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Tuesday, November 20, 2012

Pay to plea

Pay-Up-or-Shut-Up Fee Proposed for Federal Contracting Protests
The U.S. Government Accountability Office, which arbitrates contract disputes, is asking Congress to approve the agency’s first-ever fee to file a bid protest, said Ralph White, GAO’s managing associate general counsel for procurement law.

The proposed charge might come in the form of a $240 flat fee, which would fund an online docket system designed to help the GAO cope with a rising caseload, he said. The online docket would help ease the strain on GAO staff who must now manually filter through about 16,000 protest- related e-mail messages a year, White said. The current process raises the risk of mistakes and delays, he said. The proposed docketing system would increase transparency in the bid protest process by allowing contractors and the public to “instantaneously access all documents filed in a particular protest through a readily accessible web-based portal,” according to the GAO document.

It’s necessary to fund the online docket with a fee because Congress may not be willing to approve taxpayer money for it, White said.

The agency is proposing either the flat fee of $240 for each protest, or a lower initial charge with additional costs for filing supplementary documents. Both arrangements would raise about the same amount of money. The fee would be in line with the amounts charged at other legal venues, White said. For example, the U.S. Court of Federal Claims, which also hears contract disputes, charges a $350 filing fee, according to the GAO.

Some members of Congress probably will support the fee as a way to deter frivolous protests, while others may oppose it because they’ll see it as a burden on small businesses, said Dan Gordon, associate dean of procurement law at George Washington Law School and a former top contracting official in the Obama administration.

Charging a protest fee probably wouldn’t greatly alter the workload at GAO, he said.

“I would be astonished if there was a significant decline in the number of protests because of that fee,” Gordon said in a phone interview.
It's interesting to conjecture what other frivolous projects would be funded by the members of Congress instead of funding the docket system. My objection is about spending money frivolously, not about good faith petitioning our government for redress.

Monday, November 12, 2012

Past performance as a measure of responsibility

The UK law firm CMS Cameron McKenna LLP, as previously noted in prior posts, provides a valuable free resource of various legal issues called Law-Now, including procurement issues.  

The article noted below describes the newly adopted scheme in the UK to formalize consideration of bidder past performance in certain government acquisitions.  As always, you are advised to read the source document (at the link); I cut and paste and re-arrange and paraphrase in ways which may not do justice to the source.

Taking Account of a Bidder’s Past Performance  
There has been no consistent approach to considering previous performance in assessing a bidder’s ability to perform a contract.  The government has now published the PPN to ensure that, in certain cases, public bodies will now be required to include minimum standards for reliability based on past performance.  As a result, suppliers will now be required to give more detailed information and should expect that such information will be carefully checked within government.
The PPN applies to Departments, Executive Agencies and Non Departmental Public Bodies (together, “Departmental Bodies”) procuring goods and/or services in respect of information and communications technology, facilities management or business processing outsourcing with a total anticipated value of £20 million or more (excluding VAT).
In order to assess a bidder's past performance, Departmental Bodies should:
· specify the minimum standards relating to past performance and information required in relation to those standards in the OJEU notice.
  · verify information provided by any bidder in relation to past performance by checking with any reasonably available source of information and giving the bidder an opportunity to make representations on any further information obtained.
  · apply the minimum standards for reliability based on past performance to exclude bidders which fail to meet them. 
  · assess whether a bidder continues to meet the minimum standards for reliability at specified subsequent stages in the procurement process, particularly in complex or lengthy procurement processes.
To demonstrate compliance with the minimum standards for reliability based on past performance, bidders are required to provide:
  · a list comprising a statement of the principal goods sold and/or services provided by the bidder in the previous three years.  Bidders (including consortia or group entities) are entitled to satisfy the minimum standards for reliability by reference to the past performance of members of a consortium or other group entities; and 
  · certificates from those to whom the goods and/or services on the list were provided.  If the certificate does not state that the goods and/or services provided satisfactorily, bidders are required to provide information to show that the reason for such failure will not recur in the performance of the contract being procured.  In the event that a certificate cannot be obtained, the supplier may provide a self-certification. 
It should be noted, however, that although the application of minimum standards for reliability is important, it is only one aspect of the overall assessment of the suitability of bidders in any procurement.  The other requirements of technical or professional ability and economic and financial standing should continue to be assessed for all bidders who have met the minimum standards of reliability.
Past performance has long been one factor among others to be considered by US governmental bodies in the determination of bidder or offeror responsibility.  

The ABA Model Procurement Code as adopted on Guam defines responsibility to mean having "the capability in all respects to perform fully the contract requirements and the integrity and reliability which will assure good faith performance".  (5 GCA § 5201(f).)  Guam and Model regulations specifically identify "a satisfactory record of performance" as one of the factors to consider in determining responsibility.  (2 GAR § 3116(b)((2)(A)(ii).)   

Wednesday, October 10, 2012

Will FOIA be foiled by outsourced subcontracting?

I have previously reported how a couple of states have responded to claims that contractors are immune from making disclosures under Freedom of Information Act requests, using that phrase loosely since rights to government data are not uniform, either in substance or practice.

In Reveal the truth or face the consequences, I discussed a New Mexico state decision that followed Florida law to the effect that contractors who perform state functions by acting on behalf of a government entity must disclose disclosable information under the relevant local FOIA law. The test applied there was essentially based on an agency analysis under the totality of the circumstances.

The issue is being raised elsewhere, as revealed in the following two articles.

Transparency Outsourced as U.S. Hires Vendors for Disclosure Aid
At least 25 federal agencies are outsourcing parts of the FOIA process. The contractors, sometimes using workers with security clearances, are building FOIA software, corresponding with requesters, redacting documents and recommending what information should be withheld.

With contractors involved, the process becomes more complicated because the companies employing the FOIA workers aren’t directly subject to FOIA laws, said John Wonderlich, policy director at the Sunlight Foundation, a Washington-based group that pushes to open government records.

“If I was in charge of an agency and wanted to create an unaccountable FOIA process, the first thing I would do is put an outside contractor in charge of it because fewer of our accountability laws apply to them,” Wonderlich said in an interview. “It would just be another layer between me and the public.”

Using contractors to answer FOIA requests falls into a murky area of law, said Scott Amey, general counsel at the Washington-based Project on Government Oversight.

The vendors aren’t allowed to approve agency responses to FOIA requests because the work is considered “inherently governmental,” according to federal acquisition rules. On the other hand, they are permitted to “support” the preparation of responses.

While contractors may suggest what information will be released, redacted or denied, the agency must make the final decision, Amey said.

“They are walking right up to the line,” he said. “It still makes you question the integrity of the system if contractors play such a vital role and merely have their guidance approved.”

Some open-records advocates say hiring contractors to speed up the FOIA process may help federal agencies as they wrestle with budget cuts and a growing backlog of requests. FOIA contractors know employees aren’t allowed to make decisions for the government and would never cross that line, said Randolph Wagner, chief financial officer for Wagner Resources Inc., another Gaithersburg-based company.

“It’s more like a cliff,” said Wagner, whose company derives about 50 to 60 percent of its revenue from FOIA-related tasks. “We don’t want to make the decision on behalf of the government.”

His employees, who work on-site at agencies, may be involved in the process from “beginning to end,” he said.

They receive requests, communicate with information seekers and contact agency officials to retrieve the records, Wagner said. When they receive the records, his employees provide recommendations about how much information can be released. A higher authority in the agency makes the final decision, Wagner said.

The FOIA offices aren’t manned to handle all of the work, Wagner said. “In most cases, we outnumber the people we work with, three to one. They’re the decision-makers and we’re the workers.” The work isn’t glamorous and there isn’t much opportunity for federal employees in FOIA offices to get promoted, Wagner said. “If you want open transparency, you’ve got to have somebody work on it,” he said.
Government contracts called public data
In a sweeping ruling Tuesday, the Minnesota Court of Appeals said government contractors are subject to state open records laws.

The ruling means that Milwaukee-based Johnson Controls must reveal to Timberjay Newspapers of Tower, Minn., details of its subcontract with a Minnesota architectural firm to build schools in St. Louis County.

Helmberger was concerned about flaws he noticed in an $80 million project involving construction and renovation of several St. Louis County schools, whose district contracted with Johnson Controls for the project. In 2010 he requested a copy of Johnson's subcontract with Duluth-based Architectural Resources Inc. under the state's Data Practices Act. Johnson refused Helmberger's request, maintaining that the contract contained proprietary secrets and was not subject to open records laws.

Under the law, private residents or businesses contracting with the government must comply with the Data Practices Act "as if it were a government entity."

In March 2011, the Minnesota Department of Administration sided with Helmberger, but an administrative law judge threw out the request because the subcontract "did not involve the performance of a governmental function."

The Appeals Court disagreed, arguing that the planning, design and construction of five public schools falls under state laws that mandate the duty of a school district to "furnish school facilities" to children -- including constructing and renovating buildings.

Attorneys for the contractors have not yet decided whether to petition the state Supreme Court to hear the case.

Sunday, October 7, 2012

Another difference between government and private contracting

Although the scale of the deals were different, there is a common core to both stories below, apart from the obvious political meddling that can taint government contracting: what does the government do when it bungles the procurement vetting process, and how might that differ from the private sector?  Guam's case involves the solicitation of a health insurance contract; the UK's case involves the solicitation of a rail project management contract.

In Guam's case, the solicitation involved the procurement of health insurance for the government's employees. Being the political season and there being a family connection between one bidder and the administration, the Guam Parliamentarians determined to step in and remove the Executive from the role of procurer, rewrite the specifications and the procurement method for this one solicitation, this one time, and award the contract to all comers. In the UK's case, the embarrassment continues.

Guam:

Second Protest Filed Over Guam Government Insurance Contracts


3 of 4 health insurers protest bid process

Restart of bidding for health insurance sought

Health insurance measure debated


AG: Postpone health insurance bill


GovGuam health insurance procurement bill passes
UK:

This railway fiasco reveals all that's wrong with the Tories
It was an epic debacle. Last week the government withdrew the award of the vast £13bn West Coast rail franchise contract to FirstGroup, acknowledging that its own processes were faulty. Ministers, releasing the news at midnight to set the terms of the news story, spun that middle-ranking officials were to blame for the cock-up and had been suspended.

This is a first order crisis of the state. The structure of a hollowed-out Department for Transport was exposed as dysfunctional – and the proposed inquiry into what went wrong stank from the outset. It's a massive passing of the buck by frightened and callow politicians

If there is no trust in the process, meaning that companies can be expected to launch judicial reviews challenging decisions, then the expense will become prohibitive.
Anyone But Branson: Rail-bid civil servants 'exchanged derogatory emails about tycoon'
The Government awarded the new £7billion franchise to FirstGroup, but cancelled it before the planned handover in December after Sir Richard’s Virgin group, which offered £700million less, made a successful legal challenge on the grounds that the Government ‘got its sums wrong’.

Virgin executives have long been concerned about the perception of an ‘anti-Virgin’ bias and culture within the department characterised as ‘Anyone But Branson’.
Heads should roll after this rail bid debacle
If a blunder of this proportion had occurred in the private sector, the consequences would be very different.

the Department for Transport delivered a masterclass in bungling. It announced – in a statement sneaked out in the middle of the night – that the franchising process for the West Coast Main Line (WCML) would have to be re-run because of “flaws”. Specifically, mistakes were made in pricing in inflation and passenger projections when assessing the competing bids – surely an elementary error.

Patrick McLoughlin, the recently appointed Transport Secretary, wasted no time in blaming his department’s officials for the fiasco, and three civil servants have been suspended while further investigations are conducted. His predecessor, Justine Greening, who signed off the deal and who has since been moved to the Department for International Development, also has questions to answer.

Will heads roll? Don’t count on it. This, after all, is the state sector, where incompetence even on such a dizzying scale rarely leads to the culprits paying with their jobs. If a blunder of this proportion had occurred in the private sector, the consequences would be very different. As a result of failing to hire enough staff to meet its contractual obligations at the Olympics, G4S forfeited a £50 million slice of its fee and two senior executives lost their jobs. This debacle, in contrast, will cost the taxpayer £40 million in compensation payments to the bidding companies.

When it was announced in August that FirstGroup had won the 13-year West Coast franchise with a £5.5 billion bid, this newspaper was not alone in questioning whether the deal was credible. Sir Richard Branson, whose Virgin Group has run the line successfully for the past 15 years, has been vindicated in his description of the decision as “flawed and insane”.

Indeed, had Virgin not sought to take the issue to court, the miscalculation would have remained undiscovered – it was only in preparing its defence that the Department for Transport stumbled across the errors. The only consolation to be drawn from this fiasco is that the franchise had not changed hands before the flaws were exposed. And credit for that goes not to politicians or civil servants, but to Virgin and its justifiable anger over a deal that did not add up.

There's one final comment to make in regard to the last paragraph above. I refer you to a recent Guam Public Auditor decision noting gross errors that would not have gone noticed or corrected but for a bidder's protest: OPA-PA-11-002.

Notwithstanding the railing against and deflection of blame on protesting bidders, public contracting relies on them to police the system, as it is politically inadvisable to admit wrongs and correct them publicly, let alone dismiss staff. In the private arena, heads roll, personal prices are paid, and the mistakes tend not to repeat themselves so often, or at least by the same people.  Any attempt to frustrate the protest review process will result, ultimately, in more inefficiency and higher cost in the government.  It is not in the nature of the beast to control its own instinct for avoiding accountability.





Tuesday, September 25, 2012

Oligopoly in competition's clothing?

Competition is the cornerstone of most procurement regimes, but doesn't always yield lowest price, as anecdotally seen in a recent post. I would also want to have more information about the anomalous result indicated in the following story. (It would help to read the whole story to understand the context of this extract, as is usually the case in items reported here.)

Health insurance costs grew slowly for two years. Now, they’re speeding up.


Anderson argues that stronger government intervention is necessary to slow price growth in the health-care market. He points to the example of Maryland, the only state where the government sets the rates that hospitals can charge insurance companies.

The program began in 1976, when Maryland’s per-admission hospital spending was 26 percent higher than in the rest of the country. Between 1977 and 2009, the state’s hospitals “experienced the lowest cumulative increase in cost per adjusted admission of any state in the nation,” researchers in the Journal of American Medical Association concluded.

“Hospital prices have been held down substantially,” Gerard said of the Maryland experience. “And private insurers pay the same rates as public insurers.”

Such efforts, however, have fallen out of favor in other states. Congress gave states the authority to set payments in the early 1970s. About 30 states went on to do so. All states except Maryland gravitated away from those models, as states have looked for more competition and less regulation in health-care markets.

Monday, September 17, 2012

Beauty contest or drawing straws?

This article is about the debate over negotiated best value versus lowest price technically acceptable ("multi-step") competitive bidding. The subplot is whether one source selection method necessarily determines a more optimal outcome. If all facts, past, present and future, were known, best value would be a no-brainer, but best value has not insulated government from cost overruns or less than optimal contractor performance.

OFPP lets DOD deal with pricing complexities first
the Office of Federal Procurement Policy looks to DOD's experience for guidance on the balance of price against value in contract awards, [as revealed by] Joe Jordan, OFPP administrator, at a recent breakfast hosted by the Coalition for Government Procurement. “The bottom line is it’s just a tough area, because you’ve got tricky incentives,” Jordan said.

Generally speaking, he said industry likes best-value procurements. They allow companies to propose higher prices, since officials will consider other evaluation criteria beyond price. On the other hand, the government is pushing low price and not always fully analyzing the entire lifecycle of a project, Jordan said. Both sides have good arguments, so the contracting officer's judgment is the final arbiter.

“It’s always a challenge with the overburdened acquisition workforce, but I think we’re at a place where we need to do some more analysis, having some more conversations with industry and agencies, especially the Department of Defense, to figure out exactly where equilibrium lies,” Jordan said.

Industry experts have been increasingly concerned that federal officials have developed a lowest price technically acceptable attitude for their procurements.

Larry Allen, president of Allen Federal Business Partners, said “They [DOD] seem happy with the drive to low price and uninterested in whether it may be misapplied in some circumstances.”

In his speech, Jordan said both the lowest price technically acceptable and the best value procurements have their place. He emphasized that he isn’t choosing one over the other.

“Do both, but do them at the right time,” he said.

Read more at the link to the article above.
The problem is that no one can predict the future. One method gives the procurement officer a warm fuzzy feeling at the time the bid is awarded, in the belief that "best value" has been achieved. The other gives the procurement officer cover from second-guessing score keepers of her career. But either method can, and too often does, yield to buyer's remorse when the winning bidder hits the road.

Buyers like to find comfort in dealing with proven bidders with known track records, thus tend to favor "best value" and its "old boy" network of quantifiable "past performance". But multi-step must also be made only after the responsibility of the bidder is determined, so I tend to suspect that the presumed reliability of "past performance" is a red herring, deflecting the process away from competition from newcomers, erecting unnecessary obstacles to market entry.

It's a case of choosing a winner by beauty contest (best value) or drawing straws (lowest price technically acceptable). Only time will tell which method truly gives the government what it actually seeks at the most optimal cost over the life cycle, through an efficient source selection process.

And there is no "right time" to make that choice before the ultimate facts are known.




Friday, September 14, 2012

Competition does not always assure fair and reasonable price

In going through my woodpile, I came across this old Comptroller General opinion that I hope you find as instructive as I do.

The protest concerned an award to provide paint and was made by an incumbent. The award was made when three bids were submitted, but the incumbent was not advised to bid (the protest timing issue is interesting, but not the point of this post; read the Decision if you're interested in that aspect).

Excerpts follow.

Matter of: Crawford Laboratories File: B-277069 Date: August 29, 1997
We sustain the protest because the agency has provided no rational basis for its price reasonableness determination.

Prior to the awards, the contracting officer determined that Hanley's and Durant's
prices were reasonable. The contracting officer's price analysis recognized that the
prices bid on the two subitems of item 3 were "substantially higher" than the prices
that the agency had paid for those items on the prior contract. In fact, the bids
were more than double the prices that the agency had paid previously. The record
shows that the award prices for item 2 and item 4 also were more than double the
prices for those items on the prior contract.

To support the determination of price reasonableness, the contracting officer noted that there had been competition, with three bids "within a competitive range of each other" and that the Price Producers Index (PPI) for 1994-1997 showed the cost of the ingredients used to manufacture the primers had increased by 13.5 percent during that period.

While comparison of prices obtained competitively ordinarily may provide a basis for determining the reasonableness of prices, here, where all prices are significantly higher (at least double) than the prior contract prices, we think without some analysis or explanation for the higher current prices, the comparison of the bids alone is insufficient to support the determination.
For example, FAR § 15.805-2 identifies a number of price analysis techniques--such as comparison of the prices received with the published price lists or market prices, an independent government estimate, or prices obtained through market research--which a contracting officer may use to ensure a fair and reasonable price.
In spite of the agency's after-the-fact explanation, other than the comparison of prices received under the current solicitation, the contracting officer apparently did not use any of the other price analysis techniques identified under FAR § 15.805-2. In short, the record lacks any meaningful support for the price reasonableness decision, and we conclude that the contracting officer failed to satisfy her obligation under FAR § 14.408-2 to determine that the award prices were reasonable.

Unless the contracting officer can adequately justify the reasonableness of those prices in accordance with FAR §§ 14.408-2 and 15.805-2, we recommend that the contracts on items 2 through 4 be terminated for the convenience of the government and be recompeted. Further, we recommend that Crawford be reimbursed its costs of filing and pursuing the protest, including reasonable attorneys' fees. 4 C.F.R. § 21.8(d)(1).

Thursday, September 13, 2012

Virgin Islands Governor draws the blinds

Virgin Islands governor vetoes transparency bill
The governor of the U.S. Virgin Islands has vetoed a bill that would have made it easier to track spending by the Caribbean territory’s government.

The bill would require officials to create publicly searchable online databases detailing grants, contracts and other government expenditures. It would have included spending on salaries, travel and office supplies down to $100.

The legislation passed 14-0 in the Senate in August. It was introduced by Sen. Nellie O'Reilly, who argued it would allow taxpayers to track spending and give the government more legitimacy.

A statement released Wednesday by Gov. John de Jongh says that he endorses the bill’s objectives, but that he has vetoed it because there wasn’t any funding designated and it didn’t apply to all branches of government.

Even an incomplete transparency law would seem to me to be a good start. Now it will not even be possible to see if the glass is half empty or half full.

Monday, September 10, 2012

Singapore sceptical of one bid received

Procurement controls tightened after investigation into foldable bikes: Khaw
"Whenever a quotation or a tender attracts a single bidder, my instinct is to ask 'why'. There must be many bicycle dealers out there.

"Although a single bid can be accepted under the public service procurement rules, I thought NParks could have recalled the quotation with a longer opening period to try and get more bids. With greater competition, I felt that NParks might have gotten a better deal."

Mr Khaw Boon Wan said in Parliament today that the Ministry of National Development has tightened its procurement controls and introduced new measures to enhance oversight, following the investigation into the purchase of 26 Brompton foldable bicycles - each costing S$2,200 - by NParks.

Among the changes announced last month is an extension to seven working days, instead of four, as the minimum opening period for quotations called by statutory boards to encourage participation from more suppliers, said Mr Khaw. Departments can also recall the quotations with a longer opening period if they feel it would help secure more competitive bids.

And the MND now requires any quotations resulting in single bids to be cleared in person by the CEO or Deputy CEOs. The Ministry has also updated its internal procurement guide to sensitise and guide all our officers in their purchases, said Mr Khaw.

I have discussed The dilemma of "only one bid received" in a prior post, and I encourage you to jump to that post for an expansive look at that issue. The lodestone for procurement is achieving fair and reasonable pricing through competitive sourcing, and when it is not obtained, effort must be made "to foster" it, in the words of the ABA Model Procurement Code, adopted on Guam.

And WIFCON.com provides a digest of US GAO cases decided by the Comptroller General shedding further light on the topic, such as the following:


Pegasus Global Strategic Solutions, LLC
If noncompetitive procedures are used pursuant to 10 U.S.C. sect. 2304(c)(2), such as here, the agency is required to execute a written J&A with sufficient facts and rationale to support the use of the specific authority. Our review of the agency's decision to conduct a noncompetitive procurement focuses on the adequacy of the rationale and conclusions set forth in the J&A. However, noncompetitive procedures may not properly be used where the agency created the urgent need through a lack of advanced planning. In addition, the urgency justification cannot support the procurement of more than the minimum quantity needed to satisfy the immediate urgent requirement.

Although the cases digested at the referenced site go to the justification requirement for conducting a non-competitive source selection process, they are useful to illustrate the counter-balancing actions needed to be undertaken to assure fair value when utilizing efficiency shortcuts by design or default.

Thursday, August 30, 2012

Pay to play "not a good look"

After reading the article below, I was reminded of a litmus test for doing something that you feel, or should feel, perhaps you ought not do: How would you like it if your action was front page news tomorrow?

Sky's the limit for political gifts (Australia)
The Herald today publishes an Australian first, a database that captures federal politicians' disclosures over the past two years, revealing the free trips and gifts they receive from powerful vested interests. The information is not released publicly except in the form of unsearchable handwritten documents.

The Israel lobby, Qantas and mining companies are leading the charge in lavishing federal politicians with all-expenses paid junkets and other gifts, a Herald investigation has found. Billionaires including Gina Rinehart, big drug companies, controversial Chinese technology company Huawei and multinational defence contractors are behind many of the "free" flights and high-level entertainment handed to politicians.

Richard Mulgan, an emeritus professor at the Australian National University who has written extensively on accountability, said there should be a "brick wall" to gifts and hospitality from major defence contractors given the large sums of money at stake.

More generally, he questioned whether politicians accepting gifts from companies had fully considered why companies were paying to take them on trips.
"Obviously people can accept gifts and so on but if there's any suggestion that it can influence a particular decision it's not a good look," he said.
"You would have to ask yourself: why would the company do it? If the company's motives are less than pure you have to ask yourself whether you're contaminating yourself."

Professor John Uhr, the director of the centre for the study of Australian politics at the Australian National University, said there was little policing of politicians' behaviour in accepting gifts and trips. "You really need to lay down certain standards you can honestly expect your representatives to have," he says. "At the moment there is just nothing."

Professor Mulgan said the current handwritten disclosures by politicians compromised transparency as a method of holding politicians accountable. "Transparency means that the public can readily get hold of that information," he says.

Read more at the article link.

D.C. Mayor Vincent Gray Proposes End to Pay-to-Play Politics
Today, Washington, D.C. Mayor Vincent Gray is proposing a set of campaign finance and ethics reforms specifically targeting pay-to-play corruption, the all-too-common practice of a business entity making campaign contributions to candidates and public officials with the hope of gaining a lucrative government contract.

Washington, D.C., is embroiled in a series of government contracting scandals that have caused immense harm to the image and credibility of the District government. It is important that District officials make reasonable efforts to assure the public and the business community that campaign contributions are not the gateway to District contracts.

If adopted, the mayor’s pay-to-play reforms would be among the strongest in the nation. Government contractors would be prohibited from making campaign contributions to, or expenditures on behalf of, any District candidate or official who is or could be involved in awarding the contract. Similarly, they cannot give to or spend on behalf of any political committee associated with an individual or nonprofit group controlled by the candidate or official. “Government contractor” is broadly defined to include all senior executives of the company seeking a contract. Even the spouses and dependent children of the executives would be limited to contributions of no more than $300 per election.

By taking the simple step of divorcing campaign contributions from government contracts, this critical pay-to-play reform proposal will help rebuild public confidence in the integrity of the District’s government contracting process. The measures will also provide useful guidance for public officials on how to avoid the political minefield of the appearance of corruption, whether justified or not, that accompanies pay-to-play practices.

Saturday, August 25, 2012

Giving credit where credit is dubious

City school credit, procurement cards show culture of spending
Baltimore school administrators spent roughly $500,000 during the past year and a half on expenses such as a $7,300 office retreat at a downtown hotel, $300-per-night stays at hotels, and a $1,000 dinner at an exclusive members-only club, credit card statements show.

City school officials defend the majority of the credit card expenditures — outlined in statements and receipts obtained by The Baltimore Sun through a Maryland Public Information Act request — as "the cost of doing business," saying only a handful of "outliers" show questionable judgment or disregard for taxpayer money.

A review of credit card transactions and receipts by The Sun found that the bulk of the expenditures — about $300,000, generated by 16 central office employees — were made under a new procurement-card program that has operated with virtually no controls or oversight since it began in January 2011.

Card statements show that many of the expenditures violated the school system's own protocols and restrictions for use of the cards, such as a prohibition on using them for travel or to buy gifts for employees.

Amid Sun inquiries, city school officials have acknowledged that they took a series of corrective actions. The schools chief, CEO Andrés Alonso — whose card, sometimes used by his assistant, incurred a $66.77 charge to Victoria's Secret on Valentine's Day that was later removed after the system reported it as fraudulent — defended the program.

"Overall, people use the program in exactly the way we thought they were going to," Alonso said in an interview. "There's always going to be a margin where you give people flexibility, and they're not always going to use it in the way that you want [them to]."

Before last year, most school officials who needed to make work-related purchases had to either use their own money and seek a reimbursement or borrow one of several Bank of America credit cards used by the schools and registered in Alonso's name.

Asking people to pay their own travel expenses and seek reimbursement later would pose a financial burden for many employees, Edwards said.

Among those questioned transactions were a $450-per-person office retreat at the downtown Hilton, during which the 16 employees of the Information Technology Department were also treated to a $500 dinner at Brazilian steakhouse Fogo de Chao; and a $264 lunch for students at Hooter's.

The $67,000 in travel to conferences for a handful of office administrators, including an $8,000 trip to Las Vegas for a bullying conference, reflects the system's "overinvestment in professional development," she said.

And Edwards said that when a school administrator took a group of high school students to Hooter's during a student leadership conference in Atlanta, they didn't eat in the main dining room, where waitresses were wearing their trademark skimpy uniforms, but rather in a separate area served by a fully clothed manager.
Yes there will always be problems, but government is best served when it monitors and discloses the problems itself rather than have them brought to light in headlines.

Friday, August 24, 2012

Canada procurement Ombudsman issues report card

Government-appointed watchdog highlights major problems with federal procurement
A federal watchdog’s new report highlights a series of problems in how Ottawa procures some of its $20 billion in annual goods and services, including complaints about sole-sourced contracts, government ignoring its own rules, and departments doing business with firms known for producing “inferior” work.

The ombudsman’s office is responsible for reviewing complaints on the awarding of federal contracts for goods below $25,000 and for services less than $100,000 (which amounts to 90 per cent of all federal contracts). However, the office can review any complaint on the administration of a federal contract for goods and services, regardless of dollar value, as well as examine the purchasing practices of federal departments and agencies to assess fairness, openness and transparency.

The document highlights two “unexpected areas of concern” with federal procurement, including vendor performance and “the disparate nature” of procurement documents. But it also identifies problems with lack of training among procurement officials, questionable sole-sourcing of contracts among more than 100 federal departments and agencies, and concerns that government favours certain suppliers with its purchasing.

Six years after an optional certification program was introduced, only 26 of the approximately 3,200 procurement specialists working in the federal government have been certified at the program’s first of three levels, and none have been completely certified.

Some small and medium-sized businesses complained the patchwork system of procurement rules throughout the federal government is a barrier to doing business, the report says, while government officials highlighted the inefficiencies of preparing different procurement documents for similar services.

“This fragmented approach within the federal government is allowing suppliers identified as underperforming by one department to successfully bid and be awarded contracts from other departments,” the report says.

NDP deputy finance critic Guy Caron said the report highlights a troubling trend in government sole-sourcing contracts, when more competition should be promoted to ensure government receives good value for the goods and services it purchases. “The fact that we have to have competition means that we should rely less and less on those advance contracts, and we do more and more, which to me signifies a problem,” Caron said.

“What this underlies is the need for more transparency and the need to actually lower the costs of those various goods and services towards competition. I really don’t understand why government is actually going toward more of those (ACAN) contracts.”

Similar:
Major flaws in Ottawa's contract bidding process

Monday, August 20, 2012

Protests at State and local levels

State bid protests: new incentives and traps for the unwary by James C. Cox and Damien Specht of US law firm Jenner & Block
Largely because they provide for a more neutral evaluation of award decisions, protests have emerged as a staple of federal government contracting. In 2011, 2,353 cases were filed in the Government Accountability Office alone, an increase of more than 100% from ten years earlier. For most experienced contractors, an adverse award decision in a significant procurement almost always results at least in a conversation about whether to protest.

When competing for state contracts, however, considering a possible protest is not yet second nature for most contractors. Even among established firms, some might not know that states even have their own bid protest processes. Just as at the federal level, there is little reason to pass up the opportunity for a second opinion on the propriety of a procurement without due consideration.

In response to an increase in interest and the public’s desire for transparency, state protest processes have become more sophisticated. Consequently, in many states, the agencies designated to hear bid protests appear to be getting at least a little closer to what the GAO and the Court of Federal Claims do for federal contracts — providing a real check on flawed or anti-competitive awards.

At the same time, the states remain laboratories of democracy and have developed a wide variety of protest procedures. The most important thing to realize about state level protests is that no two systems are exactly the same. As a result, it is impossible to provide a one size fits all guide to state protests. There are, however, a number of areas where state protest practice in general diverges from, for example, protests before the GAO that may constitute traps for the unwary.

Read their tips and traps at the link above.

Procurement ethics for private contractors?

Government should adopt standards for private contractors
The federal government issues more than $260 billion in government contracts each year, with few restrictions on the employees of those contractors.

Government ethics expert Kathleen Clark, JD, professor of law at Washington University in St. Louis, has written extensively about this issue in the last year with three papers: “Ethics, Employees and Contractors: Financial Conflicts In and Out of Government”; “Fiduciary Standards for Bailout Contractors: What Treasury Got Right and Wrong in TARP”; and “Ethics for an Outsourced Government”.

The federal government hasn’t yet outsourced the job of Cabinet secretary, but almost all tasks that government employees perform are also performed by contractor personnel. Contractors perform jobs that are mundane or menial, such as hauling trash, but also tasks that are sophisticated and require discretion, such as providing advice about how to respond to climate change.

Over the course of 25 years, the federal government increased its spending on service contracting by 85 percent in inflation-adjusted dollars. While the government has increased its spending on service contracting, it has actually decreased the number of government employees who supervise that contract spending.

So much so that now the government actually outsources to contractors the function of supervising and evaluating the work of other contractors. That is of the areas where the government is at highest risk for ethical misconduct by contractors: where contractors can influence how the government spends money but are not subject to rigorous government ethics standards. Last year, the government adopted a new regulation to impose some ethics standards on some of these individuals, but it is not yet clear how the government and contractors are implementing that regulation.

Back in 2008, the Department of the Treasury used a contractor as the point person for its bailout of AIG. That contractor was a former employee of Goldman Sachs and owned a substantial amount of Goldman stock. He advised the government to handle the AIG bailout in a way that benefited Goldman Sachs — and himself, as a Goldman shareholder. If he had been a government employee, he could have gone to prison for this conflict of interest. But as a contractor, the conflict of interest law didn’t apply to him.

The ABA Model Procurement Code, substantially adopted on Guam, contains a code of ethics for private as well as public procurement participants. Unfortunately, the enforcement mechanism for each of them is rather ineffective, as implemented on Guam.

Sunday, August 19, 2012

Get procurement out of the way of government business

Jamaica: When the law is a shackle
"I am personally convinced that the rules and the fear of just being off the line .... have driven inaction for the simplest thing," adviser to the prime minister and head of the liquefied natural gas (LNG) steering committee Dr Carlton Davis told a Gleaner Editors' Forum last week.

"We have to recognise that this is a business world, this is not a world in which people have time to sit down and solve a thing." Davis asserted.

Like Davis, former chairman of the LNG steering committee and president of the Private Sector Organisation of Jamaica Christopher Zacca is convinced Jamaica will not be able to make significant advancement unless the procurement rules are revamped. He argued that the energy sector requires special treatment and should be subject to different rules as it relates to procurement.

"This energy thing is of such moment that it cannot be a slave so completely to methodology and rules that you get straight As for methodology and rules and straight Bs for effectiveness and economics," said Davis.

Davis and Zacca's call for changes to the procurement guidelines has the full support of Minister of Transport, Works and Housing Dr Omar Davies.

"The whole procurement process, it is lengthy, and does not necessarily guarantee the equity and the transparency," Davies told The Sunday Gleaner.

The procurement guidelines are at the heart of a dispute involving Minister of Transport, Works and Housing Dr Omar Davies and the OCG.

In April, Davies announced in Parliament that the Cabinet had established the IOP to advise it on the implementation of three megaprojects, two of which had not received the blessing of Christie.

At that time, Davies said the administration, "will not allow the OCG to be a stumbling block in the engagement of private entities as the State moves to take advantage of investment opportunities".

Christie immediately responded, arguing that the establishment of the IOP was an attempt to usurp the OCG.

"The OCG takes strong offence and exception to any suggestion that is made that by virtue of the discharge of its lawful mandates, under the Contractor General Act, as is prescribed by the Parliament of Jamaica, and which it is sworn to do, that it is impeding economic growth and development in Jamaica," said Christie.

The projects are the north-south Highway 2000 link, Gordon Cay container transhipment hub, and the Fort Augusta container terminal.

According to Davies, were it not for the intervention of the OCG last year, the Chinese investors would have long advanced work on the north-south link of Highway 2000.

"I have just reviewed the files which reported on former Minister Audley Shaw's visit to Beijing, and a year ago, they were at a stage where had we proceeded, the Mount Rosser bypass would now be complete," Davies said last month.

That did not phase Christie, who has consistently argued that the OCG was set up to ensure that government contracts and licences are void of irregularity, impropriety and corruption.

"The OCG is of the view that economic development must be pursued in a sustainable and responsible manner, and within an appropriate system of institutionalised and independent checks and balances which will ensure that the Jamaican taxpayer can be guaranteed value for money and that all government commercial transactions will withstand the highest levels of scrutiny and probity."

The parties are now before the courts for a determination on whether the OCG can dictate members of the IOP to report to it.

Tuesday, August 14, 2012

Evidence that it's not about the rules (in Singapore and elsewhere)

Following on from the last post from Singapore, It's not about the rules:

More procurement lapses uncovered
Many of the procurement lapses by Government agencies were not because of a lack of knowledge of procedures. They were due "more to administrative expediency or preference for certain suppliers taking precedence over financial prudence", according to Auditor-General Lim Soo Ping.

He cited waiving competition on weak grounds, allowing price alterations by certain bidders and not evaluating bids in accordance with specified criteria as examples of such behaviour.

Taking issue with how the agencies treated the role of the approving authorities, Mr Lim observed "quite a number of instances" where the requisite approval of an approving authority was sought after contractual commitment had been made.

"An approving authority is a gatekeeper responsible for ensuring that the principles of open and fair competition, transparency and value for money are upheld. This is not a perfunctory role and must not be treated as such," he said. "On its part, the approving authority, when considering a recommendation ... should seek to be fully satisfied that those principles are upheld and ... should exercise a measure of scepticism in its scrutiny."

The AGO's report said that a number of Government departments had been grossly overcharged for projects, primarily as a result of the inappropriate use of term contracts.

The Singapore Prison Service's enhancement work to the prison cells was one such contract. The term contractor charged SPS 1.6 times the market price for stainless steel perforated sheets and 2.2 times the market price for polycarbonate sheets. This meant that the service could have been overcharged by about S$960,000, said the AGO.

The Health Ministry overpaid a contractor S$830,000 for the foundation work and basement construction of Khoo Teck Puat Hospital. The ministry informed the AGO that it would recover the overpayment from the contractor and would engage an external auditor to check for any similar overpayments.

The Singapore Police Force was overcharged by about S$73,000 as a term contractor overstated work quantities, charged based on incorrect rates, and had submitted invoices for work not carried out. It has implemented measures, such as improving its contract management practices, to prevent the recurrence of such lapses.

High rates of non-compliance with the specifications of street cleansing contracts, valued at S$166.37 million, managed by the National Environment Agency. AGO observed "substandard work" at 15 locations, while cleansing workers did not show up at 190 locations.

In September last year, following the previous Auditor-General's report, the MHA issued a circular to all its departments setting out the principles for the use of the term contracts.

"The circular also reminded Home Team departments that while departments may engage external project managers to manage projects carried out by contractors, responsibility and accountability cannot be outsourced. The final accountability still remains with the project officer in the department," the MHA said.

In its report, the AGO recommended that the Finance Ministry introduce procurement rules to prevent the inappropriate use of term contracts and to ensure that agencies are charged at fair market prices for items not priced in the term contract.

Mr Lim reiterated that procurement officers "should be well imbued with the principles of fairness, transparency, competition and value for money".

Said Mr Lim: "It is, therefore, important that training in procurement also incorporates the imparting of values expected of public officers as custodians and stewards of public moneys. This should be reinforced by the senior management of public sector agencies setting the right tone at the top on governance and financial control matters."

Sunday, August 12, 2012

It's not about the rules -- Singapore Deputy PM

Government not satisfied, will improve procurement in public sector
The government is not satisfied with the current state of procurement, Deputy Prime Minister Tharman Shanmugaratnam said.

Mr Tharman said the government is looking at how the process can be improved.

The deputy prime minister, who is also the Minister for Finance, said this means a constant review of the rules and guidelines but most important is compliance with the rules.

The rules by and large are there.

Mr Tharman said: "It's compliance with the rules (that is the issue). This is partly a matter of competence -- we've got to build up the competence of procurement officers. That means not just the way we handle large-value tenders, where the checks are very stringent, but also the other smaller value quotations. The small transactions have to be on the radar screen as well."

Sunday, August 5, 2012

Saturday, August 4, 2012

Careful what you wish for

All the time you hear the antagonism: why can't government spending be conducted like private business? Who needs all that protest and red tape? Government has buying muscle; use it, and let the devil take the hindmost.

Well, Ukraine has evidently bought into that mantra. We might wonder how that will work out for them.


State spending moves further into shadows with new law
Ukrainian President Viktor Yanukovych on Aug. 1 signed a controversial public procurement law that will shield from public oversight tens of billions of dollars in government spending each year.

Pro-presidential lawmaker Oleksandr Yefremov of the Party of Regions defended the law. Yefremov told the Kyiv Post that the procurement bill will allow state-owned companies to compete with the private sector on equal footing since the private sector is not required to conduct competitive bids.

The bill exempts state-owned companies and taxpayer-financed enterprises from holding competitive bids. It furthermore excuses them from having to publish the dollar amounts of their orders or the winning bidder.

Pro-presidential lawmakers say the legislation will make government-owned companies more competitive. “Privately-owned companies don’t have to conduct tenders, so this bill levels the playing field for government enterprises. This will help improve the performance of our (government-owned) companies,” said Yefremov in a phone conversation.

The law was adopted in parliament on July 4, the same day a controversial language law elevating the status of the Russian language was passed. The ensuing protests and international attention over the language law meant the procurement law’s passage went almost unnoticed, fueling criticism that the language law was a smokescreen to divert public attention.

In fact the procurement bill was signed by Speaker Volodymyr Lytvyn so quietly that journalists didn't notice it until a week later.

According to z.texty.org.ua, which evaluates state procurement spending, the share of such expenditures as a proportion of gross domestic product is much higher in Ukraine than in any European country.

Watchdogs say bribery and kickbacks eat away at the state’s budget. in which insider rackets exist for government contracts. Nearly three-quarters of Ukraine’s budget spending goes toward public procurement, according to official data.

Nevertheless, such companies as gas monopoly Naftogaz Ukrainy, rail monopoly Ukrzaliznytsia and road builder Ukravtodor, to name a few – state-owned, money-losing enterprises that are heavily reliant on billions of dollars of taxpayers’ money to stay financially afloat – can now choose with which companies they want to do business on a no-bid basis and not disclose their financial transactions.

In December 2010, a Naftogaz subsidiary overpaid $150 million for an offshore oil rig, according to investigative news reports, a charge denied by government officials.

Taxpayers also now won’t know that a Naftogaz subsidiary pays some $2 million a year to fly, rent and service a helicopter for Ukraine’s president, according to a Nashi Hroshi investigation.

The same company also recently purchased three housing booths for construction workers worth Hr 934,000 ($116,750) each. This implies a price per square meter of $5,600, a figure close to the average square-meter price for an apartment in Moscow, one of the world’s most expensive capitals.

In June, the State Affairs Department bought imported raspberries worth $84 per kilogram at more than twice the market value.

Nashi Hroshi stated that last year companies owned by Rinat Akhmetov, Ukraine’s richest billionaire and a Party of Regions lawmaker, received 11 percent of all state procurement orders.

According to Nashi Hroshi, other politicians and businesses that make money on providing goods and services to public entities include: Yuriy Ivaniushchenko, a Party of Regions lawmaker; companies affiliated with the family of Yanukovych; Oleksandr Yefremov, head of the Regions’ party faction in parliament; Dmytro Firtash, the billionaire co-owner of RosUkrEnergo; Viktor Pinchuk, son-in-law of Ex-President Leonid Kuchma; Petro Poroshenko, economy minister, and Serhiy Tigipko, deputy prime minister and minister for social affairs.

Thursday, August 2, 2012

Procurement education necessary

Editorial from the Marianas Business Journal, Vol. 10 No.6. Note the link to the article requires subscription to access online.

Procurement education necessary
Kudos to those responsible for the Summer 2012 Guam Procurement Conference at the Hyatt Regency Guam held July 23 and 24. We are encouraged by reports that the conference was well attended and that participants demonstrated both their own knowledge and an eagerness to learn and improve their performance.

As well, it appears that Guam Community College is planning to boost its procurement education program from its current two-week course to, potentially, a procurement institute.

Danielle Conway, professor at the University of Hawaii's School of Law, the main conference presenter, is quite right when she says that government procurement regulations are for the protection of the taxpayers' dollar and the protection of those involved in the process. Unfortunately, though for whatever reason, the failure to comply with those regulations, or allegations of failure to comply get in the way of getting the government's business done.

The myriad of procurement problems that affect services at our schools, our hospital, our port and elsewhere reinforce our perceptions about the inefficiencies inherent in government. Government services are too often held up because seeming obvious solutions cannot be implemented while contracting irregularities are rectified.

Of course, we understand the consequences of inadequate regulation. Money that is not properly overseen is money that will be wasted - stolen outright at worst, inefficiently spent at best. The money that came from everybody is too easily treated as though it belongs to nobody.

So we're happy to see an effort to develop competent procurement professionals, capable of administering the government's procurement regulations fairly, efficiently - and correctly. We are also of the belief that simplified regulations would assist the process.

We don't doubt that she is correct, but we're not encouraged by Conway's reassurance that Guam's procurement problems are no different than anyone else's. One conclusion to be drawn is that the process cannot be improved - surely the problems would not be ubiquitous otherwise.

A more hopeful conclusion, advanced by Conway and by local procurement-education advocate John Thos. Brown, is that no one has yet launched a procurement institute such as is envisioned - potentially making Guam an example for the rest of the procurement world.

Guam Summer Procurement Conference 2012

From the Marianas Business Journal, Vol. 10 No.6. Note the link to the article requires subscription to access online.

Conference success highlights need, desire for procurement education By Frank Whitman Journal Staff
Those attending the Summer 2012 Guam Procurement Conference were "hungry for more information - hungry," said Danielle M. Conway, Michael J. Marks distinguished professor of business law and director of the University of Hawaii Procurement Institute at the William S. Richardson School of Law at the University of Hawaii, and main presenter at the conference.
"That means you have good people that have just not had access to good training and educational opportunities."
The conference was presented by the Guam Chamber of Commerce in cooperation with the Judiciary of Guam, the U.S. District Court of Guam, the Guam Bar Association and the Guam Procurement Advisory Council at the Hyatt Regency Guam on July 23 and 24.
John Thos. Brown, general counsel for Jones & Guerrero Co. Inc., a member of the Guam Procurement Advisory Council, and a conference organizer said that he was delighted with the number and caliber of attendees.
"We had people from a lot of different agencies, from desk clerks to directors," he said. "They showed that we have a strong core of people that know what they're talking about and have a desire to learn more."
Sen. Benjamin J.F. "BJ" Cruz of the 31st Guam Legislature attended the entire conference, and Sen. Shirley A. "Sam" Mabini attended parts of it.
Conway's message to the procurement professionals was to do their work properly from the beginning, she said. "Those of us who are procurement professionals are the stewards of the taxpayers' dollar," she said. "We work for the taxpayer; we have to protect and enforce that obligation. To do that means doing our job properly.
Part of doing the job properly is doing the planning it takes to do a good purchase. ... Do the homework up front instead of waiting for a problem to arise on the back end." Following the correct procedures also protects those who are involved in the process, she noted.
While Conway acknowledged problems with procurement implementation, Guam's problems are no different than those of other jurisdictions, she told the Journal. "If you step back, you realize that you're having the same or similar issues as all of the procurement professionals in the 50 states and the other territories."
Though procurement protests are often viewed as problematic, they are a valuable part of the process, Conway said. "I would hope we have challenges when agencies make mistakes," she said. "Most times industry is in a better position to understand when something has gone wrong."
During her visit, Conway was also a guest speaker at a procurement course at Guam Community College on July 24 and met with college officials afterward. The discussions included the establishment of a procurement institute, which Brown said he has been promoting.
"It's hopeful that we will have a program up within the next six months at GCC," Brown said. "So we can get the people educated who are doing all the paperwork and who are making the decisions, so they understand the rules that are there to protect them and are there to protect the taxpayer."
While no definite plans have been made for Conway's continued involvement with Guam procurement, "We have her number," Brown said.

Tuesday, July 31, 2012

Reveal the truth or face the consequences

This case involves the right of citizens to gain "freedom of information" access to records kept by outsourced service contractors. I was alerted to the case by this article: New Mexico court requires disclosure of public records held by contractors for government. As described in the article:
At issue in the case was the reach of one of New Mexico's main governmental sunshine laws, the Inspection of Public Records Act.

The court issued the decision last week in a case involving the city of Truth or Consequences and a nonprofit corporation that operated a public access cable channel for the community.

Video recordings of city commission meetings, which were made by the contractor to show on the cable system, are subject to disclosure under state law, the court said in reversing a district judge in Sierra County who had decided the recordings were not public records. The court said the cable system contractor was the "functional equivalent of a public agency in this case."
The case is from the Appeals Court of the State of New Mexico and involves a contractor service provider for the New Mexico town (well, it was a town when I passed through there back in the mid-60's) of Truth or Consequences (named after a popular TV show of that era). The case is reported here, and I cut and paste and remove the relevant context from it, so you'd benefit from a read of the case in full at the link.
the City entered into a contract (operating agreement) with SCC, designating it the “cable access management organization” for the PEG channel. The City agreed to provide funding to SCC to support the PEG channel through the dedicated portion of the franchise fees as well as equipment and, if available, physical space. In exchange, SCC agreed to operate the channel for “public/community access programming purposes” and further agreed to produce any programming the City required for a public purpose at no cost to the City. The operating agreement identified SCC as an independent contractor and stated that no principal/agent or employer/employee relationship existed between SCC and the City.

The district court found that SCC was an independent contractor, not an agent of the City. The district court further found that, at the time of the request, one meeting was still on SCC’s computer; however, it concluded that nothing in the operating agreement required SCC to create, maintain, or hold recordings of City meetings on behalf of the City. Therefore, the district court ruled that “[n]o public record was created by virtue of Hopkins recording City meetings and SCC cablecasting those meetings.”

the dispositive question is whether SCC’s recordings of the City meetings were made on behalf of the City so as to constitute public records within the meaning of IPRA.

IPRA defines “public records” as all documents, papers, letters, books, maps, tapes, photographs, recordings and other materials, regardless of physical form or
characteristics, that are used, created, received, maintained or held by or on behalf of any public body and relate to public business, whether or not the records are required by law to be created or maintained.

Florida appellate courts have repeatedly held that documents in the control of a government contractor are public records subject to inspection. Importantly, Florida’s public records law, like New Mexico’s, states that every person has the right to inspect or copy any public record including those records “made or received in connection with the official business of any public body, officer, or employee of the state, or persons acting on their behalf[.]” The Florida Public Records Act defines “public records” as including any document or sound recording made or received “by any agency.” The Florida legislature further defined “[a]gency” to include not only governmental units, but any “business entity acting on behalf of any public agency.”

The seminal Florida case addressing when a private entity will be subject to its
state public records law is News & Sun-Sentinel Co. v. Schwab, Twitty & Hanser
Architectural Group, Inc.
, 596 So. 2d 1029 (Fla. 1992). There, the Florida Supreme Court listed nine factors that can be used to determine whether a private corporation is “acting on behalf of any public agency” under the public records law.

Those factors include:
1) the level of public funding;
2) commingling of funds;
3) whether the activity was conducted on publicly owned property;
4) whether the services contracted for are an integral part of the public agency’s chosen decision-making process;
5) whether the private entity is performing a governmental function or a function which the public agency otherwise would perform;
6) the extent of the public agency’s involvement with, regulation of, or control over the private entity;
7) whether the private entity was created by the public agency;
8) whether the public agency has a substantial financial interest in the private entity; and
9) for who[se] benefit the private entity is functioning.
Applying this totality of factors test, the court held that an architectural company was not “acting on behalf of any public agency” when it was hired by the county to perform professional architectural services for the construction of a school (noting that because the firm was not created by the school board, public funds were only given for services rendered, the school board did not control the firm or delegate any of its decision-making process to the firm, and the school board did not perform a government function, the totality of factors test was not met).

Nevertheless, the Florida Supreme Court stressed that it was taking a flexible and
cautious approach by using a broad definition of “agency” that would ensure that a
public agency could not avoid disclosure under Florida law by contractually
delegating its responsibility to a private entity.

Since Schwab, Florida courts have continued to find that if a private entity is
doing more than just providing a specific contracted-for service to the public agency, the private entity is likely to be subject to its access law.

At least four other states have adopted approaches analogous to the totality of
factors approach of Florida. The Connecticut Supreme Court in Connecticut Humane Society v. Freedom of Information Commission, 591 A.2d 395, 396-97 (Conn. 1991), explained that in order for a private entity to be subject to the state Freedom of Information Act, it must be the “functional equivalent of a public agency.”

In A.S. Abell Publishing Co. v. Mezzanote, 464 A.2d 1068 (Md. 1983), the Maryland Court of Appeals held that an insurance guaranty association was an “agency or instrumentality” under the Maryland Public Information Act.

Similarly, the North Carolina Court of Appeals has held that a non-profit county
hospital system must release terms of legal settlements because of the county
commission’s control, review, and regulation; public funding; operation on leased
property; and operation pursuant to county agreement and bonds. News & Observer Publ’g Co. v. Wake Cnty. Hosp. Sys., Inc., 284 S.E.2d 542, 544-45, 549 (N.C. Ct. App. 1981).

Finally, the Oregon Supreme Court in Marks v. McKenzie High School FactFinding Team, 878 P.2d 417, 419 (Or. 1994), adopted a totality of factors approach when it denied parents access to the records of a fact-finding team appointed by the school district to investigate problems at the local high school. Because the team was independent of the government and not able to make decisions, the court held that the factors weighed against finding it subject to the inspection of public records law.

We are persuaded by the application of a totality of factors approach adopted
by the courts in Florida and the other states listed above. Further, although no New
Mexico case has used the totality of factors test to determine when a private entity
should be subject to IPRA’s provisions, we find support for utilizing this procedure
in our cases that have considered when a private entity performs a public function
such that it must comply with statutes generally governing only government agencies.

We emphasize, however, that IPRA should be construed broadly to effectuate its purposes, and courts should avoid narrow definitions that would defeat the intent of the Legislature. See Cox, 2010-NMCA-096, ¶ 5 (noting that access to information concerning the affairs of the government is a fundamental and necessary right of every person in this state).

Applying the totality of factors test, we conclude that SCC was acting “on behalf of” the City in this case. All of SCC’s funding comes from the City; SCC’s operation and activity is conducted on publicly owned property, albeit for a nominal fee; the services provided by SCC are an integral part of the City’s decision under the Ordinance to operate a PEG channel; the City is intimately involved in the regulation and procedures for access channel use and has control over SCC to the extent that it can unilaterally cancel the contract; and SCC is operating for the sole benefit of the City. Consequently, once SCC relieved the City of its function to operate the PEG channel and because it uses public equipment and funds to perform that function, the SCC acts “on behalf of” the City and becomes subject to IPRA.

Today, traditional public functions such as fire protection, transportation, jails, afterschool programs, and health care are routinely delegated to private entities — or privatized — for a variety of reasons. To allow such entities to circumvent a Citizen’s right of access to records by contracting as the City and NMML suggest would thwart the very purpose of IPRA and mark a significant departure from New Mexico’s presumption of openness at the heart of our access law. See Rio Grande Sun v. Jemez Mountains Pub. Sch. Dist., 2012-NMCA-___, ¶ 9, ___ P.3d ___ (No. 30,698, Apr. 26, 2012) (stating that “IPRA embodies New Mexico’s policy of open government”. We therefore continue to utilize a flexible approach that favors access to records even when held by a private entity.

Although the court repeatedly spelled out the language of the IPRA, indicating it may be specific to local law, it also relied on a common law type test based on the totality of the circumstances, coupled with a policy of law to promote transparency, so it may be that your particular jurisdiction may be persuaded by the rationale even if your local statute varies from the code law of New Mexico.

Guam has a Sunshine Act that applies to "public records", which "includes ... any writing containing information relating to the conduct of the public’s business prepared, owned, used, or retained by any state or local agency in any format, including an electronic format."

It does not apply to entities other than government "agencies", and as currently used on Guam, it would be difficult to make the case that a private contracted service provider is an "agency", even if performing governmental function services as an agent. 5 GCA § 10102(a): "Agency means any authority of the government and includes a department, institution, board, bureau, commission, council, committee of Guam government, branch, autonomous instrumentality, public corporation funded by public taxes or funds, or other public entity of the government of Guam, whether or not it is within or subject to review by another agency."

Wednesday, July 25, 2012

The rotating door can be difficult to prove

Feds, contractor working to settle Ky. fraud suit
The federal government has sued a former Fort Knox contractor who attorneys say steered hundreds of thousands of military contracting dollars into his own company, saying he misused his military assignment to create a lucrative retirement for himself.

[About 2005] Meredith created and signed a deal creating an energy savings program and sent the request for proposal to Nolin. The Army awarded the $2 million deal to Nolin in October 2007, with Meredith and his company, Meredith & Co., making $200,000 off of the contract he created.

Meredith worked from 1987 through 2007 as the energy program director at Fort Knox, with the job of finding ways for the military post to conserve energy. From 1996 on, Fort Knox worked with Nolin Rural Electric Cooperative on the program. Meredith retired from the U.S. Army in August 2007 and immediately went to work for Nolin, using the same office and computer at Fort Knox he had while serving in the military.

Federal prosecutors say Meredith spent nearly two years negotiating with Nolin before retirement and had been talking with the company about a job when he wrote the contract and took the position he ultimately created.

In a dozen emails sent before his retirement, Meredith contact Nolin for details that would allow him to award the cooperative the contract and place himself in the job of implementing the deal.

On April 12, 2005, Meredith wrote in an email to Nolin, "...Have considered doing it myself...retire (And I can), and come back on Monday as a REM, IN THE SAME CHAIR, probably same office and be off the Government rolls...."

When Nolin advertised the job at Fort Knox in September 2007, only Meredith applied. Nolin's Vice President of Operations, Vince Heuser, told Defense Criminal Investigator Jared Camper that he told Meredith about the advertisement, which had been placed to make the job look legitimate, but didn't notify anyone else. Camper noted that Meredith was the lone applicant for the job.

The lawsuit filed in federal court in Louisville seeks to prevent Meredith from spending any more of the money and recover what he had been paid. Court records indicate that federal prosecutors are also interested in settling the dispute. No criminal charges have been filed against Meredith or his company.

Buy or build: cost of outsourcing services depends on scope of factors considered

New GAO Report reads a bit like the two-handed lawyer: on the one hand....

But that appears to have been the limited goal of the study. Notwithstanding, it did highlight the problematic notion that method may determine outcome.


Results of Studies on Federal Pay Varied Due to Differing Methodologies
A careful consideration of federal pay is an essential part of fiscal stewardship and is necessary to support the recruitment and retention of a competent, successful workforce. Recent studies comparing the compensation of federal workers to workers in other sectors have produced varying findings. To improve understanding of federal pay setting, GAO was asked to examine
(1) how annual pay adjustments for the GS system are determined;

(2) the extent to which the pay increases and awards available to GS employees recognize individual performance, and how the Office of Personnel Management (OPM) provides oversight of pay increases and awards; and

(3) how selected studies compare federal and private pay and total compensation and the factors that may account for the different findings.
GAO reviewed legislation, OPM regulations, executive orders, and federal agency documents; analyzed OPM data; and interviewed agency officials. GAO reviewed six studies that met three criteria: issuance since 2005, original analysis, and focus on federal and private sector compensation.

GAO compared and contrasted the differences between their approaches, methodologies, and data sources, and interviewed the studies’ authors, people with expertise in compensation issues, and agency officials responsible for the data.

Findings of selected pay and total compensation (pay and benefit) comparison studies varied due to different approaches, methods, and data.

Regarding their pay analysis, the studies’ conclusions varied on which sector had the higher pay and the size of pay disparities. However, the overall pay disparity number does not tell the whole story; each of the studies that examined whether differences in pay varied among categories of workers, such as highly or less educated workers or workers in different occupations, found such variations.

Three approaches were used to compare pay:

• human capital approach (3 studies)—compares pay for individuals with various personal attributes (e.g., education, experience) and other attributes (e.g., occupation, firm size);

• job-to-job approach (2 studies)—compares pay for similar jobs of various types based on job-related attributes such as occupation, does not take into account the personal attributes of the workers currently filling them; and

• trend analysis approach (1 study)—illustrates broad trends in pay over time without controlling for attributes of the workers or jobs.

When looking within and across the studies, it is important to understand the studies’ differences in approach, methods, and data because they impact how the studies can be interpreted.

The differences among the selected studies are such that comparing their results to help inform pay decisions is potentially problematic. Given the different approaches of the selected studies, their findings should not be taken in isolation as the answer to how federal pay and total compensation compares with other sectors.

GAO provided drafts to agencies and study authors for review and comment and made technical changes as appropriate in response to comments received. One study author provided written comments concurring with the findings.

GAO is not making any recommendations in this report.
No Mention of Contractors, But Federal and Private Pay Differences Depend on Methodologies
The issue of federal vs. private sector pay has been hotly contested, and was the subject of a March 2011 hearing before Chairman Ross’ Subcommittee. Unfortunately, that hearing raised more questions than it answered and GAO was called into to analyze the pay gap issue. The GAO report fails to make any recommendations, but it provides a comprehensive explanation of the legal and practical reality of the federal pay system and why comparisons to the private sector vary in their conclusions about the pay gap.

GAO found that the studies used different methodological approaches, methods, and data. That was expected, as we had previously pointed out flaws in the Heritage Foundation 2010 study, which found that “federal employees earn approximately 30 percent to 40 percent more in total compensation (wages and benefits) than comparable private-sector workers.” POGO calculated the federal and private sector compensation gap to be 20 percent, but we emphasized that no one will really know the truth until uniform systems are created and apples-to-apples comparisons are conducted that factor in comparable skills, work experience, education, and other non-pay factors.

The debate is important for the limited purpose of complying with the Federal Employee Pay Comparability Act of 1990. However, if the prevailing attitude is, as Heritage has proclaimed (see p. 16), that the private sector is cheaper than the public sector, and therefore we should “Hire More Private Contractors,” then GAO’s time and energy was wasted.

A comparison of federal and private sector pay doesn’t do anything to help contribute to the government’s decisions to insource or outsource work. While there are relevant policy concerns related to the 2.1 million civilian federal employees (who cost $200 billion in fiscal year 2011), there are more concerns with the unknown number of service contractor employees, who cost about $120 billion more.

Procurement after the end of corruption

Kenya, Procurement laws an obstacle, protests PM
Prime Minister Raila Odinga criticized the current procurement laws, saying that were imposed by the World Bank and the International Monetary Fund to curb financial irregularities at a time when corruption was rife in the country, and hence have outlived their intended purpose.

“We need to review these procurement rules as they may not be in the interest of the country at the moment because they were introduced as conditionality to cut down on corrupt practices” he said.

Odinga was speaking during a forum on low absorption and implementation capacity among government Ministries, Departments and Agencies (MDAs).

The low utilization of budgeted funds impacted negatively on donor funded programmes and projects, he added, putting more of a burden on the government that has to repay the loans with interest. Under-absorption, he said, was being fuelled by failure of ministries to plan funds ahead of the budget, which was evident in the amount of government projects that failed to materialize within the expected timeframes.

Yes, now that corruption is solved, simply plan the budget and then spend away, and make sure you spend it all.