1. Florida Politics

State's flawed contracting process comes under fire

Published Feb. 10, 2013

TALLAHASSEE — In the last two years, Florida Chief Financial Officer Jeff Atwater has agreed to let the state lose $48 million.

That's the amount of taxpayer money Atwater spent to settle dozens of bad contracts and grants that he said could have been avoided had the state done a better job cutting the deals.

"We could have built two elementary schools with that money,'' said Atwater, a former Senate president whose office writes the checks.

In each case, the state concluded it was not going to get what it paid for, Atwater said. "So we said, 'This is hogwash and you know it.'" Rather than taking the company to court, the state agreed to settle the contract at a loss.

With $50 billion of the state's $70 billion spent on vendors this year, the state of Florida is one of the largest buyers of goods and services in the Southeast, but its contract management is haphazard and inconsistent.

Now, Atwater, Gov. Rick Scott and his secretary of the Department of Management Services, Craig Nichols, are inching toward some improvements that will change the system.

Atwater is asking the Legislature for "pre-audit" authority to review contracts before they are completed to make sure the state is getting its money's worth.

Nichols has published a guidebook for contract negotiators, including a set of uniform standards. His agency has increased the number of agencies using the state's online purchasing program, MyFloridaMarketPlace, to get better discounts, and DMS is working to streamline the state's patchwork of contract procedures.

Scott has urged his agency heads to attempt to renegotiate their top contracts to produce savings, and he recommended spending $353,000 in his 2013-14 budget to hire four full-time people to train contract managers across the state.

The state's flawed contracting process has been the target of criticism for years, most recently from former Senate budget chairman JD Alexander, who bashed state agencies for using different methods and even different codes to buy cars, lease buildings, or purchase cell phones and computers.

In 2011, an independent group hired to review the state's online purchasing program, the 10-year-old MyFloridaMarketPlace system, found that half of the eligible state contracts were covered by the program and that the system was "hampered by poor project governance, lack of standard procurement processes… uneven executive sponsorship, and continued dependence on older shadow systems and workarounds.''

An analysis by the Times/Herald found hundreds of contracts, known as evergreens, are given terms that allow them to automatically renew, with little or no standards. Others vendors get in the door as the lowest cost bidder but the cost is allowed to balloon with budget amendments. Dozens of contracts have been on the books with the same vendor for more than 20 years.

One of the loudest critics has been the Koch brothers-funded Americans For Prosperity, which lists as its top legislative priority the increase in oversight and transparency of the state's contracting process. The Republican Legislature and governor's failure to properly police the state's contracting system has earned the organization's charge that the process "rewards cronyism and picking winners and losers."

"Our principles are limited government, lower taxes and clear oversight,'' said Abigail MacIver, the group's legislative director in Florida. "If we don't have clear oversight over state contracts, we don't know if those taxpayer dollars are being spent well.''

Alexander, R-Lake Wales, blames state agencies, which each have their own procurement system, bid process and overhead and don't want to see the process streamlined. But the Legislature, which writes the spending plan that outsources everything from leasing space to running prisons, is also to blame, he said.

Every time a company loses a contract, they hire someone to come back to the Legislature to write them back in, Alexander said. "It works, so who wouldn't keep trying?"

"It's a very politically charged issue,'' noted Brad Douglas, the former chief procurement officer for the state of Georgia. "I found a very decentralized, bureaucratic and fragmented" process for buying state goods and services, he told the Times/Herald. He recalls how one agency had signed a contract for staffing and another agency would sign a contract for the same people and pay 70 percent more.

But with every change comes pushback from the lobbying corps who work for vendors, and from the bureaucrats who feel threatened by change, he said. "It comes down to, are trying to lower our cost or are we trying to put people to work?"

Within four years, said Douglas, Georgia put in place a uniform contracting process, posted an online catalog for discounted goods and services that allowed cities, counties and universities to share in the savings, and his office went from managing 6 percent of its contracts to 80 percent. In 2010, the state saved $100 million, he said.

By contrast, Florida's online contracting system, MyFloridaMarketPlace, handles only about $1 billion of the state's contracts, Nichols said. The state also negotiates discounts for another $1.57 billion in large, state term contracts. Those numbers have improved steadily in the last six months as 23 of the state's 30 agencies have shifted their purchases to MyFloridaMarketPlace and are realizing savings.

"We're in really good shape in terms of having a fairly open procurement process,'' Nichols said. "The room for improvement is, once you initiate the contract, how do you manage it better."

Atwater said the state can catch flawed contracts if the Legislature gives his office the power to review them before they are signed. The change would require $783,363 and 11 positions, but Atwater believes the savings could be much higher.

"If we audit a contract before someone signs on the dotted line and also at the time of final payment, we can ensure that the promised goods or services were delivered at the best possible price,'' he said.