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Wednesday, August 23, 2017

The ethics of paperwork

Illinois, USA

Note: As I so often warn, I slice and dice and paraphrase and omit articles to my end an didactic idiosyncrasies. Therefore, don't take my word for the renditions of articles here. If you need to know the actual intent and full context of the authors of articles presented in this blawg, read the source at the links.

Procurement changes welcome
Gov. Bruce Rauner signed bipartisan legislation last week that should make it easier for the state to make required purchases at lower costs for taxpayers. S.B. 8 has particularly positive ramifications for public universities throughout Illinois.

The legislation is intended to make the procurement process more efficient and transparent by undoing restrictive rules that were put into place after the scandals of the administrations of former Govs. Rod Blagojevich and George Ryan. They created bureaucratic nightmares, the undoing of which Rauner said will "make it easier for small and midsize businesses to bid on contracts." It also will make it easier for public entities to accept the lowest bid. That may seem like common sense, but in Illinois, it's revolutionary political reform.

Killeen cited several problems UI officials endured under the old rules that he expects to be addressed by the new law. He said that "our libraries will be able to purchase academic journals that are staples throughout higher education without going through unnecessary and time-consuming procurement reviews" and "will avert delays that have slowed research and frustrated top faculty, threatening to chase them and their nearly $1 billion in annual research funding to states with "less-cumbersome" procurement guidelines. "For instance, our chemistry and biology researchers will be able to order a specialized microscope that is available from just a single source without jumping through hoops to attract other vendors that don't exist," Killeen said.

The goal of limiting public corruption under the old approach was well intended. Given the criminal instincts that pervade government in this state, they can hardly be ignored. But there are limits to what bureaucratic rules can achieve in pursuit of the noble but challenging goal of legislating honesty. They can become counter-productive when they have the effect of paralyzing the process — in this case, the procurement process.
Governor Signs Procurement Reform Bill
Rauner said the bill isn’t perfect, but it will make the procurement process easier for both vendors and state agencies like universities. “And, based upon the estimates I’ve heard, this can save the university tens of millions of dollars every year.” And Rauner says the savings will be even greater for other state agencies, from Central Management Services to the state prison system. Rauner said that his administration estimated that procurement reform would, in time, save the state $250 million to $300 million a year.

“This bill will allow us to save hundreds of millions of dollars every year”, the governor said. “This is big stuff, and it’s wonderful. This is major progress for the people of Illinois.”

Prof. Jeffrey Moore, said he welcomed the measure. Moore said Illinois’ complicated procurement rules have made it difficult for researchers to obtain vital but obscure equipment and parts at good prices, because many suppliers find them too complicated to bother with. He gave the example of a researcher who was seeking a part that was made by only one small company. “And this particular company, which is a small company and doesn’t have a lot of business, but is the only maker of this research part, was not willing to learn the process of our complicated system and chose not to participate in the bidding process”, said Moore, “which meant that the researcher was not able to do the research that they needed to do, because they couldn’t get this part.”

Gov. Rauner said it’s difficult to regulate ethics, and the result is often a surplus of paperwork. He said his own administration supported a different approach.

“We’ve made an effort to try to encourage ethical behavior”, said Rauner, “and encourage good government, but try to also balance that with making government efficient and effective and transparent.”
The devil is always in the detail. There will never be a one-size-fits-all-perfectly procurement system for all time. It's a balancing process. Every procurement change involves a rebalance of crucial principles, for better or worse. You can never finally have it the way you'll always be happy with it. In other words, it's a politician's dream come true: a never-ending dream of posture and headline. As Prof. Steven Schooner of the George Washington University Law School tells us in his procurement Desiderata, the choices we make in procurement reform involve trade-offs of critical governance principles.
It is difficult to articulate objectives for a procurement system. There are many options, and most are contradictory.

Critics of the U.S. system suggest that, historically, efficiency was not a fundamental goal of the procurement process and, arguably, our system is designed to thwart efficiency. A procurement system is efficient when it spends the least amount of resources in the process of purchasing what is needed. If your buyers are overworked, however, such a system becomes more expensive, because your buyers fail to obtain the best prices. Unfortunately, the pursuit of best value typically requires greater buyer resources, from market research to negotiation.

Ultimately, each government must decide how much discretion or flexibility it wishes to delegate to its buyers. For each individual transaction, greater buyer flexibility should result in higher customer satisfaction and better value for money. For all of your transactions, taking a systemic view, broad delegations of discretion or flexibility may reduce transparency and competition. Accordingly, this discretion may entail a lack of control that may threaten public confidence in your procurement system.

No system can achieve all of these goals. Nor can a state expect that its objectives for its system will remain constant over time. Determining which goals are most important is a daunting, ever-evolving challenge.

Because no system can achieve all of the goals here (or the many not discussed), your desiderata entails important tradeoffs. There are significant transactional, economic, and social costs associated with maximizing transparency, integrity, and competition. Nonetheless, the author believes these costs are an excellent long-term investment.

Three “pillars”, in my opinion, underlie the United States procurement system: system transparency; procurement integrity; and competition. In the United States, we believe that, as a general rule, our government enjoys access to the best contractors, lowest prices, most advanced technology, favourable contract terms and conditions, and the highest quality goods and services. We think this is so because our system, for the most part, encourages participation by the widest possible pools of potential competitors; it consistently demonstrates that competitors will be impartially considered for award of our contracts; and it treats all contractors in a manner that balances appropriate risks with meaningful profit incentives and rewards.

Alternatives to competitive bidding, designed to save time or money, reduced accountability

New Mexico, USA

Audit: State contracts lack competition
New Mexico state procurement rules designed to ensure competition on contracts for goods and services are being circumvented unnecessarily amid exemptions that cover $6.5 billion in spending each year, the State Auditor’s Office said Tuesday. A special audit by the office of State Auditor Tim Keller found some state agencies used emergency exemptions in ways not permitted by law and that sole source contracting remains common.... New Mexico spends between $10 billion $13 billion in state funds and federal aid each year on procuring goods and services.

Health care contracts signed by the Human Services Department accounted for the bulk of exemptions to the state procurement code — more than $5 million in the fiscal year ending in June 2016.

State Auditor Tim Keller said current alternatives to competitive bidding were designed to save the state time or money, but have ended up reducing accountability in government and fairness to outside businesses. The audit also found limited oversight of political campaign contributions from contractors hired by the state.

The report recommends reforms to rein in exemptions to competitive bidding and to streamline contract approvals under a single procurement oversight authority. Agencies typically spend over six months to approve a contract, making it more likely that agencies will look for short-cuts, the audit stated.

In a letter to Keller, Department of Finance and Administration Secretary Duffy Rodriguez called the methodology behind the audit “questionable” and described as conjecture concerns about the general overuse of non-competitive procurement. Keller said, “We’re supposed to protect against pay-to-play and fraud, waste and abuse, and also I think just be accountable for where those dollars are going. What our audit showed is that, by and large, for billions of dollars, we are not doing that in one way or another. We’re either violating our own laws or we’re not tracking the data.”

Auditor’s report reveals state overreliance on no-bid contracts
The study, to be formally released Tuesday, found state agencies, in violation of the government procurement law, used emergency exemptions from purchasing rules when there was no urgency to bypass the competitive bidding process.

The Auditor’s Office reviewed 11 small contracts, too. Less oversight is required for purchases of less than $60,000 in many cases, but the report found a state agency amending small contracts several times to include much larger sums.

The report examined 13 larger sole-source contracts and found 10 did not meet the state’s rules for such purchases. The State Auditor’s Office said agencies are skipping the competitive bidding process out of convenience and based on assumptions about price. The report also examined 14 emergency purchases and found only three fit the definition of an emergency; an agency said it needed to fix what the report described as a contamination issue even though the agency had learned of the issue one year earlier.

State Auditor Tim Keller said the study’s findings show a government too reliant on contracts that are not put out to bid, as well as a purchasing system that is complex, decentralized and rife with loopholes. “The spirit of procurement is to safeguard tax dollar funded contracting from fraud, waste and abuse,” Keller said in a statement. “Strong directive executive leadership and a reworking of the law to make bidding more effective and efficient would have a game-changing impact on creating local jobs, cutting red tape, and providing essential services to New Mexicans at the best value.”

The biggest share of state spending outside the usual purchasing process goes to goods and services that are bought by one state agency from another or from a local government. Those purchases are usually exempt from competitive bidding. And certain health care spending, a major expense for the state, also falls under what is known as “sole source procurement,” which is when an agency gives the contract to one company without competitive bids.

State agencies can buy goods and services from private companies without a competitive, open bidding process only when one company sells a particular product or an emergency requires officials to move quicker than the time it takes for competitive bids. However, agencies must make an effort to find other vendors and detail the reasons for an emergency. The state’s rules warn that agencies are not supposed to bypass the usual purchasing process because staff believes one particular option is best or the least expensive.

The report raised concerns that the General Services Department and the Department of Finance and Administration “do not always provide adequate scrutiny.” As a result, the report said, agencies can get away with no-bid contracts that do not meet the state’s rules.

The State Auditor’s Office suggested consolidating oversight of the purchasing process, which the Legislative Finance Committee has long recommended. The report also called for additional training of all state personnel involved in procurement and suggested legislators comprehensively review the exemptions and exceptions in the state’s purchasing law.

Sen. Sander Rue, R-Albuquerque, has sponsored legislation reforming the procurement process but said lawmakers may need to revisit the language of the current rules. Rue said the state should open up the process even further by, for example, making public how officials choose winning contracts.

“The more transparent and open procurement is,” he said, “the less you are to have mistakes, errors and perhaps mischief.”
Note: New Mexico is one of a couple of dozen states, including the Territory of Guam, that use the principals and are guided by the processes of the ABA Model Procurement Code.