State auditors find problems with Land Office contracts
The Texas General Land Office had a conflict of interest when hiring the firm Grant Thornton LLP for oil and gas royalty audits. The July 2015 report said the land office’s former director of financial subsidiary operations had a “personal and professional association with her former supervisor,” who now works as a subcontractor to Grant Thornton. The land office employee served as a liaison between the two offices.
State Auditor Terry Keel’s office launched its audit in December 2014 after the three contracts were procured. The land office agreed with the state’s recommendations, which called for a cost analysis, a needs assessment and addressing any conflicts of interests prior to each procurement.
State procurement requirements call for agencies to disclose conflicts of interests during contract planning but the office failed to do so. [Some go further: disclosure only works when someone somewhere cares and pays attention. Some jurisdictions require recusal, and some fewer add bite to the requirement.]
Tom “Smitty” Smith of the group Public Citizen said, “It is the same old story of allegations of conflict of interest and failure to follow the rules for contracting.”
The state also found that the land office did not compare the cost of hiring full-time employees to conduct oil and gas royalty audits with the cost of contracting Grant Thornton LLP. According to the report, the office could have hired four employees to complete four audits for $426,813, but the Grant Thornton contract totaled more than $1 million.
A separate contract with IDEA Integration Corporation for information technology services was also not planned and monitored correctly, the audit found. The state’s Quality Assurance Team, which monitors major information resources projects for agencies, was not involved with the $1.9 million contract. Normally, if contract expenditures exceed $1 million it must be reviewed by the group.
In addition, the office assigned contract managers that had not obtained contract management training that is required by law.
This is not the first time state contracting practices have been under scrutiny, but Gov. Greg Abbott recently signed approved legislation that will strengthen state contracting regulations. The approval came after it was discovered that the Health and Human Services Commission handed a $110 million contract to Austin technology company 21CT. “It just goes to show you can’t trust the state agencies to do it without an outside agency to supervise their work,” Smith said. “This is the same story here — agency after agency failing to follow basic contracting provisions.”
Audit Finds "Significant Weaknesses" in GLO Contracting
The General Land Office’s contracting procedures are riddled with “significant weaknesses” that threaten the agency’s ability to ensure it is wisely spending its dollars, State Auditor John Keel said in a report made public Tuesday. “Due to significant weaknesses in its processes,” the audit said, the General Land Office “did not always plan, procure, form, and monitor” the contracts according to state rules and the agency’s own policies.
The GLO has a wide range of duties, including managing the rights to millions of acres of state-owned minerals, protecting the state’s coastline, handling billions of dollars for disaster recovery, preserving the Alamo and administering loans and other benefits to veterans.
For the nearly $2 million Grant Thornton contract, signed in 2013 and renewed in 2014, the auditor identified “significant deficiencies,” such as failing to study whether it needed to hire the firm in the first place. “The Office did not assess the need to hire Grant Thornton to provide supplemental staffing for the Office’s existing minerals audit department,” the report said. The agency researched rates at other firms, but only after it decided to hire Grant Thornton.
The agency initially told the state auditor that it removed the employee from the Grant Thornton contract, but it downplayed her involvement in brokering the contract. The auditor, however, concluded that the employee “had a significant role in the procurement,” including attending a relevant meeting, preparing a proposal for staffing mineral audits with Grant Thornton personnel and helping approve contracts with the company in 2013 and 2014.
The audit found other problems with the information technology contract with IDEA Integration Corporation. In that case, the report said, the GLO prepared an incomplete “statement of work,” and underestimated the roughly $1.9 million cost. The agency initially pegged the cost at about $93,000. While planning the deal, the agency "did not include key information, such as project time lines and applicable Texas Administrative Code information technology requirements," the report said.
Because of that error, the auditor said, agency staff did not complete disclosure forms designed to ward off nepotism, as required for contracts over $1 million.
In contrast, this:
UK: How To Guard Against Bribery And Corruption In The Tender Process
Any company caught paying bribes faces the prospect of a criminal conviction, an unlimited fine and terrible publicity. A further consequence for those supplying the public sector, is a discretionary ban from bidding for government contracts across the EU if the company is convicted of the offence of failing to prevent bribery under section seven of the Bribery Act 2010. The ban would be mandatory if one of the directors (or any person who has powers of representation, decision or control of the company) is involved and is convicted of bribing another person or a foreign public official under sections one or six of the Act. The stakes are high so it is important to have policies to prevent bribes being paid on your behalf.
For example taking a procurement manager for an expensive day out shortly before they decide on a tender. This could be unlawful if the intention was to influence their decision to favour your bid for reasons other than the relative merits of your tender. Timing is everything. The closer in time the hospitality is to a contract award the greater the likelihood that there will be an inference of impropriety.
What is required is a culture in which bribery is not tolerated at any level.
In a procurement setting you must understand the rules and stick to them.