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Sunday, February 1, 2015

The eyes of Texas are not on its procurement system -- yet?

As is customary with this post, you must read the mentioned article. I tend to cut, paste, rearrange, paraphrase, leave out important stuff and otherwise use the material for didactic purposes, not literature, legal or otherwise. 

For instance, in the following article there is a catalog of big-name contractors (e.g., Accenture, Xerox, IBM) and big money contracts that went awry that are mentioned. You may find reading about those much more interesting and juicy than reading the about the context in which they went awry.

In Texas contracting, failure is an option
For two decades, Texas has pursued a wave of privatization of public functions with the belief that corporations could save taxpayer money while improving the delivery of essential government services. But multiple contracts representing billions in public dollars have blown up in the state’s face, leading to lawsuits, ethics investigations, wasted funds and frustrated Texans.

The pattern that emerges is one of famously business-friendly Texas repeatedly fumbling its efforts to hold the businesses it hires accountable.

Dozens of audits going back to the 1990s have found similar problems with contract management and procurement across a wide stretch of state agencies. And conflict of interest questions similar to those now dogging the 21CT deal have periodically emerged over other state contracts.

“I think it’s gotten worse rather than better in terms of the oversight, the accountability and making sure that people aren’t taking advantage of the contracting process,” said state Rep. Sylvester Turner, D-Houston, who has been critical of privatization efforts since joining the Legislature in 1989.

“My observation over the years is we have often entered into contracts that may not have been in the best interest of the state, and we try to overcome it by managing them poorly,” said Carl Isett, a Republican state representative from Lubbock from 1997 to 2010 who worked on contracting issues and is now a lobbyist. “It’s just the recurring theme.”

While contracting problems have arisen in nearly every corner of state government, including foster care, standardized testing and border security, Texas’ highest-profile disasters have coincided largely with big information technology projects that come in over budget, behind schedule or both.

In 1991, the Texas attorney general’s office signed an $11 million contract to computerize its child-support payment system. By 1997, the deal with Andersen Consulting had ballooned to more than $68 million and was three years behind schedule. A state audit found that the company deserved a share of the blame for overpromising and underperforming.

A decade later, Andersen Consulting had renamed itself Accenture and was in the crosshairs of Texas law Poorly trained personnel and technical problems led to a series of well-publicized snafus, including applicant backlogs growing by thousands and misinformed workers denying benefits to eligible families. Texas ultimately paid Accenture $244 million and canceled the contract.

Despite the two high-profile flubs, Accenture’s relationship with Texas appears stronger than ever. The company is in charge of most of the state’s Medicaid claims processing, as well as a $99 million upgrade of the attorney general’s child support payment system, two areas synonymous with its past missteps.

State Rep. Garnet Coleman, D-Houston, who was first elected in 1991, said he would support temporary “freeze-outs” from future bidding by companies that have been shown to handle past contracts poorly. Yet more important than holding vendors accountable, he said, is boosting the state’s resources so that agencies aren’t outgunned when dealing with the private sector.

“The only way to do outsourcing properly is to have enough people working on the agency side to do appropriate oversight of the company that has the contract,” Coleman said. “What we don’t want is the tail wagging the dog, which is what usually happens.”

Coleman recalled being in the Legislature in the 1990s, when “outsourcing” emerged as a buzzword, coming up constantly in hearings and policy proposals. Texas was drawing national attention for its efforts to transfer responsibilities onto the private sector, which Republican lawmakers predicted would lower costs while producing a reliable, efficient and technologically sophisticated delivery of services.

In 1997, under Gov. George W. Bush, the state began taking bids to outsource the state’s welfare, Medicaid and food stamp programs, predicting that doing so would save the state at least $10 million a month. The concept, viewed at the time as the most ambitious privatization effort by any state, fell apart after President Bill Clinton denied Bush’s request for a waiver from federal rules requiring that government employees handle much of that work. Bush accused Clinton of siding with politically powerful labor unions over good policy solutions.

The setback slowed, but didn’t stop, Texas’ march toward privatization. In 2003, Gov. Perry signed House Bill 2292, which consolidated 12 health and human services agencies into five and ultimately replaced thousands of state workers with private contractors handling duties like screening welfare recipients.

More than a decade later, the bill’s author and lead proponent, former state Rep. Arlene Wohlgemuth, described the bill as a success in its goal of shrinking state government and outsourcing services better handled by the private sector. Yet contracting oversight needs to be reformed, she said.

“In my opinion it is one of the greatest weaknesses of state government,” said Wohlgemuth, executive director of the Texas Public Policy Foundation, a conservative think tank. “We need to do a better job of enforcing the contract once we have agreed upon it and auditing those contracts.”

Last month, newly elected Gov. Greg Abbott directed all state agencies to follow new, enhanced contracting rules, including requiring agencies to publicly disclose all no-bid contracts, as well as a “public justification” for use of the no-bid method.

Abbott’s order is just one reaction to the health commission’s no-bid contract with 21CT, which has drawn allegations of cronyism and incompetence. Yet for all the coverage that deal has received, it is a relatively small item in state contracting. Most big contracts are for highway projects and involve organizations providing health services to Texans. And for the most part, they operate without incident.

The health plan vendors, who handle billions of state and federal dollars, deliver on time and with fewer problems because there’s more than one contractor in the region, Goodman said. If one had to be pulled, the others remain and there’s no interruption in service.

Contractors are also required by state lawmakers to be more transparent than in the past. If they’re late or are fined for performance, you can see it on the health commission’s website. The agency has also, in recent years, shortened the time it takes to go from a warning to a fine for a contractor.

“You don’t get a whole lot of warning now,” Goodman said. “You are out of compliance; you get a fine.”

“We’re prepared to throw the book after the welfare mom, but the people who are getting the $10 or $20 or $150 million contract, we deal with them in a very different fashion,” Rep. Turner said. “When there are questions raised about whether there’s been abuse of the contract, we’re not as animated or outraged.”

Discussions continue among lawmakers on what they can do this session to improve contract oversight.
I note that Guam has long required that all sole-source contracts be identified by an annual report to the legislature. It is also considering more stringent disclosure of the determinations that must be made to engage in a sole-source solicitation.

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