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Auditors fault bid process for state fuel contract

The state’s primary procurement agency should have restructured or rebid a five-year, $305 million fuel contract when it received only one bid that fulfilled all the requirements, auditors for the General Assembly concluded in a report released Friday.

The Department of General Services’ Office of Procurement and Logistics also did not “clearly advise” the Board of Public Works — which gives final approval for state contracts — that it was approving what was “essentially a single-bid award,” the Office of Legislative Audits found.

According to the report, the office sought a single vendor to perform a myriad of fuel delivery, tracking and maintenance functions that could be handled more efficiently and economically by multiple providers.

“In view of the large contract value, we believe OPL should have considered rebidding the contract using a different procurement structure and/or methodology…,” the auditors’ report stated. “For example, cost savings may have been possible if OPL would have provided more flexibility in the bidding options, such as allowing it to select bids on a piecemeal basis.”

The Department of General Services, in comments included in the report, defended its procurement agency and the “rigorous process” it undertook to “generate as much competition as possible” for such a large contract.

“A contract of this size and scope, more than $305 million over five years, does by its size and complexity, narrow the field of those companies who can not only provide the fuel and services, but who possess the financial position to accept the credit risk associated with such an endeavor,” the department wrote in a response sent by DGS Secretary Alvin C. Collins.

The Request for Proposals sought a single vendor to replace fuel monitoring devices, maintain fuel pumps and provide bulk motor and heating fuel to agencies across the state.

Although 113 vendors were alerted to the RFP, only seven submitted proposals, of which only four were deemed acceptable by OPL, the report stated.

“The RFP was widely advertised and the oil distribution community was communicated with not only by email and public solicitation but at industry events,” DGS added. “DGS did not bundle the contract to eliminate competition … but rather sought to issue a solicitation that would encourage competition and meet the state’s socioeconomic policies, all while bringing the best value to the state.”

Ultimately, Mansfield Oil Co., of Gainesville, Ga., was the only bidder that said it could perform all the requested tasks and was awarded the contract, which went into effect Aug. 1, 2012.

However, the Office of Legislative Audits also said OPL’s presentation to the Board of Public Works — consisting of Gov. Martin O’Malley, Comptroller Peter Franchot and Treasurer Nancy K. Kopp — “was, at least, ambiguous.” OPL notified the board of the multiple bidders but did not clearly state that only one had satisfied all the requirements, the report stated.

OPL also neglected to obtain proof of insurance from the winning bidder in a timely fashion and did not ensure that state agencies were billed the proper fuel rates, stated the OLA, a division of the General Assembly’s Department of Legislative Services.

“OPL also did not perform random verifications of fuel invoices as required by its policies,” OLA stated. “For example, during a three-month period, OPL only verified the fuel rates for eight of the 334 locations billed by the vendor even though its policy required it to randomly select 20 percent of billed locations monthly to ensure that the related agencies were charged the correct price per gallon in accordance with the contract.”

The Office of Legislative Audits recommended that OPL “ensure that future RFPs are structured to promote maximum competition.” The procurement agencies should also “evaluate the circumstances when sufficient competition is not obtained to determine if rebidding large value contract procurements would be in the state’s best interest,” the report added.

The Department of General Services said it accepts the recommendations.

“[W]hile we can never be certain of how many vendors will submit bids or proposals in response to our solicitations, DGS has implemented a procedure to monitor anticipated responses to solicitations before the bid or proposal due date to determine whether there will be sufficient competition,” the agency’s response said. “DGS acknowledges the importance of providing the BPW with clear and accurate information. It was never our intention to appear to be misleading … when requesting approval of the statewide fuel contract award.”