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.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.
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.”
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