Senators Grill Agency Head Over Contracting Scandal

Senate budget writers on Tuesday described the state's growing contracting scandal as "embarrassing" and "out of control" while the head of an agency at the center of the scandal defended its procurement policies.

State Sen. Jane Nelson, R-Flower Mound, at a public hearing at the Texas Capitol on Feb. 20, 2014.

The state Senate’s budget writers on Tuesday grilled the head of one of the state agencies at the center of a growing contracting scandal while expressing suspicions that all of state government is rife with questionable business arrangements.

“We’ve got serious contracting problems in many different agencies,” said Senate Finance Chairwoman Jane Nelson, R-Flower Mound. “It’s out of control, and we are going to do something about it.”

The contracting discussion came up while Todd Kimbriel, interim executive director of the Texas Department of Information Resources, addressed the Finance Committee about his department’s budget. The conversation quickly shifted toward the issue the committee was more interested in: how Austin tech firm 21CT ended up on DIR’s “Cooperative Contracts” program.

Since 2005, state agencies have been required to purchase computer products and services through DIR’s “Cooperative Contracts” program. In 2012, the state’s Health and Human Services Commission used that program to sign a $20 million contract with 21CT for Medicaid fraud software. Questions about whether the company had somehow secured a sweetheart deal and sidestepped competitive bidding rules have since led to forced resignations at HHSC, three investigations and a lawsuit.

Kimbriel told senators that the Cooperative Contracts program was managed in a manner “consistent with the procurement and contracting guidelines produced by the comptroller.”

Last month, newly elected Gov. Greg Abbott directed all state agencies to follow a new, enhanced set of 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.

Kimbriel said his agency was already “largely in compliance” with Abbott’s order before it was issued, but he added that he supported instituting them across state government.

“We now see certain behaviors that need to be better monitored,” Kimbriel said. “I don’t think it’s fundamentally a problem we have with this program. Clearly, bad behavior is very difficult to legislate around, but I do think the idea of legislating some elevated reporting is a very good idea.”

Nelson said she believed Abbott’s orders, which were largely based on a bill Nelson has filed, were not enough to address the concerns about contracting this session.

State Sen. Joan Huffman, a Houston Republican who serves on the Senate Finance Committee, said that the 21CT deal was indicative of a much larger problem, and that the state wasn’t meeting “a basic level of competency” in its financial dealings.

“The state of Texas is listening to us, and we don’t sound like we’ve got it together here, folks,” Huffman said. “I’m embarrassed.”

Huffman stressed that her remarks weren’t directed at Kimbriel, who only took over as DIR’s interim executive director in January.

“It’s not against you,” Huffman said. “I understand you walked into a mess.”

State Sen. Royce West, D-Dallas, another member of the Finance Committee, asked Kimbriel about Frederick Chang, who became president of 21CT around the time the company was approved to be part of DIR’s Cooperative Contracts program. Chang was also on a volunteer advisory council at DIR at the same time, according to the Houston Chronicle.

“That has the appearance of impropriety, wouldn’t you agree?” West asked Kimbriel.

Kimbriel conceded that the situation looked bad but said Chang’s work on the council had nothing to do with DIR’s approval of 21CT's application.

“That board had absolutely no interaction or correlation or engagement with the team inside DIR that operates the Cooperative Contracts program,” Kimbriel said.