Contract High is an occasional series looking at how Texas outsourced crucial state services for two decades — and got smoked.
Ten years ago, the state of Texas estimated it had $41.6 billion in contracts with private vendors, paying for everything from file folders to highways. Five years later, that number had grown to nearly $60 billion.
The latest figure, covering the 12 months from September 2012 to August 2013: a whopping $161 billion.
Did the state’s contracts really quadruple in value in just under a decade, and nearly triple since 2010?
The answer is as clear as mud. The Legislative Budget Board’s cumbersome online database of contracts has so many errors that LBB staff warns against using it for any analysis. State agencies have entered many contracts more than once while failing to report others, despite state law requiring them to submit the information accurately.
The LBB’s data woes are one example of a broader loss of clarity by state officials when it comes to contracting. While virtually every other area of Texas government has seen its ability to mine data for trends and analysis advance in recent years, the state’s grasp of more than $100 billion in business with private vendors has moved backwards.
As lawmakers approach the halfway point of the legislative session, competing efforts to beef up contracting oversight are taking different approaches to tackle a single, ambitious goal: transforming the current unwieldy, loophole-ridden system into something that can be properly tracked, analyzed and, when needed, restrained.
“Currently today, we have no mechanism to find out what the agencies are doing unless we go to all 254 agencies and ask them individually what we’re looking at,” said state Rep. Gary Elkins, R-Houston, who is chairing a House committee on government transparency and working on contract oversight legislation. "It's very difficult to get our arms around what's happening."
The recent push for contracting reform came following questions about how little-known Austin software maker 21CT received a $20 million contract for Medicaid fraud-tracking software. The Health and Human Services Commission had told federal officials that 21CT’s contract was competitively bid out. That was not true. Since the deal began drawing scrutiny last year, allegations of corruption have led to forced resignations at HHSC, at least three investigations and a lawsuit.
As state officials looked into how the deal came to be signed in the first place, they found widespread inconsistency in how state agencies handle contracts or report information related to them. A simple directive like a state law requiring agencies to post information on contracts worth more than $100,000 has proved subject to wildly different interpretations. Some agencies, like the attorney general, post the dates and value of each contract. Others, like the Employees Retirement System, only post the names of the vendors.
Adding to the confusion is the Department of Information Resources’ fast-growing Cooperative Contracts program, which agencies use to purchase computer products and services. The program was designed to allow agencies to streamline repetitive purchases, like laptops and printers, but critics charge it has been exploited by vendors like 21CT to sidestep competitive bidding rules.
Nelson’s Senate Bill 20 would require agencies to develop a central contract management database and post all of their contracts online. It would also create a public vendor tracking system that state agencies would have to use to grade vendors as a way to inform other agencies when buying goods and services from them.
“Every part of contracting is open to possible abuse, so we need some very stringent procedures,” said Zaffirini, who has worked on contracting issues in the Senate for 20 years.
Zaffirini’s Senate Bill 1053 would create a new “contract management division” at LBB to monitor contracts deemed “high-risk,” including those valued at more than $10 million, or with a vendor that has had past problems with a Texas agency.
Both Nelson and Zaffirini have also proposed curtailing what purchases can be made in DIR’s Cooperative Contracts program, hoping to make it tougher for another 21CT to emerge as a state vendor without proper oversight.
While Nelson said her bill remains a work in progress, it will be the subject of a Senate Finance Committee hearing on Wednesday. Members of the public and representatives of the comptroller, state auditor and DIR are expected to testify.
On the other side of the Capitol, the Texas House is gearing up for more debate on contract oversight as well. Elkins, who has already filed bills this session aimed at increasing transparency and oversight in state contracting, said he is working on more legislation that will focus on creating a better system for the state to manage its contracts. He's talking to accounting firms for Fortune 500 companies to get ideas.
“I know that passing one more law is not going to solve the problem because they’re already ignoring the ones that we have,” Elkins said. “What we have to do is put in a framework and put teeth into it.”
He said the best “teeth” might be provisions that cut off payments to vendors if problems with a contract emerge.
“Then,” Elkins predicted, “miraculously we will see this thing clean up itself.”