to plead guilty to conspiracy to submit false statements to the U.S. government.

"The company very much regrets and accepts full responsibility for these past shortcomings," BAE said on Feb. 5.

BAE, the second largest defense contractor in the world, said it also agreed to pay nearly $50 million in fines to Britain's Serious Fraud Office. The police unit had been investigating BAE concerning illegal payments to officials in the Czech Republic, Romania, South Africa and Tanzania.

The company also agreed to plead guilty to a British charge of failing to keep proper accounting records in Tanzania. Executives said BAE has already implemented measures to prevent bribery to foreign procurement officials.

"The British government was up to its neck in this whole business," Vince Cable, deputy chairman of the Liberal Democrats, said. "Government ministers were almost certainly fully aware of what was happening."

Procurement Fraud conviction -- Oklahoma

man sentenced in Tulsa Public Works scandal
Stuart Jay Franklin, 49, pleaded guilty in September to a federal bribery charge connected to the city’s public corruption scandal. He is the fifth of six defendants to be sentenced in the case.

He admitted that while working as an accountant for FBS Inc., an engineering design and inspection services firm in Tulsa, he paid $6,150 of what was to be a $10,000 bribe to Albert Martinez to steer engineering inspection services contracts to the company.

The judge took exception to any assertion that Franklin’s crime was a victimless one. “The victims are the city of Tulsa and all of the citizens of the city of Tulsa,” Kern said.

Kern said the case had harmed public confidence in the competitive bidding process and deprived the people of Tulsa of the honest services they expected.

Read more from this Tulsa World article at http://www.tulsaworld.com/news/article.aspx?subjectid=14&articleid=20100202_14_0_AClare19590&allcom=1

Friday, February 5, 2010

Procurement controversies -- Bangledesh

Editorial: Citizens' monitoring of public procurement -- The watchdog body needs to be failsafe to deliver
THE planning minister's frank admission that graft gobbles up 40 to 50 per cent of the public funds allocated against any procurement contract only confirms the public perception on the issue. Since public procurement involves about 70 per cent of the expenditures under the Annual Development Programme (ADP), the amount of money involved in it is also huge. Naturally, unless the rules of procurement are strict and foolproof, one should not be too surprised if a significant sum of the money leaks through into corrupt hands.

However, the success of the PPSC in plugging the holes through which corruption creeps in depends on how effectively it can oversee the procurement process.

But recently, with a view to speeding up the procurement process some provisions of the Public Procurement Act (PPA), 2006 have been amended. The somewhat relaxed procurement regime has definitely thrown a fresh challenge before PPSC or any monitoring mechanism for that matter meant to ensure transparency in the purchasing procedure as it has by definition become vulnerable to quarters seeking to gain from the slackened procurement rules.

Procurement controversies -- the District of Columbia

D.C. Mayor Fenty's associates bypassed rules in donating rescue vehicles
A friend and a staffer of Mayor Adrian M. Fenty's skirted procurement rules in arranging a deal that raised questions about how to properly dispose of city property.

"What makes the transaction so incredible is the fact that so much effort -- at the highest levels of District government -- was expended to facilitate a transfer of surplus property without even a hint of potential benefit for the District government," said a report by the Committee on Government Operations and the Environment. "Rather, the entire affair was merely the pet project -- even if well intentioned -- of a senior District official and a well-connected non-government individual."

No city laws were broken

In their reports on the firetruck controversy, the committees call for stricter policies on how government property can be donated or auctioned off, especially to a foreign government. The reports also say that the Fenty administration hastily arranged the transfer of the firetruck and ambulance to Sousa outside traditional procurement procedures.

according to the report, Skinner, Giles and Jannarone were working behind the scenes to make sure the transfer would be legal. In March 2009, the District government issued an emergency rule "to allow the Chief Procurement Officer to donate surplus supplies to Peaceoholics," according to the report.


D.C. Council questions parks projects it didn't approve
D.C. Mayor Adrian M. Fenty's administration has funneled at least $82 million to the D.C. Housing Authority to build a dozen parks, ballfields and recreation centers, a process that has circumvented D.C. Council oversight and awarded contracts to firms with ties to the mayor.

By law, the council must approve contracts that exceed $1 million. Last month, contracts for as much as $16 million went to various construction companies as part of the mayor's effort to improve the city's parks system.

Banneker Ventures, a firm owned by a Fenty fraternity brother, Omar Karim, is the construction manager on every project

Some talks with housing authority and parks officials this week led to the discovery of millions of dollars in projects that the council never approved. Thomas said it appears the money was taken from the Department of Parks and Recreation, given to the Office of the Deputy Mayor for Planning and Economic Development and then passed through the quasi-government agency that operates the city's public housing system.

Thomas said he wanted to know how Banneker received the 12 contracts last month. "There are some real concerns that one contractor could win competitive contracts 100 percent of the time," he said.

Dena Michaelson, a spokeswoman for the housing authority, said Thursday that she did not have information about the projects. She also said she did not know whether the contracts had been competitively bid.

But she said it is not unusual for city officials to route money through the housing authority for construction work. "They tap into us . . . to get the projects off the ground," Michaelson said. "We get projects going fast, and we keep costs low."


FURTHER READING: In 2007 the GAO issued a report regarding Washington D.C., which was headed "Procurement System Needs Major Reform". In its introductory comments and preliminary brief it said (excerpts):
The District’s procurement law generally does not apply to all District entities nor does it provide authority to the CPO to effectively carry out and oversee the full scope of procurement responsibilities across all agencies. A lack of uniformity in its procurement law and the CPO’s limited authority not only undermines transparency, accountability, and competition but also increases the risk of preferential treatment for certain vendors and ultimately drives up costs.

The District has been challenged to effectively manage and oversee its procurement function, due in large part to the low-level position of the procurement office in the governmental structure, the rapid turnover of CPOs, and multiple players having authority to award contracts and affect contract decisions. At the same time, the District does not have the basic tools that contracting and agency staff and financial managers need to effectively manage and oversee procurements—including a procurement manual, a professional development program, and an integrated procurement data system.

In summary, the District’s procurement system does not incorporate a number of generally accepted key principles and practices for protecting taxpayer resources from fraud, waste, and abuse. Specifically, the District lacks a comprehensive procurement law that applies to all District entities over which the CPO has sole procurement authority and promotes competition; an organizational alignment that empowers its procurement leadership; an adequately trained acquisition and contracting workforce; and the technology and tools to help managers and staff make well-informed acquisition decisions.

The District’s history of procurement problems—which include poor planning, excessive use of sole source contracts, and unauthorized personnel committing government resources—is well documented. Contracts have suffered from poorly defined requirements, noncompliance with procurement rules, and avoidance of competition. Almost 10 years ago in an effort to improve its procurement outcomes and promote oversight and accountability, the District amended its procurement law. Since then, the District’s inspector general’s and auditor’s offices as well as numerous press reports continue to identify improper contracting practices across various District entities.

the law has frequently been amended to grant exemptions to its provisions and the CPO’s authority for certain entities and special procurements. Current and former CPOs, as well as NASPO and other city procurement officials, noted that these exemptions distort the District’s law, undermine efforts to establish a central authority, and circumvent the competitive process.

In addition to generally lacking a law that reflects accepted key principles of sound procurement, the District has been challenged to effectively manage and oversee its procurement system. The low-level position of the procurement office within the District’s governmental structure, combined with rapid turnover of five CPOs in the past 10 years, has resulted in fragmented and inconsistent procurement management and oversight with multiple players having authority to award contracts and affect procurement decisions. At the same time, contracting and agency staff and financial managers do not have the basic tools needed for effective procurement management and oversight.

European Union protest timing rule similar in principle

Guam procurement law bases its timing deadline for bringing protests based on when the protestor knew or should know of the facts giving rise to the protestor's cause of aggrievement.

The European Union has a similar principle, as explained in a recent court case discussed in United Kingdom: ECJ Rules UK Procurement Challenge Timing Illegal. (Note, if this article does not link, you may have to free register to see it at this site, then view it here.)

[The EU rule is that] the period for bringing proceedings seeking to have an infringement of the public procurement rules established or to obtain damages for the infringement of those rules should start to run from the date on which the claimant knew, or ought to have known, of that infringement.

The European Court of Justice overturned UK rules which allowed the UK courts discretion to rule the time runs from the date of breach.

The ECJ noted that at the time that a candidate or tenderer learns that it has been rejected, it is not in a position to establish whether there has been any illegality. It is not until it has been informed of the reasons for its elimination from the procurement procedure that it can come to a view on whether there has been any illegality and whether it is appropriate to bring proceedings.