Senators Worry State Contracting is Too Decentralized

Senators learned at a hearing Wednesday that the current state contracting system is so fragmented that no one knows the total value of the state's current contracts.

Senate Finance Committee Chairwoman Jane Nelson, R-Flower Mound, confers with Sen. Juan "Chuy" Hinojosa, D-McAllen, during a March 11, 2015, committee hearing on state contracting issues.

As Texas senators discussed overhauling how the state handles billions of dollars in contracts, they expressed frustration Wednesday that the system is so fragmented that even basic information about current contracts is unavailable.

“We’re not even letting the horses run out of the barn," said state Sen. Paul Bettencourt, R-Houston, at Wednesday’s hearing of the Senate Finance Committee. "They don’t even know where the barn is.” 

The hearing focused on Senate Bill 20, a contracting reform bill filed by the committee’s chairwoman, Sen. Jane Nelson, R-Flower Mound. Nelson said the committee would vote on the bill next week after it is updated to incorporate suggestions from other committee members.

Nelson credited last year’s review of the Health and Human Services Commission by the Sunset Commission, as well as “good investigative journalism,” for bringing contracting problems to the forefront this session.

“Before we put new resources into this budget, we have got to address serious problems with respect to contracting at our state agencies," Nelson said.

Nelson's bill would require agencies to develop a central contract management database and post all of their contracts online, as well as create a public vendor tracking system that state agencies would have to use to grade vendors. It would also prevent agencies from entering into contracts with companies where a conflict of interest exists between the agency’s leadership and the vendor.

While addressing the committee, representatives from both the state comptroller’s office and the Legislative Budget Board described the state’s current contracting system as “decentralized." Several senators said their goal with any contracting reform measures is to increase transparency and accountability. 

At one point, Nelson asked Robert Wood of the comptroller’s office how much money Texas government spends on contracts in a biennium, a figure that no state agency currently has a firm grasp on.

“I’ve seen a variety of figures,” Wood said. “There are a lot of contracts that are done at the agency level, and they’re not aggregated at the state level.”

Nelson said that no one knowing that information was part of the problem.

“If we do, let’s say $50 billion in contracting, if a 50th of that is not going to what we want it to go for, that’s a billion dollars,” Nelson said.

Todd Kimbriel, executive director of the Department of Information Resources, provided senators with hard numbers on how much state agencies have spent in contracts through DIR’s Cooperative Contracts program. Agencies use the program to purchase computer products and services.

But the Health and Human Services Commission's use of the program in 2012 to sign a $20 million contract with little-known Austin software maker 21CT has drawn investigations and allegations of corruption. Nelson’s bill would cap contracts through the Cooperative Contracts program at $1 million. Kimbriel told the committee that 92 percent of spending through the program was for purchases less than $1 million. Kimbriel said bringing more competition to those larger purchases made sense. He said he supports Nelson’s bill but noted that its impact on DIR would be limited.

“We are largely compliant with the contract proposals proposed today,” Kimbriel said.

But Sen. Robert Nichols, R-Jacksonville, told Kimbriel that he didn’t believe DIR was doing enough to ensure that state agencies were getting the lowest prices for technology products, and he argued that more changes at the agency were needed.

“Your agency is the root of the problem,” Nichols said. 

Near the end of the 90-minute hearing, the public was invited to testify on the issue. Tom “Smitty” Smith, director of the Texas office of Public Citizen, a consumer-rights advocacy group, was the only person to speak. He told the committee that Nelson’s bill was a good first step, but he advocated for beefing up the conflict-of-interest provisions and banning “big buys, like Accenture and IBM,” from future contract work due to past problems.

“We think this bill ought to be significantly broader,” Smith said.