Procurement Controversy de jure (Australia): No solicitation, no barrier?

Scientists, conservation groups welcome senators' call for Great Barrier Reef cash to be returned Evidently, in this story, the Australian Government entered into a Foundation Partnership Agreement with privately run not-for-profit Great Barrier Reef Foundation, granting it approximately A$$444 million.

Perhaps this was not a unique government grant.

"The Queensland Government today (Sunday) announced it would provide $3 million to the Great Barrier Reef Foundation over the next three years, provided the private sector and philanthropists match it dollar for dollar to fund projects that will boost the resilience of the Great Barrier Reef.

Minister for Environment and Heritage Protection, National Parks and the Great Barrier Reef Dr Steven Miles said the Great Barrier Reef Foundation had been working with the private sector for many years to boost investment into Reef science and management and has plans to increase its fundraising efforts, including through a number of new philanthropic programs."

Nor was government the only, or necessarily largest, donor:

BHP Billiton and the Great Barrier Reef Foundation today announced a new $7 million partnership to support critical marine research and rehabilitation works at remote Raine Island, and the development of an overarching reef-wide ‘Reef Resilience Framework.’ The partnership was announced by BHP Billiton’s President, Coal, Mr Mike Henry and the Great Barrier Reef Foundation’s Managing Director, Ms Claire Hanratty.

This research investment will enable the development of an overarching ‘Reef Resilience Framework’ to direct critical research that bolsters the Reef’s ability to adapt to all the threats it faces, including climate change risks. Mr Henry said BHP Billion was extraordinarily proud of the partnership because it would underpin critical research into environmental sustainability and biodiversity.

Nevertheless, the Australian government's grant has stirred up a bit dust-up over the Great Barrier Reef. As the lead story above (see link) reported,

"an inquiry led by Greens senator Peter Whish-Wilson zeroed in on the controversial funding arrangement which was made without the foundation soliciting it or going through a competitive tender process. As a result, the committee recommended that the money be returned to the federal government. Senator Whish-Wilson said there was significant shortcomings with the intent, design and proposed implementation of the Foundation Partnership Agreement. "The granting of $444 million to the Foundation was a highly irresponsible decision, hastily concocted by relevant ministers, without proper consideration of risks and potential effectiveness, no consultation with key stakeholders, and without having undertaken due diligence,"

The story also reported,

"Australian Marine Conservation Society campaigner David Cazzulino said the government had made a "big mistake" when it gave the funds to the private foundation. “We support the money being handed back but want it to go to a transparent, open and accountable special purpose fund," he said. "The new fund should be in public hands and provide a long term commitment to invest in the health of the Reef in the face of escalating climate change."

As is so often the case, the processes by which this decision was made can get wrapped around the axle of procurement requirements, whatever the altruistic (or other) motive may be.

'Highly irresponsible': Senate calls for Great Barrier Reef Foundation to return money

A Senate committee examining the government’s decision to award $443.3m to the Great Barrier Reef Foundation has recommended unspent funds from the controversial grant be returned to the commonwealth and reserved for future reef projects; at the very least, if the government decides to maintain the funding arrangement, it should take all necessary steps to ensure the foundation can't invest in anything that directly or indirectly contributes to climate change.. The final report, tabled in the Senate on Thursday, calls the awarding of the grant last year “a highly irresponsible decision, hastily concocted by relevant ministers” and calls for a fresh review of the structure of all government funding meant to protect the Great Barrier Reef.

This grant was a desperate attempt to cover up this government’s legacy of reef mismanagement, years of chronic underfunding and disregard for climate change, in the context of an imminent world heritage ‘in danger’ listing,” the committee’s chair, Peter Whish-Wilson, said.
Great Barrier Reef Foundation awards first funding – to a government agency “It was clearly a political decision made with no consultation, due diligence or regard for proper process.”

The report also noted "that the “‘off-the-cuff decision has caused massive disruption to existing policy and program delivery, including by existing government agencies" and recommended that "the most appropriate action would be to “terminate the foundation partnership”. “The committee believes this is necessary to help restore trust in the process of commonwealth funding for the reef, if not the entire commonwealth grants process,” the report says.

Coalition senators issued a dissenting report, saying there had been "exceptional transparency" around the grant and rejected the majority of the Senate report's findings.

Marine Biologist and director of science at the Great Barrier Reef Legacy Dean Miller said "they were super keen to see some action take place".

Going back to that first article above, "What needs to happen is a very quick response into what is going on, especially leading into another bleaching year."

Crikey! Wot a rort!

I remind my reader to click the links to the articles presented and read the originals, as I slice and dice the material for didactic purposes in order to try to present a "teachable moment". These posts are mostly to be considered as hypothetical procurement case studies, not news or other literary content, and omit, paraphrase and rearrange a lot of original material. You've been warned, again.

Allegations of systemic fraud sparked Defence Department internal audit

Confidential documents drafted by a senior defence department investigator reveal allegations of systemic fraud spanning several years inside the government's biggest spender. The 10-month investigation, which finished in February this year, was prompted by an anonymous disclosure about fraud and corruption made to the department in April 2016.

One of the most concerning aspects involved the department awarding companies contracts without a competitive tender process and only a flimsy justification they met "value for money" requirements. In other cases the department was unable to tell whether a contract breached procurement rules or not because important paper work could not be found.

In 2015-16 the Department of Defence reported the largest yearly contract spend of any agency within the public service. The department dialled-up a bill of $30.5 billion on contracts, amounting to 54 per cent of total government contractor spending.

The investigation raised serious questions about the department's use of "single source" tenders, where a single company is awarded a contract without having to compete against other providers. "It is questionable whether true value for money is achieved when [redacted] continually conduct single source limited tenders," Dr Clarke wrote. "Whilst there is less administration and quicker decision making with this approach, it provides limited opportunity for Defence to achieve the best possible outcome. "Single source limited tenders increase the risk of contractor underperformance and corruption."

Defence spending data unreliable, incomplete, national audit office says

Transparency and accountability for billions of dollars of annual defence spending remains suspect despite recent reforms, the Australian National Audit Office (ANAO) has found.

Last year, the Defence Department spent $8.3 billion on keeping its equipment in working order, known as "sustainment" in military jargon. Yet, the audit office found that despite small recent improvements, information about where that money went and whether it was being spent wisely was often unreliable or not available.

The report also questions a claim from Defence that reforms to its sustainment policies had saved $2 billion. "Defence has not been able to provide the ANAO with adequate evidence to support this claim, nor an account of how $360 million allocated as 'seed funding' for Smart Sustainment initiatives was used," it read.

Auditors were also critical of inconsistencies between figures given to the Government during the budget process and those provided in the department's annual report. "It's absolutely not good enough," Andrew Davies, director of defence and strategy at the Australian Strategic Policy Institute, told AM.

Oz military megahack

An Australian Signals Directorate (ASD) presentation to the Australian Information Security Association (AISA) conference yesterday detailed the hack. Suffice to say that a medium-sized defence contractor was breached and gigabytes of aerospace data and commercial arrangements for military aircraft and naval vessels were delivered into the hands of the attackers. The ASD used it as a case study for the AISA conference yesterday.

The government has since said the information was commercial-in-confidence, but not classified. This is not an isolated incident: in Australia, as elsewhere, attackers thwarted by a network's defences then seek out third-party contractors as an easier mark.

This suggests a problem in sub-contractor oversight – you can win a government contract without proving you have adequate network security.

Minister for Defence Industry Christopher Pyne seems to agree. This morning, he told Radio National's Breakfast programme that the government can't be held responsible for a contractor's lax security.

Fat and mismanaged public sector is eating us alive

In a Crikey article, carried by the Community and Public Services Union, Eric Beecher chronicles appalling mismanagement in service delivery.

Then there’s the $11 billion spent by the Defence Department managing 119 bases around Australia which the ANAO says is well in excess of the $9.3bn “expected value” of the 10 services contracts, signed in 2014, to do the work. The department has defended its performance, saying the vast project to renegotiate the contracts has delivered value for money, when considered against increased service demands and changing expectations of the ADF. Yet a new $120 million IT system, meant to manage contracts ­between Defence and the private companies servicing the bases, was $39m over budget and five years late.

There’s also the flawed tendering and contracting processes overseen by the Immigration ­Department, which resulted in the waste of “tens and possibly, hundreds of millions of dollars”. Given these practices were subject to a scathing ANAO report, they could hardly be ignored.

We’re reminded of last year’s Australian Bureau of Statistics census “stuff-up”, the Australian Taxation Office’s massive and damaging IT outage, the Department of Health’s decade-long mismanagement of e-health records, and the embarrassing release of identifiable Medicare information. There’s also the Department of Finance’s lax oversight of ministerial travel arrangements. But not raised is the $576m public service travel bill — a blowout of $75m in just four years.

While this shocking record is acknowledged, Beecher argues the blame lies mainly with outsourcing to powerful private contractors.

Outsourcing failures expose weaknesses in both government and business

The problems of dealing with private sector providers and contractors are a persistent theme in the analysis of government shortcomings. For example, recent Australian National Audit Office reports highlighted contracting problems in Air Services Australia, the Defence Department and the Immigration Department. Contract management issues were at the heart of last year's failed online census and have been a constant factor in the turbulent administration of Australia's controversial offshore detention centres. Over-reliance on contracted consultants was a major cause of the botched home insulation scheme.

Given the extent to which governments rely on private contractors for a large range of goods and services, it is unsurprising that contractors are often in the frame when things go wrong. But many of the recurring issues arise out of factors specific to the contracting process.

A common complaint is that the use of contractors has caused agencies to run down their in-house expertise and technical resources. As a result, it can be argued, agencies lack the capacity to assess whether the contracts they are agreeing to give the government and taxpayer adequate value for money. Without their own professional judgment, grounded in technical knowledge and practical experience of the area in question, public service managers are ill-equipped to decide matters of all-round quality. Instead, they tend to fall back on generic checklists of assessment criteria that emphasise easily specifiable factors, such as cost and timeliness.

Alternatively, if funds allow and time permits, they may contract in an external consultant or commissioner to give an expert opinion on a proposed contract. But such advice carries the risks of perverse incentives attached to all forms of external contracting and consulting. The consultants' objective is to gain future contracts, which encourages them to say what they think governments want to hear in preference to what they ought to hear. Once again, without the professional judgment to tell the difference and without their own in-house, trusted staff to advise them, public service managers are at the mercy of self-interested outsiders. This vulnerability is compounded by the lack of transparency that surrounds contracting. Overuse of commercial-in-confidence provisions has shielded public servants from the bracing effects of public scrutiny.

The lack of in-house capacity can affect not only the initial process of drawing up contracts but also the oversight of how contracts are implemented. However, as the constant stream of scandals illustrates, many commercial providers are more interested in profit than in good service and cannot be trusted to do the right thing. As a result, governments are being driven to impose tighter controls and regulations. Even then, in the face of determined rorting and corner-cutting, most government agencies lack the resources to prevent opportunistic contractors from wrongfully expropriating public funds.

After two decades of wholesale outsourcing, some general conclusions are clear. Contracting out is an efficient and effective alternative to in-house provision where the objectives are clear and easily monitored, and where there is a competitive market of alternative providers. It also works well for more complex services where providers can be trusted to pursue public-interest objectives for their own reasons. However, where these conditions of either simplicity or trust do not apply, the risks that governments will not receive value for money start to build. Moreover, extensive experience with outsourcing has itself compounded these risks by reducing governments' capacity to effectively draw up and monitor outsourcing contracts. Some complex service contracts that could have been safely contemplated a generation ago are now beyond the professional expertise of public servants to administer.

politicians need to recognise that outsourcing complex government services requires the development of trust between the parties, which means looking beyond the short-term bottom line and not always preferring the cheapest option. In addition, successful contracting depends on well-resourced government agencies with the skills and experience necessary to manage ongoing relationships with contractors. Running down government staffing levels while relying more on private contractors is a recipe for continuing policy failure.

Contractors, for their part, must earn the right to be treated as trusted partners. They must be prepared for the long haul and willing to learn from experience. They must also be ready to submit to the level of public scrutiny and accountability that public servants take for granted. Indeed, given that the commercial private sector is not imbued with the same commitment to serving the public interest, there is a case for subjecting private contractors to more scrutiny than the public service, not less.

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.

No emergency, just a desire to act quickly, like business

The procurement issues here raise issues of noncompetitive acquisitions, the requirement to obtain a fair and reasonable price before acquiring anything, even by sole source, and the contrast between government acquisition and private business. Government contracting requires market research to have independent knowledge of source alternatives in the market, prices and costs, as part of the acquisition process before a selection process is even chosen.

The governance policies of government acquisition are intended to assure transparency and the pursuit of effective competition within the free enterprise system. It is meant to avoid the secretive and arbitrary selection of colleagues and strong-arm "horse trading" linked to matters far afield from the instant acquisition that is the norm in private business ("you scratch my back and I'll scratch yours").

Government procurement is concerned with public confidence, fair and equitable treatment of market participants, maximization of public funds, and safeguards to establish and maintain a contracting system of integrity with accountability to the public. It's not meant to trade products or services for votes or favors or other "godfather offers".

In these respects, government procurement is intentionally designed to be the antithesis of private business, especially private business whose only concern is the welfare of the business owner. Not that there is anything wrong with that in the context of people betting their own money in their own smoke-filled rooms or out on the golf course or the box seat of some entertainment venue. 

But, private business has no concern about other people's money, whereas government must be concerned with other people's money or face a fractious public, as well as a mutinous supply of vendors. 
 
Again, I advise readers of articles I present to read the articles themselves, at the link provided. I omit, rearrange, slice, dice, paraphrase, editorialize and generally use the general fact situation of articles to provide teachable moments concerning procurement practice and principle. My version may or may not reflect the article's author's intent, and likely do not to my re-working of the following story, so read the original; click the link at the title.


No competition, no cost estimate as Kansas City firm picked for coveted VA contract McClatchy Washington Bureau

The federal government typically awards contracts to private companies after a competitive bidding process in order to keep costs low and avoid conflicts of interest. “When you have competitive bidding it prevents government officials from throwing contracts to their friends or keeping them from people they don’t like,” said Richard Painter, chairman of the board of Citizens for Responsibility and Ethics in Washington, a nonpartisan watchdog group.

But, the Trump administration picked Kansas City-based Cerner Corp. for a coveted contract to modernize veterans health records, and there will be no competition for the taxpayer-funded project. Cerner partnered with defense technology contractor Leidos, Accenture Federal Services and Intermountain Healthcare in its bid for the $4.3 billion, 10-year defense contract. Other health IT companies didn’t have a chance.

VA Secretary David Shulkin told reporters his decision to waive competition and acquire Cerner’s software directly was motivated by President Donald Trump’s desire to act quickly. “From the outset that when the president selected me to be secretary, he made clear to me that he expected us to act with faster decisions, to act like business, and to really make sure that we are really doing the right thing to change veterans’ health care. And that's exactly what we’re trying to do today,” Shulkin said.

Shulkin said there was a “public interest exception” to allow awarding the Cerner contract without a “full and open competition.” The VA still must draw up a justification for waiving open and public competition, and Tester’s office will be following up with VA for those documents, said his spokesman, Dave Kuntz.

Sen. Jon Tester of Montana, the top Democrat on Senate’s Veterans Affairs Committee, was supportive of Shulkin’s announcement but his spokesman said he has some questions and concerns about timing and costs that the secretary did not answer. Neither Cerner nor the Department of Veterans Affairs could say how much the contract will cost, however.

“The challenge here is that by giving up competition, the VA has given up all control to the company” when it comes to price, said Phillip Carter, a senior fellow at the Center for a New American Security who teaches government contracts law at Georgetown University Law Center. “At the end of the day ... they’re probably going to pay whatever Cerner asks,” Carter said.

The new VA health records system won’t be identical to the Defense Department’s, but its core will be Cerner’s Millennium software, Shulkin said on Monday. He said Cerner’s work on the Pentagon’s system, now known as MHS Genesis, pushed his decision in Cerner’s favor. Adoption of the same system “will ultimately result in all patient data residing in one common system,” the secretary said.

To me, adopting a system that will ultimately result in "all data residing in one common" (but proprietary) software will assure everyone else will become locked out. There are historical precedents, such as Motorola's lock on emergency radio systems, and Microsoft's lock on desktop software systems. See, Sure, Kid, first one's free.


The US government has been trying hard to break free of such locks.  This procurement seems to also go against the US Government's Federal Source Code Policy: Achieving Efficiency, Transparency, and Innovation through Reusable and Open Source Software:

When Federal agencies are unable to identify an existing Federal or commercial software solution that satisfies their specific needs, they may choose to develop a custom software solution on their own or pay for its development. When agencies procure custom-developed source code, however, they do not necessarily make their new code (source code or code) broadly available for Federal Government-wide reuse.

Even when agencies are in a position to make their source code available on a Government-wide basis, they do not make such code available to other agencies in a consistent manner. In some cases, agencies may even have difficulty establishing that the software was produced in the performance of a Federal Government contract.
These challenges may result in duplicative acquisitions for substantially similar code and an inefficient use of taxpayer dollars.

This policy seeks to address these challenges by ensuring that new custom-developed Federal source code be made broadly available for reuse across the Federal Government. This is consistent with the Digital Government Strategy’s “Shared Platform” approach, which enables Federal employees to work together—both within and across agencies—to reduce costs, streamline development, apply uniform standards, and ensure consistency in creating and delivering information. Enhanced reuse of custom-developed code across the Federal Government can have significant benefits for American taxpayers, including decreasing duplicative costs for the same code and reducing Federal vendor lock-in.

Note also the internationally informed Open Source for Government component of the Open Spouse Initiative.

Other article(s) on this topic: VA to dump Vista for DOD's electronic health record system

Procurement controversies series: Ohio. Time after time...

Ohio awards millions in unbid IT contracts, sidestepping state policy, analysts’ protests

Time after time, state purchasing analysts warned that the pricey pending contracts were improper. “This position was unbid” ... ”No competitive procurement was issued” ... “The rates seem to be excessive” ... “The agency did not complete any competitive process” ... ”This position could have been filled ... with rates at least $63 less per hour.” The supervisors also repeatedly disregarded the agency’s own purchasing policy and sidestepped approval of the bipartisan state Controlling Board that serves as a check on spending on non-competitive contracts.

And, time after time, their superiors at the Ohio Department of Administrative Services overrode those concerns to award millions of dollars in no-bid, information-technology contracts, frequently paying more than $200 an hour — often to a company employing one-time Administrative Services executives, a Dispatch investigation found. As a result, Ohioans likely have paid much more than if routine competitive purchasing procedures had been used by the agency with the responsibility to “guide the use of resources on behalf of the public trust.”

Revolving door in reverse:

The high cost of contracting consultants' employees is underscored by a pair of instances in which the consultants later were hired by the state to perform similar duties — but at a sharply lower cost to taxpayers.

Gregory Jackson, one of Davis’ predecessors as the state’s chief information officer for five years (Davis was a 20-year agency employee who was named chief information officer in 2009 and became a deputy director two years later), left his state job in 2005. He was employed by Advocate beginning in September 2012, and through an unbid contract approved by Administrative Services, immediately became interim chief information officer at the Ohio Department of Medicaid. The company received more than $913,000, charging $218 an hour for Jackson’s full-time services until May 2015, when he departed both Advocate and the Medicaid department.

Jackson then returned to the state 10 months later as a full-time state employee in a similar job as head of information services at the Department of Job and Family Services. His hourly state salary of $67.31 — which yields $140,000 a year — represents less than a third of what Advocate was paid for his services. Advocate was paid $453,400 in its last contract for the services of Jackson, who listed a salary of $180,000 a year at Advocate on his state employment application. Jackson declined a request for an interview.

Peter McGeoch, Administrative Services’ IT director in the 1990s and an Advocate employee, worked at the Ohio Department of Higher Education through an unbid contract. His duties included advising Chancellor John Carey on IT issues. Records show McGeoch was hired for $150 an hour, for a total of $77,400, to work for three months ending in September 2016. A spokesman for Carey said McGeoch continued his work at $150 an hour under an extension with Advocate before departing in January. Advocate also was paid $456,000 in 2014 and 2015 for general consulting services provided by McGeoch.

A spokesman for the agency said that it did nothing wrong because its awarding of no-bid contracts is lawful under a waiver of competitive selection granted by the Controlling Board for the past 45 years. But the spokesman could not point to any law or another written policy permitting the awarding of contracts, even with the waiver, without first obtaining at least three price quotes from competing suppliers, as required by the department’s own policy.

The Department of Administrative Services oversees or handles most state purchasing. It also serves as the state property manager and human-resources and payroll office. Its Office of Information Technology handles most software and computer-system contracts for state agencies. The state spends more than $930 million a year on those agencies’ computer and information-technology needs. State agencies generally are required to obtain Controlling Board approval of no-bid or single-source contracts in excess of $50,000 per vendor per year. Last year, a department purchasing analyst pointed out a need to “help reduce the $75 million spent on consultants ... who have since 2006 received several million dollars in unbid work,” writing that some tasks could have been done at lower cost by other companies.

Administrative Services has not submitted any no-bid information-technology contracts for board approval during the past four years, records show. Top agency officials, such as Director Robert Blair and Chief Information Officer Stuart Davis, were not made available for interviews requested by The Dispatch. “The complexity of this subject matter does not lend itself to an interview,” wrote department spokesman Tom Hoyt.

“The majority of the identified (no-bid) contracts are for managing large-scale, complex IT projects and programs that span several years,” Hoyt said. “Items such as a pen or pencil can be compared or purchased in a like manner, apples-to-apples, while IT consulting involving specialized skills, knowledge and experience is difficult to compare in the same way.”

Among the findings from The Dispatch’s seven-month investigation:

‒ Advocate, a Columbus family of companies that has received in excess of $14 million in multiple unbid contracts since mid-2011, employs several former Department of Administrative Services IT executives who once worked closely with the state’s current highest-ranking IT officials.

‒ Stonyhurst Consulting, based in the Washington, D.C., exurb of Middleburg, Virginia, was handed more than $3 million in unbid IT contracts — again, many over the protest of Administrative Service analysts — that included pay rates of up to $250 an hour.

‒ Advocate also charged hourly rates exceeding $200 an hour. In fact, when a couple of its employees transferred to the state payroll, their wages were less than a third of what Advocate had charged the state for similar services.

‒ Despite insisting the no-bid contracts were proper, agency officials canceled some and sought price quotes following the protests of purchasing analysts. However, department leaders gave some contracts to Advocate and Stonyhurst anyway — even though they were the highest-priced.

The unbid contracts uncovered by The Dispatch were awarded without complying with an Administrative Services policy that since 2008 has required the agency to obtain at least three price quotes from competing suppliers, a process intended to save tax dollars by yielding lower prices through competition. The quotes are to come from pre-negotiated and pre-approved “state term schedules” that would-be contractors file with the state.

Hoyt said that policy is overridden by the agency’s receipt of a waiver of competitive selection each biennium from the Controlling Board, which consists of six legislators and a Kasich appointee. The waiver permits the granting of unbid contracts for specialized work and “to provide continuity of services,” Hoyt said. “It allows for a judgment call to be made by DAS.”

Addressing the purchasing analysts’ objections to sole-source contracts, Hoyt said they did not understand that the work was so specialized that it could not be obtained through the so-called staff augmentation contract at lower hourly rates. Analysts periodically have questioned supervisor justifications for some no-bid contracts, disagreeing that the work called for specialized expertise.

On June 4, 2015, acquisition analyst Andrew Miller flagged a $56,250 contract for Stonyhurst. “No competitive process has been completed,” he wrote. “I would recommend that the requester seek Controlling Board approval.” Davis responded that it was “not realistic” to seek the Controlling Board’s OK because the state fiscal year was ending June 30. Davis noted that the contract request was submitted in late April, but documents show the contract did not enter the state-vetting system until June 3. The contract called for one consultant to work 250 hours, at $225 an hour, during June, an average of 62.5 hours a week.

The Controlling Board waiver contains no language overriding Administrative Services’ three-price-quotes policy, which its own employees have written must be followed. The agency’s 127-page state procurement manual does not list any process for directly hiring “specialized” consultants through no-bid contracts. An internal department document also states that sole-source and no-quote contracts cannot be awarded in the manner used by the agency.

Opaque "transparency"

Most of the documents about the transactions are not easily accessible by the public. Administrative Services officials took more than four months to fulfill much of The Dispatch’s request for public records concerning vendors’ contracts. Some records still were being turned over last week — after nearly seven months.

A spokesperson for Kasich, who appoints the head of the Department of Administrative Services, referred questions to the agency.

The husband-and-wife team of Steven Zielenski and Jonelle St. John worked for a state IT contractor called Top5 before forming their own company, Stonyhurst Consulting. State purchasing analysts complained that the company’s first contract in 2015 for $128,100 to help with IT optimization efforts was unbid. Most of the company’s subsequent contracts also were flagged as “unbid” — a total of nearly $3.2 million in all.

Asked for comment, Zielenski responded in an email: “Stonyhurst LLC maintains strict confidentiality with respect to all our clients and our business relationships with them.”

See related article, It can be a tortured path to get state records.

Note that almost every article I reference in this blog gets sliced and diced. Here, for instance, there is much detail that has been left out and many bits of the article have been re-arranged to suit a didactic, rather than newsworthy, intent, as a case study of procurement law and (mal)practice.  

You are advised, therefore, always to go to the article at the provided link for the straight scoop.

Sole searching in Oakland, CA?

Courthouse News Service, which is a nationwide news service for lawyers and the news media, filed the following story. This shortened version is intended to alert you to the item and tease you to go to the sourced link and read it in full. Especially since I cut, paste, omit, edit, rearrange and paraphrase to suit the educational content and intent of this blawg; so you must read the original and not take my version of it as true, complete or accurate.

Oakland Playing Fast & Loose With Contracts, Bidders Say

Competitive bidding is meant to secure the lowest price for a project by creating competition and ensuring contracts don't go to pre-selected firms. So when an agency wants to sole-source a contract, it must justify the move internally and get it approved. If that doesn't happen, officials can use sole-sourcing to steer contracts to favored firms and exclude cheaper bidders — raising project costs that taxpayers ultimately pay.

"They're trying to convert the process from a shield-bidding process to a negotiation process and at the federal level, it's not appropriate," said Steve Sorret, an attorney with Kutak Rock in Washington and a former curriculum director for The George Washington University Law School's government contracts program. "What they're doing here certainly goes against the grain of a typical public contracting process."

In a city known for awarding fraudulent contracts, routinely sole-sourcing its projects signals entrenched problems in the way Oakland does business, and in how that affects residents. The City Council currently faces findings by the Alameda County Grand Jury that it improperly awarded a $1.5 billion trash collection contract to an unqualified recycler. The 2014 deal sent garbage collection fees skyrocketing, prompting a group of Oakland landlords to sue the city earlier this year.

And in a 2013 report, the city auditor blasted councilmembers Desley Brooks and Larry Reid for breaking the law by steering part of a $2 million contract for demolition work at the former Oakland Army Base to a friend's company after the city had already begun negotiating with another contractor. Those initial negotiations, too, were illegitimate since municipal law requires the contract to go up for competitive bids first. Brooks also negotiated three separate contracts for a teen center in East Oakland, something only the city administrator can do.

Emboldened by high-ranking officials willing to look the other way when councilmembers break the law, the Oakland City Council routinely waives its legally mandated competitive bid requirement for awarding construction contracts worth more than $50,000 and negotiates the contracts directly with firms of its choice, according to a report by the city auditor.

The council simply relies on a statute allowing it to reject bids it deems invalid — or "nonresponsive." And at a City Council meeting on Tuesday, it blessed another competitive bid waiver, this time for the $400,000 renovation of the Dimond Branch library in East Oakland. Instead, the city will approach construction firms and negotiate with them one-on-one in a process known as sole-source contracting.

But falling short of small business goals and bidding over the project price don't render a bid nonresponsive. If a bidder fulfills all of the requirements for submitting the bid, they are by definition responsive and both Greentech and Wickman satisfied those requirements.

Jonathan Wickman says the city violated its own laws in deeming his firm's proposal nonresponsive so it could justify moving to direct negotiations. "That doesn't seem legal to me," Wickman said. "They should rebid it or find more money and rebid with more money in the budget. It's not like they're left with no avenue."

Procurement controversy - North Carolina Dept of Health & Human Services

Audit outlines shortcomings in DHHS contracting

A new audit has found that many no-bid contracts within the N.C. Department of Health and Human Services lacked proper review or documentation, and didn’t have adequate written justification to waive competition, putting taxpayer dollars at risk. State Auditor Beth Wood said that agency officials are supposed to provide justification before waiving the bid process. Many contracts had no waiver justification, and others were assigned justifications that didn’t add up, she said.

The deficiencies were found under both Democratic and Republican administrations.

On several occasions, Wood said, officials said bidding was waived because there was an immediate need for the contract, even though the state “had this person on contract for 10 years.”

The report found three contracts with a value of $6.1 million lacked the required review from the Attorney General’s office. “When the A.G. does not review no-bid contracts, a greater risk exists that these contracts are not in proper legal form, do not contain all clauses required by law, are not legally enforceable, and do not accomplish the intended purposes of the proposed contract.”

The State Auditor’s Office recommended that DHHS evaluate and monitor its contracting processes to ensure that its personnel are applying state laws and department policies and procedures effectively and efficiently. It also recommended that the department incorporate best practices when negotiating no-bid contracts. In addition, it recommended that DHHS ensure its contract personnel provided more specific documentation when it waived competitive bidding.

The audit quotes from author William Sims Curry’s book, Contracting for Services in State and Local Government Agencies. Curry has been a member of the National Contract Management Association for more than 30 years and has held procurement or contract positions in federal, state, and local governments.

“Contractors that are well aware of their status as the sole source provider for a particular service have a tendency to propose higher pricing than they would in a competitive environment,” Curry writes. “Sole source contractors involved in service delivery over the long term also tend to increase their pricing at a rate higher than increases to their costs or the applicable rate of inflation. This tendency for higher initial pricing and excessive price escalation from sole source contractors is intuitive and well understood.”

The report noted, by way of background,

The North Carolina Administrative Code states “North Carolina’s purchasing program shall be built on the principle of competition.” The competitive bidding process is designed to prevent collusion and favoritism in the award of contracts, and to generate better pricing, quality or value to conserve public funds. However, the Administrative Code allows competition to be waived when contracting under certain circumstances. When a contract is awarded without competition, NC regulations, and contracting best practices require it to be sufficiently justified, negotiated when feasible, and supported by documentation.

It found that "data in DHHS’ contract database, Open Window, had approximately 2,500 non-competitively bid contracts with a value of approximately $2.4 billion between state fiscal year 2012 through 2014. The value of the no-bid contracts accounts for more than 32% of all contracts during the same period."

Its key findings were:

• Many no-bid contracts lacked required review and approval to protect state interests
• Many no-bid contracts lacked documentation of negotiations to improve pricing or terms
• Many no-bid contracts lacked adequate written justification to waive competition, which increases the risk of favoritism, unfavorable terms, and poor performance

See no evil

The State of Wyoming does not keep procurement statistics, so is self-inflicted blinded to a sole source cancer, according to this article.

Competitive bidding has largely become the exception

A Budget examination of state records has found that since June 2014, the state procurement office has doled out no-bid contracts roughly 2,000 times, while awarding competitively bid contracts just over 300 times. The no-bid deals over the last roughly two years total almost $594 million and represent about 80 percent of all contracts handled by the state procurement office.

The procurement office deals with contracts for all state offices, excluding the Wyoming Department of Transportation, the University of Wyoming, the Wyoming Business Council, the School Facilities Department and the Legislative Services Office.

The Budget has pending record requests with those offices. However, Doug McGee, of WYDOT, has already said that his office doesn’t keep electronic records for bid waivers, so there is no way of knowing what percentage of contracts receive competitive bidding. “Regarding what I would call our ‘goods and services,’ the majority of them are competitively bid, but there are some occasionally which are ‘sole source’ based on meeting certain requirements. We do not track those in any way. So I don’t have a database to draw from for you,” McGee wrote in an email.

In Wyoming, competitive bidding is required by law for major procurements exceeding $7,500 or $20,000 for an elected official. However, by obtaining a bid waiver, officials can skirt the requirement. And, as the records search showed, they often do. Regardless, officials maintain that there is nothing nefarious about how often the waiver loophole is utilized.

In a statement, Gov. Matt Mead said his administration follows “the spirit and letter” of the law and noted that the bid waivers are publicly posted online.

Lori Galles, the procurement office’s purchasing manager, said that no-bid contracts are given for several reasons. Sometimes they are awarded to companies based on existing contracts or because a vendor is certified for a certain geographic area; sometimes they are awarded because of compatibility issues with existing equipment; or the need to use a particular “proprietary” software; or because a company has “expertise” in a particular area and is the only one that can meet the requirements for a project.

A Budget analysis of the most common justifications for no-bid contracts found the following:

• nearly 1,000 no-bid contracts were awarded because the company was listed as the “sole source” for the job;

• 450 no-bid contracts weren’t competitively bid but were “negotiated” in some way;

• 350 were listed as change orders, where a company revises its contract after successfully bidding low;

Records obtained by the Budget through the state’s public records act show more than 40 capitol-related contracts that eschewed the competitive bidding process.

The contracts total almost $229 million, about half of which are change orders — a process often criticized because a company can bid low and then name its price later by citing additional work, causing project costs to balloon.

The controversy surrounding no-bid contracts stems largely from a long history of corruption around the world.

In recent years, there have been several examples of no-bid contract scandals across the country, many of which have led to the ouster or even prosecution of high-ranking officials.

Barbara Byrd-Bennett, the chief executive of Chicago Public Schools, pleaded guilty to a bribery scheme in which she steered more than $23 million to an organization for roughly $2.3 million in kickbacks.

In 2015, the Fresno Unified School District in California was investigated for the way it awarded a no-bid contract to build a school.

A $90 million contract extension in Texas was canceled after an American-Statesman investigation revealed a possible conflict of interest, problems with the bidding process and minimal oversight. The investigation resulted in resignations, lawsuits and state employees being put on leave.

And Kentucky’s former Gov. Steve Beshear drew heavy scrutiny after he awarded a $3 million contract on his last day to a company with which his office had ties.

The controversy surrounding no-bid contracts even led a Pennsylvania governor to issue an executive order banning them altogether in a hope for better transparency.

But when it comes to transparency, Wyoming ranks second-lowest in the country, trailing only Michigan.

The Center for Public Integrity, a nonpartisan investigative outlet in Washington D.C., recently downgraded the state, giving Wyoming an “F” in its annual State Integrity Report.

There's more in the article at the link above, including details of a pending suit alleging the non-compete process is illegal.

California no-bid health contracts not healthy for competition, either

Following on from the same theme in the immediately prior post is this item from California.

California’s health exchange bent own rules in awarding big contracts

A new audit slams Covered California, the agency tasked with enrolling state residents in Obamacare, for not following rules when awarding lucrative contracts without a competitive-bidding process.

Covered California officials did not dispute the audit but said they have adopted new contracting policies and have improved staff training on the subject.

Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified – or cost-effective – auditors said.

Read more at the link.

The State Auditor's cover letter summarizes:

Covered California’s contracting practices must be improved to ensure the integrity of the process it uses to award sole-source contracts.

We reviewed the justifications for 20 of Covered California’s sole-source contracts and another 20 applicable amendments to those contracts, for a total of 40 justifications. The policy adopted by Covered California’s board of directors (board) and in place during our review stated that sole-source contracts should be justified in writing. In our review, we found that nine of the 40 justifications were insufficient according to Covered California’s board‑adopted policy. For example, Covered California did not sufficiently justify the use of a noncompetitive procurement method to award a contract for marketing and outreach services totaling nearly $134 million.

In addition, we question the validity of an additional three justifications because, even though Covered California asserts either timeliness or unique expertise as a basis for using the noncompetitive procurement process, available documentation indicates that either Covered California had sufficient time to use a competitive procurement process or the vendor was not unique.

Finally, although the California Healthcare Eligibility, Enrollment, and Retention System (CalHEERS) is functional, its rapid design, development, and implementation have resulted in some risks to system maintainability.

Adequate planning and competition are essential principles for an effective procurement system.

The tenacity - and audacity - of incumbent legacy

Although not part of the ABA Model Procurement Code which is Guam's model for its own Procurement Act, 5 GCA 5210, which summarizes the various authorized procurement methods, says "(a) Unless other wise authorized by law, all territorial contracts shall be awarded by competitive sealed bidding [except as authorized by other specified procurement methods. (b) Nothing in this Section requiring competitive bidding shall prohibit the development of specifications which require compatibility with existing supplies, equipment or data processing systems."

On the face of it, such compatibility seems rational enough. The Guam drafters of this provision thought so, commenting "In the past, some problems have arisen due to the requirement for competitive bidding for equipment which should have been, but was not, compatible with existing equipment. The reason alleged was that the lowest bidder had to be chosen. Of course, the proper writing of specifications could have prevented the problem and Subsection (b) makes clear that compatibility may be a legitimate part of the specifications."

Fortunately, the provisions on specifications, in Article 4 of the procurement law, is not part of "this Section", so are not, on the face of the provision, restricted by it, and the provisions of Article 4 are replete with requirements for competition, saying nothing of compatibility. This become important when one stops to consider that compatibility is a substitute for legacy, old school technology and creative destruction.

Which brings me back to yet another Motorola case, this one decided by the federal GAO, related to Motorola's lock on the radio communications market. As always, read the cases and articles in the original, and don't rely on my creative destruction of them in my rendering.

Matter of: Harris IT Services Corporation B-411699; B-411796, October 2, 2015

Harris IT Services Corporation protests the terms of two requests for proposal issued by the Department of Justice, Federal Bureau of Investigation (FBI), to acquire land mobile radio (LMR) equipment through the issuance of a single delivery order under each RFP. Harris maintains that both of these RFPs improperly contemplate the issuance of a single, second-tier, indefinite-delivery, indefinite-quantity (IDIQ) instrument (labelled by the FBI as a delivery order), under which the agency will place subsequent delivery orders for this equipment without providing Harris a fair opportunity to compete for those orders, in violation of the statute authorizing the use of multiple-award IDIQ contracts. Harris also argues that the RFPs contemplate the issuance of orders that potentially exceed the scope of the underlying multiple-award IDIQ contract program, and include unduly restrictive specifications.

We sustain the protests.

Both solicitations have been issued under the Department of Homeland Security’s (DHS) tactical communications (TacCom) IDIQ multiple award contracts program and competition has been limited to concerns that previously have been awarded contracts under the DHS TacCom program. The underlying DHS TacCom multiple award IDIQ contract program solicitation contemplated the award of IDIQ contracts for a full array of communications equipment and services ("commodity products, infrastructure and services"). "DHS seeks to establish a multi-vendor approach to implementing fully interoperable solutions to support mission critical, public safety communications." In effect, the equipment to be purchased using the TacCom program is required to employ open systems architecture so that each contractor’s equipment will “interoperate” with equipment manufactured by other concerns.

The current RFPs represent the FBI’s second attempt to meet its requirements for the equipment being solicited. The first attempt sought the award of a sole-source contract for these requirements, and supported its solicitation with a justification and approval ("J&A"; aka "determination")) document maintaining that only one source--Motorola--was capable of meeting its requirements. After protests, this approach was abandoned.

This is the second attempt. RFP 68 is for the acquisition of “subscriber base radio” LMR equipment and is valued at approximately $200 million. RFP 81 is for the acquisition of infrastructure LMR equipment and is valued at approximately $135 million. Both RFPs contemplate the issuance of what the FBI characterizes as a single delivery order for a base year, with 4 one-year options.

The Federal Acquisition and Streamlining Act of 1994 (FASA) provided agencies with express authority to award task and delivery order type contracts. Broadly speaking, the statutory and regulatory framework favors the award of multiple task or delivery order contracts for the same requirements, rather than the award of a single task or delivery order contract for an agency’s requirements.

The drafters of this federal law said the use of task order contracts for advisory and assistance services and establishing a requirement that solicitations for such contracts shall ordinarily provide for multiple awards and for fair consideration of each awardee for task orders issued under the contracts; indiscriminate use of task order contracts for broad categories of ill-defined services unnecessarily diminishes competition and results in the waste of taxpayer dollars; in many cases, this problem can effectively be addressed, without significantly burdening the procurement system, by awarding multiple task order contracts for the same or similar services and providing reasonable consideration to all such contractors in the award of such task orders under such contracts; and, all federal agencies should move to the use of multiple task order contracts, in lieu of single task order contracts, wherever it is practical to do so.

[Similarly, see Guam procurement regulations: 2 GAR 3122(b): A multiple award is an award of an indefinite quantity contract for one or more similar supplies or services to more than one bidder or offeror when the territory is obligated to order all of its actual requirements for the specified supplies or services from those contractors. A multiple award may be made when award to two or more bidders or offerors for similar products is necessary for adequate delivery, service, or product compatibility.]

The statutory and regulatory framework contemplates that, where an agency is issuing task or delivery orders using a multiple-award IDIQ contract program, it is not required to engage in full and open competition, and may instead confine its competition to firms that have been awarded an underlying multiple-award IDIQ contract. However, those same provisions require agencies to give each contractor that has been awarded a contract a “fair opportunity” to be considered for each task or delivery order in excess of $3,500, and to provide for “enhanced competition” for orders in excess of $5.5 million. Finally, each task or delivery order must specify all of the services to be performed or all the property to be delivered under the order.

Harris first argues that the RFPs impermissibly call for the issuance of what amounts to IDIQ instruments to the successful contractor for a 5-year period. The protester maintains that the RFPs effectively remove the agency’s requirements from further competition for an extended period and amount to an impermissible “downselect” to a single vendor. Harris maintains that this is inconsistent with the terms of the underlying TacCom contracts, as well as applicable statutes and regulations which, the protester maintains, require the FBI to permit all of the eligible TacCom vendors to compete for every delivery order that the FBI may issue to meet its requirements.

The FBI explains that it elected to take this approach to meet its ongoing and future, geographically diverse, requirements in the most streamlined manner possible. According to the agency, its approach will allow it to avoid individually having to compete potentially dozens of delivery orders for varying quantities of equipment over a 5-year period. According to the agency, the latter approach--competing potentially dozens of separate delivery orders--“would place an enormous administrative burden on the FBI.” Legal Memorandum at 5. The agency states that its approach will result in substantial savings of both time and money over the contemplated 5-year period of the delivery orders.

As set forth below [sorry: you're going to have to read the case decision], we conclude that the FBI’s solicitations contemplate the award of what, in effect, would amount to single, multi-year, second-tier IDIQ instruments that are not permitted under the requirements discussed above. The FBI’s contemplated award of a 5-year second-tier IDIQ instrument to a single contractor is inconsistent with the requirements of the applicable statutes and FAR provisions regarding what constitutes a “delivery order.” Those requirements are, at a minimum, that the delivery order be defined as to quantity, place of delivery and schedule.

[Compare Guam's definition of an "incremental" contract, which is distinct from the "multiple award" contract mentioned earlier, in 2 GAR 3122(a). An incremental award is an award of portions of a definite quantity requirement to more than one contractor. Each portion is for a definite quantity and the sum of the portions is the total definite quantity required. An incremental award may be used only when awards to more than one bidder or offeror for different amounts of the same item are necessary to obtain the total quantity or the required delivery. The right to make such an award and the criteria for award shall be stated in the solicitation. Thus, multiple awards, for indefinite quantities, and incremental awards, for definite quantities, are limited to cases where awards to more than one contractor are necessary to obtain the total quantity of the required delivery.]

In essence, the two orders contemplated under these RFPs will deprive all the other TacCom contractors of a fair opportunity to compete for each of the delivery orders that will be issued in the future, despite their aggregate value of approximately $335 million. We therefore sustain this aspect of Harris’s protest.

Harris also maintains that the RFPs impermissibly include a period of performance that exceeds the period of performance of the underlying TacCom contracts. In this connection the FBI’s RFPs contemplate the issuance of delivery orders until August 31, 2020 (whereas the TacCom contracts only allow for issuance of delivery orders until March 25, 2019), and contemplate fulfilling those delivery orders by August 31, 2021 (whereas the TacCom contracts contemplate fulfilling all delivery orders by May 25, 2021). The FBI notes in connection with this allegation that both RFPs incorporate the terms of the underlying TacCom IDIQ contracts and provide that, in the event of a conflict, the terms of the underlying TacCom contracts control. According to the agency, to the extent its RFPs specify a period of performance longer than that contemplated under the TacCom contracts, the terms of the TacCom contracts supersede the terms of its RFPs.

We agree with Harris that the RFPs seek impermissibly to increase the scope of the underlying TacCom contracts. As noted, the agency does not deny that its contemplated delivery schedules vary from, and increase the period of performance beyond, the terms of the underlying TacCom contracts. Rather, the FBI merely asserts that the terms of the TacCom contracts will supersede the inconsistent terms of its solicitations. However, the fact remains that the RFPs expressly contemplate a period of performance longer than the period of performance included in the TacCom contracts.

In addition, and more fundamentally (as discussed above), neither RFP includes a maximum quantity, but, rather, specifies only an estimated quantity. As we conclude above, there essentially is no limit on the quantities the agency could order under the second-tier IDIQ instruments contemplated by the RFPs. It follows that the agency could order quantities that exceed not only the estimated quantities specified in the RFPs, but also the maximum value of the underlying TacCom contracts. In view of the foregoing, we conclude that the FBIs RFPs contemplate delivery orders that potentially are beyond the scope of the underlying TacCom contracts. We therefore sustain this aspect of Harris’s protest.

As a final matter, Harris’s protests that certain specifications are unduly restrictive and are designed to result in the award of the delivery orders to Motorola. Because we recommend below that the agency cancel the RFPs and consider alternatives to how it intends to meet its requirements, we need not consider these allegations in great detail. Nonetheless, we discuss several obvious solicitation requirements that even the agency concedes call for Motorola-specific products.

RFP 68 requires that all radios provided be compatible with a standards based radio system called “SmartNet.” In a similar vein, RFP 68 calls for providing radios that can be reprogrammed using “over-the-air-rekeying” when used with a “key variable loader.”

Harris maintains that these requirements are proprietary to Motorola and that, for all intents and purposes, they limit competition under RFP 68 to products made by Motorola. Harris also maintains that specifying such requirements is inconsistent with the overarching requirement of the TacCom contracts to provide equipment that is interoperable and that meets the P25 open architecture standards.

The agency does not challenge Harris’s fundamental assertion, but nonetheless maintains that these requirements are necessary in order for the radios that it acquires to meet the agency’s needs for data security, and in order for them to be useable with state and local law enforcement entities that still use legacy radio systems that depend on the Motorola-proprietary standards specified.

Where an agency seeks to issue a task or delivery order to acquire items peculiar to one manufacturer, it must execute a J&A in support of its specification for the task or delivery order, unless it has otherwise executed a J&A for other than full and open competition. Here, the agency concedes that it has specified Motorola-specific requirements. However, the record does not include the required J&A, and the agency has offered no explanation regarding its failure to execute such a J&A.

The agency previously attempted to meet its requirements on a sole-source basis, but concluded that the J&A prepared in connection with that acquisition was inadequate to support its attempted sole-source acquisition of Motorola products. Here, the agency again is attempting to acquire Motorola-specific products, but has not executed the required J&A, or even, for that matter, explained or demonstrated why it is not required to execute the J&A. Under the circumstances, we conclude that the RFPs include specifications for products that are specific to Motorola, and that the agency has failed to justify its inclusion of such requirements. We agree with Harris that the agency’s attempt to acquire Motorola-specific equipment appears fundamentally inconsistent with the underlying interoperability objective of the TacCom IDIQ contract program.

We recommend that the FBI cancel the solicitations.

No wonder it's so much fun

‘It’s more fun of the Philippines’ campaign violated procurement rules finds state auditor

According to the Philippines’ audit commission there was irregularities in the way the tourism authorities assigned their ad agency for a P1.2 billion (US$26 million) project that led to the hugely popular and highly awarded ‘It’s more fun in the Philippines’ campaign.

In a 2014 report released over the weekend, the government’s Commission on Audit said that tourism advertising contracts were not put out to public tender, and were renewed and extended by an amount larger than stated in the original contract. This violates Republic Act 9184, better known as the procurement law, the audit body pointed out.

Aquino need not approve 1.2-billion DOT ad contracts questioned by COA–Palace

Malacañang maintained on Tuesday that the Department of Tourism’s (DOT) P1.2-billion advertising contracts being questioned by the Commission on Audit (COA) for alleged irregularities did not require President Aquino’s approval.

“Unless fully justified by management, the renewal of advertising services contract with the advertising consultant and the extension of advertising services may not be allowed in audit,” the COA auditors said.

They pointed out that the procurement of advertising services was “not even included in the Annual Procurement Plan” of the department’s TPB constituting, the COA said, a violation of the provisions of the Procurement Law.

Sure, Kid, first one's free

In the face of rising new technologies, it is tempting to place mission critical facilities into the hands of the apparent rising star. Think Microsoft's early DOS, for instance. Or, more pertinent to this post, Motorola's emergency radio system. 

Microsoft's DOS and its Windows progeny, and Motorola and its hand-held radios are ubiquitous, not because they are the best in show now, but because they were best in show when the curtains went up on the show. And like Vaudevillians, they refuse to retire gracefully, even in the face of newly emerging and disruptive technologies offering more effective and economic solutions. If only they would embrace an open source system. By doggedly hanging on they loose their luster and prestige; they become speed bumps in the race to the future.

I think, to foster competition (which is a fundamental principle and requirement of US federal and local procurement laws based on the ABA Model Procurement Code), no technology should be purchased with government funds for what is or is likely to become a standard and commonly used piece of equipment (or software) unless the vendor offers to submit its proprietary rights in the equipment to open sourcing after a limited period of time: say, five years. They don't have to sell to the government if they don't want to. And rising technologies bring out competition, so the government would not long be left out of the loop.

I have mentioned the Motorola example before, here and here. But it's a story that won't go away, as seen below. The the full stories at the links.

Want government reform? Idea #3: A new public safety communication strategy

Have you ever noticed how police officers carry both a cellular phone and a hand-held radio? It might surprise you to learn that you are paying hundreds of times more for the radio than the cell phone. And you’re about to pay millions more unless we have the courage to change course.

Today there are as many mobile phones as people, prices have fallen and consumers have benefitted from innovation that led to iPhones, Windows Mobile, Droid and other robust platforms. The change has been technically disruptive and positive. In that same time, the nation’s public safety community—law enforcement, fire, EMS—has also spent billions of public tax dollars on new infrastructure and yet the quality, cost and functionality of their expensive, proprietary, two-way radios has not materially improved since the 1970s.

The uncomfortable truth is that for city, county and state governments public safety radio equipment costs between 10x and 100x more than it does in most other countries, despite the U.S. leadership position for wireless technologies such as smartphones, WiFi, WiMax and more. The reason is that the nation’s public safety communications market does not enjoy healthy, vibrant, market-based competition in any way comparable to consumer mobile services.

Our nation’s first responders and 9-1-1 dispatchers aggressively moved to establish an industry standard for first responders called “P25” to get better radios at lower prices, to break the monopoly of the current structure. Unfortunately, more than 25 years later, P25 is still not available, still not implemented and even the Chairman of the FCC recently jolted Members of Congress by acknowledging “…[P25] has taken more than 20 years to develop and is still not complete” and “the protracted development of P25 has allowed vendors to take advantage of selling proprietary solutions.”

If our state’s march toward P25 continues, it will be more business as usual – and first responder radios will still cost $5,000 each. Just one P25 radio for one police officer costs $5,000 and yet it has less processing power and functionality than an iPhone, Windows Mobile or Droid phone. Public safety is building their own mirror system to commercial services. A mirror system that is on track to be proprietary, closed, and expensive like our existing first responder radio systems.

We should stop buying P25 radios at literally $5,000 per radio and start buying TETRA radios. TETRA is similar to P25, but it is truly open standard radio used by police and fire departments in Europe and Asia . They offer more features and are tested around the globe… and cost less than $500 each. They are essentially “Nextel-like” in their capability but are a fraction of the cost of the non-open standard P25. We should absolutely back a national broadband plan – but not this one. Not until it is legally bound to an open, public standard that enables true, free market participation from any and all vendors. Not a penny of federal or state funding should go towards any proprietary 4G/LTE solutions.

Faced with a tech tsunami, Motorola fights to preserve cop-com franchise

As Chicago cops braced for protests in advance of the NATO and G-8 summits in 2012, hometown radio giant Motorola made what seemed like a grand gesture. The company, which for years has used tenacious marketing and clout to reign over the emergency radio business, donated to the city $1.8 million worth of telecom equipment that could beam data and videos to law enforcement officers shielding the world leaders. Motorola Vice President John Molloy said the company also could operate a network for the city as a “test platform” until year end and provide Chicago’s public safety agencies entrée to the world of emergency broadband LTE – the new global standard for transmitting huge amounts of data at rocket speed.

Motorola’s gift was designed to keep on giving.

From Mississippi to Texas and California, the company now known as Motorola Solutions Inc. has reshaped its business strategy in the face of a technology tsunami that threatens to upend its decades-long hold on the emergency communications market. While fighting to preserve its immense walkie-talkie franchise, Motorola has maneuvered to become a player in broadband, where it must contend with new and bigger competitors in a scrum for billions of dollars of taxpayer funds pledged for a coast-to-coast emergency data delivery network.

Motorola’s aggressive push into broadband, however, is a cause for consternation among officials of the First Responder Network Authority, or FirstNet, the Commerce Department agency tasked with building the first nationwide public-safety communications system. To garner broadband business, Motorola has relied on many of the same strategies and deep customer relationships that helped it capture more than 80 percent of the radio market.

As McClatchy reported in a series of articles last year, the industry giant has landed scores of sole-source radio contracts and wielded enough pricing power to sell its glitzy handsets for as much as $7,000 apiece, at a taxpayer cost of hundreds of millions, if not billions, of dollars that could have been saved in a more competitive market.

Motorola rival charges FBI’s new radio deal also biased

For the second time in a year, the FBI’s attempt to replace its 30-year-old two-way radio network could be stalled because of accusations that the bureau is skewing its bid solicitation to favor Motorola Solutions Inc., the emergency communications industry’s dominant player.

Last year, the bureau scrapped a plan to hand Illinois-based Motorola a sole-source contract worth up to $500 million, including upgrades for other law enforcement agencies, after four competing vendors filed protests.

Now the FBI has sought competitive bids for a contract limited to modernizing its own network at a cost of about $200 million, but the action is still drawing allegations of bias from Motorola’s biggest rival, Harris Corp., which has formally protested. The conflict offers the latest evidence of how difficult it will be to break one company's market power over a multibillion-dollar business underwritten solely by taxpayers.

The FBI’s dilemma is that it wants its agents’ radios to be able to connect with all of the thousands of law enforcement agencies nationwide. But many state and local systems use older Motorola equipment with proprietary designs that cannot interact with other manufacturers’ products, meaning that Motorola’s rivals cannot meet the bureau’s requirement.

Motorola Solutions’ monopoly on radio systems needs to end

In 2005 San Francisco Sheriff, Warren Rupf, and Alameda Sheriff, Charlie Plummer, decided that because of the failures of communication during 9/11, they wanted to implement a new digital two-way radio system so that all of their first responders could talk to each other.

Unfortunately, Motorola Solutions stood in the way. Motorola had no interest in allowing for any competitive bidding process. Before the Sheriff’s could try to solicit bids for such a radio system, they were told that any plan must include the first $5.7 million going towards a master controller made by Motorola and any equipment must connect with the older, antiquated Motorola SmartNet II system.

A seven-month McClatchy investigation found that local and state politicians around the country have helped Motorola secure an estimated 80 percent of all the emergency telecommunications business in America. The politicians help Motorola by giving them noncompetitive contracts, modifying years-old contracts to acquire new systems or by crafting bid specifications to Motorola’s advantage. [Read the story for more on this study.]

In 2004, a Sept. 11 commission recommended that the nation’s public safety community adopt measures to improve interoperability, meaning that all radios must interact no matter their manufacturer. Yet, Motorola has continued to fight such interoperability. In Colorado, Louisiana, Kansas and other states, Motorola has found ways to insert software encryption that serve no purpose other than to not allow rival companies to interact with them. John Powell, a former chairman of a National Public Safety Telecommunications Council panel, criticized federal agencies for failing to put enough “teeth in those grant guidance documents” to ensure against proprietary features, such as Motorola’s encryption.

Et cetera

The eyes of Texas are not on its procurement system -- yet?

As is customary with this post, you must read the mentioned article. I tend to cut, paste, rearrange, paraphrase, leave out important stuff and otherwise use the material for didactic purposes, not literature, legal or otherwise. 

For instance, in the following article there is a catalog of big-name contractors (e.g., Accenture, Xerox, IBM) and big money contracts that went awry that are mentioned. You may find reading about those much more interesting and juicy than reading the about the context in which they went awry.

In Texas contracting, failure is an option

For two decades, Texas has pursued a wave of privatization of public functions with the belief that corporations could save taxpayer money while improving the delivery of essential government services. But multiple contracts representing billions in public dollars have blown up in the state’s face, leading to lawsuits, ethics investigations, wasted funds and frustrated Texans.

The pattern that emerges is one of famously business-friendly Texas repeatedly fumbling its efforts to hold the businesses it hires accountable.

Dozens of audits going back to the 1990s have found similar problems with contract management and procurement across a wide stretch of state agencies. And conflict of interest questions similar to those now dogging the 21CT deal have periodically emerged over other state contracts.

“I think it’s gotten worse rather than better in terms of the oversight, the accountability and making sure that people aren’t taking advantage of the contracting process,” said state Rep. Sylvester Turner, D-Houston, who has been critical of privatization efforts since joining the Legislature in 1989.

“My observation over the years is we have often entered into contracts that may not have been in the best interest of the state, and we try to overcome it by managing them poorly,” said Carl Isett, a Republican state representative from Lubbock from 1997 to 2010 who worked on contracting issues and is now a lobbyist. “It’s just the recurring theme.”

While contracting problems have arisen in nearly every corner of state government, including foster care, standardized testing and border security, Texas’ highest-profile disasters have coincided largely with big information technology projects that come in over budget, behind schedule or both.

In 1991, the Texas attorney general’s office signed an $11 million contract to computerize its child-support payment system. By 1997, the deal with Andersen Consulting had ballooned to more than $68 million and was three years behind schedule. A state audit found that the company deserved a share of the blame for overpromising and underperforming.

A decade later, Andersen Consulting had renamed itself Accenture and was in the crosshairs of Texas law Poorly trained personnel and technical problems led to a series of well-publicized snafus, including applicant backlogs growing by thousands and misinformed workers denying benefits to eligible families. Texas ultimately paid Accenture $244 million and canceled the contract.

Despite the two high-profile flubs, Accenture’s relationship with Texas appears stronger than ever. The company is in charge of most of the state’s Medicaid claims processing, as well as a $99 million upgrade of the attorney general’s child support payment system, two areas synonymous with its past missteps.

State Rep. Garnet Coleman, D-Houston, who was first elected in 1991, said he would support temporary “freeze-outs” from future bidding by companies that have been shown to handle past contracts poorly. Yet more important than holding vendors accountable, he said, is boosting the state’s resources so that agencies aren’t outgunned when dealing with the private sector.

“The only way to do outsourcing properly is to have enough people working on the agency side to do appropriate oversight of the company that has the contract,” Coleman said. “What we don’t want is the tail wagging the dog, which is what usually happens.”

Coleman recalled being in the Legislature in the 1990s, when “outsourcing” emerged as a buzzword, coming up constantly in hearings and policy proposals. Texas was drawing national attention for its efforts to transfer responsibilities onto the private sector, which Republican lawmakers predicted would lower costs while producing a reliable, efficient and technologically sophisticated delivery of services.

In 1997, under Gov. George W. Bush, the state began taking bids to outsource the state’s welfare, Medicaid and food stamp programs, predicting that doing so would save the state at least $10 million a month. The concept, viewed at the time as the most ambitious privatization effort by any state, fell apart after President Bill Clinton denied Bush’s request for a waiver from federal rules requiring that government employees handle much of that work. Bush accused Clinton of siding with politically powerful labor unions over good policy solutions.

The setback slowed, but didn’t stop, Texas’ march toward privatization. In 2003, Gov. Perry signed House Bill 2292, which consolidated 12 health and human services agencies into five and ultimately replaced thousands of state workers with private contractors handling duties like screening welfare recipients.

More than a decade later, the bill’s author and lead proponent, former state Rep. Arlene Wohlgemuth, described the bill as a success in its goal of shrinking state government and outsourcing services better handled by the private sector. Yet contracting oversight needs to be reformed, she said.

“In my opinion it is one of the greatest weaknesses of state government,” said Wohlgemuth, executive director of the Texas Public Policy Foundation, a conservative think tank. “We need to do a better job of enforcing the contract once we have agreed upon it and auditing those contracts.”

Last month, newly elected Gov. Greg Abbott directed all state agencies to follow new, enhanced contracting rules, including requiring agencies to publicly disclose all no-bid contracts, as well as a “public justification” for use of the no-bid method.

Abbott’s order is just one reaction to the health commission’s no-bid contract with 21CT, which has drawn allegations of cronyism and incompetence. Yet for all the coverage that deal has received, it is a relatively small item in state contracting. Most big contracts are for highway projects and involve organizations providing health services to Texans. And for the most part, they operate without incident.

The health plan vendors, who handle billions of state and federal dollars, deliver on time and with fewer problems because there’s more than one contractor in the region, Goodman said. If one had to be pulled, the others remain and there’s no interruption in service.

Contractors are also required by state lawmakers to be more transparent than in the past. If they’re late or are fined for performance, you can see it on the health commission’s website. The agency has also, in recent years, shortened the time it takes to go from a warning to a fine for a contractor.

“You don’t get a whole lot of warning now,” Goodman said. “You are out of compliance; you get a fine.”

“We’re prepared to throw the book after the welfare mom, but the people who are getting the $10 or $20 or $150 million contract, we deal with them in a very different fashion,” Rep. Turner said. “When there are questions raised about whether there’s been abuse of the contract, we’re not as animated or outraged.”

Discussions continue among lawmakers on what they can do this session to improve contract oversight.

I note that Guam has long required that all sole-source contracts be identified by an annual report to the legislature. It is also considering more stringent disclosure of the determinations that must be made to engage in a sole-source solicitation.