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Friday, April 22, 2016

Of legs up, hand outs, and ... fingers crossed, eyes shut?

Government contracting staff have it hard enough making sure the public fisc is prudentially targeted to acquiring satisfaction of minimum needs with maximum value and efficiency. When social welfare schemes, or other political aims, let alone nefarious criminal schemes, are interjected into the process, acquisition staff and resources quickly get distracted from the primary purpose of the acquisition process. Putting responsibility on the acquisition process to account for such incidental matters is a step too far, a straw that may break the camel's back.

Responsibility for the smooth handling of those extraneous non-acquistition issues should be shouldered by other instrumentalities with the expertise required for those matters and dealing with the controversies that come with those activities. But someone must be saddled with that responsibility. Because, as we all know, government contracting money is a significant part of any government's budget, and unaccountable diversion of acquisition funds to non-acquisition activities taints public perception of the acquisition process, and reduces the government's purchasing power.

But when everyone is made responsible, no one is.

Note that you should read the article in its original at the link. I tend to cut, paste, delete, paraphrase and otherwise alter the story line to fit in the educational theme and space of this blog.

Governments Struggle to Root Out Fake Minority Contractors
Like many cities and states, Portland, Ord. has a program allowing it to give special consideration to women- and minority-owned companies when handing out government contracts. The goal, of course, is to help support traditionally disadvantaged companies by giving them a leg up. But as Margie Sollinger, the city's ombudsman, began to discover, the city wasn’t necessarily helping the firms it thought it was.

As the city’s ombudsman, Sollinger had for some time been hearing from business owners about fraud in the city’s minority- and women-owned contracting program. According to state law, the city of Portland wasn’t allowed to take action against minority-owned firms it believed to be fraudulent; those complaints had to be referred to the state. But Sollinger says the state Office of Minority, Women and Emerging Small Businesses initially shrugged her off.

So she referred the case to the Oregon Department of Justice, where the investigation continued for nearly two years. Simple city inspections to make sure the awarded company is showing up to perform the job would have caught past violators. But cities and states across the country are struggling to provide sufficient oversight when it comes to minority- and women-owned firms, also known as disadvantaged business enterprises, or DBEs. As a result, much of the money that’s targeted to help these businesses doesn’t really go where governments want it to.

State legislators took an interest in the issue, and last year passed legislation allowing all public agencies in the state to conduct their own investigations into future allegations of minority contract fraud.

It’s a problem that’s shown up all over the place. In Louisville, Ky., the metro sewer district banned two minority businesses from receiving future contracts after it was discovered that they were subcontracting with nonminority-owned businesses. An audit in Pittsburgh found the city didn’t even have a way to track how much work was going to DBEs. The city of Denver has also been dealt a blow by contracting scandals in recent years. In 2014, the city proudly touted a new contract for mechanical work at Denver International Airport that had been awarded to a company owned by an African-American woman; at $39.6 million, it was the city’s largest-ever minority contract. But it later became clear that the company was subcontracting more than $23 million of the work to a different firm, one that didn’t qualify as a minority contractor.

Nationwide data on DBE contracting programs is spotty; states’ efforts vary widely. The National Association of State Procurement Officials doesn’t monitor them. The US GAO has published a smattering of reports over the past 25 years on women- and minority-owned contracting programs with two main conclusions: More information was needed, and the contracting world in general lacks women and minorities.

Wendell Stemley, president of the board of the National Association of Minority Contractors believes states owe it to their residents to help minority firms. He says, "the faces of these businesses should reflect how diverse the locality actually is. And if a state has lax compliance standards, then of course there are going to be firms willing and able to game the system.”

Ensuring that a minority contracting program is functioning properly takes a lot of work. A 2013 internal audit by the Minnesota Department of Transportation found extensive problems with its DBE program, ranging from mismanagement and weak oversight to outright fraud. “We just weren’t seeing a lot of success, and we were even having protests outside the state Department of Transportation office,” says Minnesota state Sen. Scott Dibble, chairman of the Transportation and Public Safety Committee. The scathing audit highlighted millions of dollars that had been passed through to non-DBEs and a consistent failure to meet the state’s own DBE goals. But the key finding, says Dibble, was from the state Office of Civil Rights. “There were some serious concerns within that office that numbers were fudged,” he says.

This year a consortium of state agencies will be working together to develop more objective criteria for what really qualifies as a disadvantaged business. Perhaps most important, Dibble says, the effort has raised awareness among lawmakers of the need for intense oversight. “In order to remedy age-old injustices” against disadvantaged firms, he says, “it requires proactive action, not passive acceptance.” Still there’s an inherent challenge when a state endeavors to mix bureaucracy with “complicated social problems,” says Dibble. “It’s a problem, and I don’t really know how to solve it.”

Another place that’s taking on contract reform is New Orleans. The city has long had a minority contracting program in place, but when construction projects ramped up as the city rebuilt after Hurricane Katrina, it became clear the program had extensive problems. There was a two-year backlog of companies waiting to be certified as minority- or women-owned businesses, and the city had virtually no record-keeping or monitoring processes in place. In 2013, Mayor Mitch Landrieu introduced a set of proposals to raise the profile of the program. These reforms focused mostly on outreach and oversight of public contracts.

Last fall the city implemented a second wave of regulations, focused more on enforcement and compliance. Now, when fraudulent activity is discovered, the city can withhold payments and exclude that particular firm from future contracts. The city has also introduced new technology tools to monitor existing contracts and payments. (As a side benefit, the technology will allow subcontractors to see when a primary contractor gets paid, adding another level of transparency to the entire contracting process.) The city needed to invest in more people. When Landrieu took office in 2010, the Office of Supplier Diversity was made up of one person. But thanks to a local millage, the city was able to budget $700,000 to beef up staffing. Now there’s a staff of seven people. It’s too soon to know how effective the new technology and compliance measures will be; the city only began training employees on them in February.

National Association of Minority Contractors’ Stemley believes the high-profile cases of fraud and noncompliance are the exception to the rule. The onus, he says, is on states and cities to step up their efforts to attract more minority- and women-owned businesses. “We need to be trying harder to make sure we have workforce diversity in the contracting community,” he says. “We can’t ignore these underserved communities that need jobs.”
And don't forget that the main job of the acquisition program and staff is to get the government's needed things and services delivered when and where needed and on budget. Too many times, preference programs are simple political campaigns, big on promotion and bereft of substance and accountability, and the acquisition process gets blamed for the short-changes of the programs.

1 comment:

Procurement Analyst said...

The obvious solution WHICH WILL NOT BE TAKEN: Dump the entire programs. Nothing but bureaucrats creating work for other bureaucrats that ultimately only helps the bureaucracy continue to grow with little or no effect.