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Thursday, March 24, 2016

Mastering "master contracts"

Park board 'could have done things differently,' Budig says
The Cincinnati Park Board has been using existing city contracts intended for routine maintenance to do major projects for “as much as a decade,” Park Board Chairman Otto Budig said in an interview on Thursday.

Such “master agreements” have become a point of contention after City Manager Harry Black and Patrick Duhaney, the city’s chief procurement officer, revealed on Tuesday that the parks department had not done a fresh round of competitive bidding when it built Smale Riverfront Park and instead funneled most the work to vendors with the already-existing contracts. Those contracts are rebid periodically, Budig noted. [The periodicity was not mentioned in the article.]

That practice, Black and Duhaney said, potentially put the city at financial risk because the contractors did not have the performance bonds required in the city’s code. It has since been halted, they wrote. Asked whether the practice extends back through the past several city administrations, Budig said, “There’s no question about that. The park board had been working successfully in dealing with these projects that had come up from time to time.”

“The board was informed, as this project moved along, the various aspects that were being completed. I don’t think any of us had questioned whether the staff had taken this to the bidding floor or whether it was a continuation of a process that had taken place for some time.” “If we were to follow that (bidding) process to its conclusion, with the inevitable pauses that occur in the city framework … we would have ended up with a mudhole for the All-Star Game,” he said.

Park board members did not know that the Smale work was being procured using the master agreements, said Budig. “It was not necessarily an error of commission but an error of omission,” Budig said. [An error is an error; negligent actions have the same effect as negligent omissions. This is disingenuous.]
And in a related article: Park director’s fate up to board following allegations
All but $519,118 of at least $15 million in construction work on the park was done by using existing city contracts with firms that were intended for ongoing routine maintenance and repair of city buildings, according to Chief Procurement Officer Patrick Duhaney’s memo. The contracts are known as “master agreements.”

“[T]hey were not structured for or put in place for new construction or renovation work of the scale and scope of the SMR Park project,” Duhaney wrote. “[T]he city is inadequately protected with respect to the performance bonds in place for Smale Riverfront Park." The 12 contracts used to build the park came with about $1.7 million in performance bonds when at least $15 million in work was done, leaving a little more than $13 million in work unprotected by bonds.

On the parks’ website a statement attributed to the Cincinnati Park Board maintained the park board “followed city purchasing regulations by using existing competitively bid master agreements previously awarded by the city. “The board did extensively use city ‘master agreements,’ which are periodically awarded by the city for a range of construction, repair and maintenance services, to build parts of SPR (Smale Riverfront Park)," the statement says. “[T]hese contractors had previously been vetted and approved by the city as being the most advantageous and the best price for their services.”

Mayor John Cranley blamed the situation on the previous city manager, Milton Dohoney. “There was a culture of using these master service agreements,” Cranley said. “We don’t know the extent to which all of the other departments have done this. Clearly, it was wrong. We put an end to it in the middle of last year.”

Cranley added that he believed the park board members were "shocked" to find out about the department’s practices. "I’m confident they did not know,” Cranley said.
Here on Guam, an analogous form of "master agreement" has been revealed.

FestPac faces financial challenges less than 70 days away
With less than 70 days until the start of the Festival of Pacific Arts, the amount of community donations for the cultural event is about $1.7 million short of projections. Nathan Denight, FestPac committee chairman, said the event is short of the expected funding. A budget from 2013 showed the event would get $2 million in donations, but it currently has about $300,000 — $1.7 million short, he said. Sen. Tina Muna Barnes, D-Mangilao, the committee’s finance chairwoman, said the government of Guam has committed $5 million to the event through various legislative bills.

Rose Ramsey, the festival’s director, said the priority for funding would be for the main FestPac area of Paseo and the schools housing delegates. Monica Guzman, Council on the Arts and Humanities Agency chairwoman, which is overseeing the programming of the event, asked Ramsey to release funding in a timely matter. “Well, it took you weeks to submit your budget,” Ramsey responded. Guzman said price quotations have been submitted, but the amount of time the approval process takes for the release of funds is too long. “I don’t know what to do. We need the money,” she said.

And one lawmaker is concerned that festival organizers have been awarding large contracts for services without going through a procurement process. Sen. Rory Respicio, D-Agana Heights, brought up concerns over the contract with Adztech, the event’s coordinator, and whether or not local procurement law is being followed. “This is taxpayers’ money,” he said. “It’s like you found a way to circumvent the procurement law,” he said.

Denight said the Office of the Attorney General approved the request for proposals for the contract with Adztech and went through the procurement process with CAHA so it shouldn’t be an issue. However, the committee said, it would talk to Adelup’s legal counsel or the AG’s office on the issue to get an opinion.
FestPac faces another hitch
According to the Adelup officials, during their meeting with the OAG, the attorney general stated that her office had reviewed the events manager procurement and contract and approved both. “She also stated that the contract allows for the private contractor to procure needed goods and services without going through additional government procurement,” a statement from Adelup said. But yesterday, the AG said the contract approved by her office was limited to the $800,000 that was negotiated with the event manager.

The AG also stressed that procurement beyond this limitation could not be conducted through the contract with the events manager.
A.G. Reccomends That GVB Handle Millions in FESTPAC Procurement
Last week the A.G. told the FESTPAC committee and the Department of Chamorro Affairs that they could not funnel some $4.2 million dollars in tourist attraction funds through a company that won the bid to be the FESTPAC event coordinator because that company's contract was only for $800 thousand dollars.

The FESTPAC money was given to the Department of Chamorro Affairs who awarded the $800 thousand dollar event coordinator contract to Adztech. The problem is they need to spend some $4.2 million dollars for FESTPAC. But GVB's board will have to meet to decide whether or not they will handle these funds. "So tomorrow is our board meeting. So I’ll bring up the OPA and the A.G.'s suggestion that these funds come back to GVB," said FESTPAC Committee Chairman Nate Denight.

It's not yet certain if GVB will take on this responsibility however as they turned the funds over to the Department of Chamorro Affairs at the recommendation of their auditors Deloitte and Touche. If the money does go back to GVB Denight says they will likely use their existing event coordinators RIMS and Tropical Productions.

It looks like Mr. Denight has been taking taking a page from the Cincinnati Park Board's playbook if he intends to use existing contracts to bolt on to them the FestPac project, or the events management contract.

There are many issues involved here, chiefly, making changes to a contract and solicitation beyond the scope of the contract and the field of competition. One Guam Superior case, for instance, disallowed an extension of an existing contract on the ground that "the change results from side stepping the purpose and protection of the bidding process". (L.P. Ganacias Enterprises, Inc., dba Radiocom vs. GIAA and Guam Cell Communications, CV 1787-00.)

I have not looked deeply into this, but there is another issue that seems in need of resolution. The FestPac contract for the events manager was made through the auspices of the Department of Chamorro Affairs, whose purposes and powers are set out in its enabling statute, 5 GCA Chapter 87

Although promoting FestPac seems fairly enough to fall with the limited purposes of the DCA (5 GCA § 87103), it does not clearly appear that the powers assigned to DCA (5 GCA § 87104) include the power to acquire services.

Among its laundry list of powers, the acquisition powers given to DCA include the specific powers: to acquire real property (§ 87104(f)); to acquire any property of historical or cultural importance (§ 87104(g)); to construct, equip, operate and maintain buildings and equipment (§ 87104(l); to acquire any tangible personal property (§ 87104(t)); and finally, to acquire any intangible personal property (§ 87104(u)). In short, DCA is given express authority to acquire supplies and construction.

But procurement under Guam's law has a broader scope. Procurement law is also intended to apply to the expenditure of government funds via a contract for the acquisition of services. (5 GCA §§ 5004(b) and 5030(o))  And, there is no express power given to DCA to acquire services in its enabling statute. It has the power to "employee persons to provide professional, clerical and technical assistance", subject to the civil service law (§ 87104(j)), but no express power to contract to acquire such services from non-employees.

It does not appear that DCA had the authority necessary to procure the events manager in the first place.  And if it simply delegates its power to spend FestPac funds to GVB, or anyone else, the power of delegation is limited to transferring only such power as the person delegating possesses. DCA cannot create the procurement power to acquire services by delegation.  And, it appears at first blush that GVB does not have the express power to acquire services, either.  (12 GCA § 9105.)

But, so what, right? Maybe, but consider the ENFORCEMENT OF PROPER GOVERNMENT SPENDING Act, 5 GCA Chapt 7.
Any officer, agent, contractor, or employee of the Executive Branch of the government of Guam who is charged with ... the spending of money belonging to the territory of Guam, including the Governor and Lt. Governor of Guam, stands in a fiduciary relationship to the people of Guam in regard to the management of public money. (§ 7102)

Any taxpayer who is a resident of Guam shall have standing to sue the government of Guam and any officer, agent, contractor, or employee of the Executive Branch of the government of Guam for the purpose of enjoining any officer, agent, contractor, or employee of the Executive Branch of the government of Guam from expending money without proper appropriation, without proper authority, illegally, or contrary to law, and to obtain a personal judgment in the courts of Guam against such officers, agents, contractors, or employees of the government of Guam and in favor of the Government of Guam for the return to the Government of Guam of any money which has been expended without proper appropriation, without proper authority, illegally, or contrary to law. (§ 7103)
The masters of spending government funds through acquisition contracts need to first master the laws of procurement.

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