[T]he Vermont State Auditor says five state agencies have awarded too many no-bid contracts to private companies.
The state for more than 20 years has required a competitive bid process, and Doug Hoffer, the auditor, says that policy has been ignored.
Hoffer says sole source contract awards are “commonplace.”
The competitive bidding process is designed to ensure that multiple companies have an opportunity to bid on state contracts and that the state gets a good price for services paid for by taxpayers.
In a sole source contract process, only one company is considered for services. Under state rules promulgated in 1995, no bid contracts are to be used under extraordinary circumstances.
In a report released on Monday, the auditor’s office showed that of nearly 1,000 contracts across five agencies and departments no-bid agreements accounted for 41 percent of contracts awarded by the agencies to private companies. The total amount awarded to sole source bidders was $68 million in fiscal year 2015, or 27 percent of all contracts.
“The high frequency of sole source contracts reviewed for this analysis raises questions about the effectiveness of the state’s contract management,” Hoffer said in a statement. “The state’s longstanding policy to competitively bid for contracts is meant to ensure taxpayers receive the highest values for their contracted dollars and Vermont businesses are afforded an equal opportunity to obtain contracts.”
The auditor’s review showed that many of the contracts “lacked evidence” to support claims that no-bid contracts were necessary.
Familiarity with contractors “took precedence” over an open and competitive process, according to the auditor.
Hoffer said it is critical for the state to identify structural deficiencies to improve contract oversight, especially in light of the dramatic increase in the amount the state spends on outside services. From 2001 to 2014, the number of private contracts increased from 719 to 2,011, and spending on contracts ballooned from $130.4 million to $519.7 million.
The auditor reviewed sole source contracts from 2015 with the Agency of Education, the Agency of Human Services central office, the Department of Buildings and General Services, the Department for Children and Families and the Department of Vermont Health Access.
The total amount spent on outside vendors in 2015 in the Department of Vermont Health Access was $160.7 million; Buildings and General Services, $111 million; DCF, $54.5 million; Agency of Education, $13.2 million; Agency of Human Services central office, $3.78 million.
The Agency of Education had the largest percentage (86 percent) of no-bid contracts, followed by AHS (72 percent), DCF (54 percent), DVHA (45 percent) and BGS (23 percent).
Of the five state agencies, DCF spent the most on sole source contracts: $28.9 million. DVHA spent $27.9 million on no-bid contracts.
Ken Schatz, the commissioner of the Department for Children and Families, said he is working with the secretary of the Agency of Administration to carefully review contracting procedures and he intends “to utilize bidding processes as much as possible.”
The auditor’s report points to sole source contracts for out-of-state residential programs as the biggest outlier for DCF. Schatz said the department will be “reviewing how we contract with residential programs going forward.”
According to the auditor’s report, DCF has justified the use of no-bid contracts by blaming a federal rule. The Medicaid rule the department has been citing as a reason for sidestepping the bidding process doesn’t exist, the auditor’s office says.
There are several types of bids commonly used under state rules promulgated in 1995. In a standard bid, there is a public request for proposals. A “simplified bid” awards between $15,000 and $100,000 for solicited proposals from at least three potential bidders. A “pre-qualified bid” qualifies bidders in advance of specific work and can be used for routine services. The last competitive solicitation process is a “qualification-based selection,” which ranks vendors by qualification and is subject to approval by the Secretary of Administration.
The standard RFP is used 41 percent of the time — exactly the same rate at which the agencies use sole source contracts. Simplified bids are used 16 percent of the time.
Sole source contracts of $100,000 or more must be reviewed by the Department of Finance and Management, which makes a recommendation to the secretary of the Agency of Administration who must approve or deny the request made by an agency or department.
