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Tuesday, June 2, 2015

Special needs and higher education

I'm not quite sure what it is about public universities and their yearning freedom from a scrutable contracting regime that is good enough for the rest of tax-supported government enterprise. The prior post was about plans to exempt Illinois colleges from common procurement practices of the state. Today I read of another such move afoot in Wisconsin:

UW funding cut trimmed
Lawmakers on the powerful budget committee trimmed Gov. Scott Walker’s proposed $300 million two-year funding cut to the University of Wisconsin System and introduced significant changes to faculty tenure and shared governance that will take away some power from faculty, students and staff and give more power to campus chancellors and the UW System Board of Regents, who are appointed by Walker. The proposed changes by the Joint Finance Committee also officially put an end to Walker’s proposal, supported by top System officials, to spin the system off from state control to be operated as a public authority.

The lawmakers restored at least in part two key operating flexibilities that were included in Walker’s public authority model. They’d be exempt from state oversight on purchasing and procurement once the regents develop their own rules governing them. They’d also be exempt from state rules on building projects provided the projects are funded entirely through gifts or grants.

The first proposal reminds me of a prior post about the University of Hawaii, and the second one of a post about the University of South Carolina.

The situation in Hawaii is particularly worth recalling.

UH’s procurement privilege could release $337M, May 23, 2010
The University of Hawaii system will be exempt from following the state’s public procurement code, which it has largely blamed for its backlog of deferred maintenance and capital improvement projects, under a new law that takes effect July 1.

University officials say the exemption, effective for two years, will help the 10-campus system operate more efficiently and with greater flexibility in awarding contracts for goods and services, including construction work. The university system has pointed to the existing code, which requires larger contracts to be awarded through a competitive sealed bidding process, for tying up projects and increasing costs as a result.

“This will allow the university to get construction projects started more efficiently and at a faster pace — and it has the added benefit of saving taxpayers’ money by allowing us to take advantage of current construction costs, which are coming in 30 [percent] to 40 percent lower in some cases.”

House Bill 347, which Gov. Linda Lingle signed into law May 6 as Act 82, allows the statewide public university system to come up with its own procurement process “in lieu of” the state procurement code. This was the sixth consecutive year that UH asked lawmakers for the exemption. It previously had flexibility from 1998 through 2004.
And how did that work out for them?

UH to lose procurement exemption as bill flops Apr 27, 2012

University of Hawaii Procurement Under Fire for Wasting Millions of Dollars on Fraud and Corruption March 12th, 2013
Local construction industry leaders are questioning as the University doles out a total of $622 million in contracts including $206 million for major contracts now underway, $229 million of major projects being procured and $187 million in health, safety, code and repairs and maintenance projects.

Dennis Mitsunaga, a successful and politically connected government contractor who has worked for virtually every state agency over the last 40 years, sent shock waves through his industry when he testified at a recent Senate hearing about waste, fraud and abuse that he witnessed firsthand in the University’s procurement system. Mitsunaga, a practicing structural engineer since 1969 and a general contractor since 1971, has worked on several projects including the University of Hawaii Chemistry building, the University of Hawaii Cancer Research Center, the Rainbow Baseball Stadium, and the University of Hawaii- Hilo Housing Project, Phase 1.

He focused much of his criticism on Brian Minaai, a University administrator who has overseen the capital improvement projects for all of the campuses since March 2008. “Brian’s process for selection of non-bid contracts is highly suspect. His selection committee consists of two ‘yes men’ assistants and a third member from the department involved in the project. In essence he controls two out of the three votes he himself makes each selection. He selects only friends from a pool of hundreds of qualified architects and engineers in Honolulu. An investigation will show that the consultants he selected were very small and not the best qualified for the projects he gave them,” Mitsunaga added.

Mitsunaga, who has two companies, Mitsunaga and Associates and Mitsunaga Construction, said Minaai directed him to replace his own civil engineering company on the job with Minaai’s pick, Wesley Segawa, even though Mitsunaga and Associates had applied for and was selected for the project as the civil engineer of record. Segawa charged the University another $293,260 for the civil engineering work and Mitsunaga and Associates had to add a 10 percent coordination fee of $29,326 plus General Excise tax; boosting the cost of the project by $30,000.

Minaai also directed Mitsunaga and Associates to replace Kimura International as the environmental assessment consultant with Wilson Okamoto and directed Mitsunaga and Associates to use Palekana Permitting and Planning to do the permit and processing at a cost of $23,000. “That work is usually covered by the companies involved so the $23,000 was an additional cost, plus a 10 percent coordination fee and GE Tax,” Mitsunaga said.

On another job for the University of Hawaii Cancer Research Center in Kakaako, Palekana Permitting and Planning charged $120,000 to process the permits even though the Kakaako district is currently exempt from such permitting.

Other architects and engineers have privately confirmed Mitsunaga’s claims. One claimed on average on University construction jobs, a construction management firm will charge 10 to 28 percent of the construction contract instead of 5 to 6 percent other state agencies would allow for the same service. Similar allegations were made public when the University of Hawaii agreed to pay $2.5 million to settle a lawsuit that alleged cronyism played a role in the award of a key development contract at the $120 million Cancer Research Center of Hawaii.

The University of Hawaii received a great deal of autonomy in 1999 from Legislature, including management of its own legal affairs, tuition and salaries and contracting.

But some senators said their own investigations have shown the University administration is failing in all of these areas. In addition, students have complained about tuition skyrocketing at the school, making it unaffordable for many local residents, because tuition has been increasing by 141 percent over the last 11 years.

Senate President Donna Mercado Kim proposed several bills this session that would take some of the power away from the University administration and its president, MRC Greenwood, including procurement responsibilities, and help bring what some legislators believe is excessive spending under control. However, during two recent Senate hearings, University officials opposed the plan to transfer procurement responsibilities to the state, and maintained autonomy is necessary.

The procurement bill passed the Senate Higher Education Committee this session, but was killed by Senators,

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