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Franchot sees ally in Hogan on state contracts

Bryan P. Sears//December 6, 2014

Franchot sees ally in Hogan on state contracts

By Bryan P. Sears

//December 6, 2014

When Maryland voters elected Republican Larry Hogan governor last month they may not have realized they were also offering a glimmer of hope to the state’s Democratic comptroller on one particular issue — state procurement.

Comptroller Peter V.R. Franchot, at numerous times since being elected in 2006, has railed against the procurement system as a member of the Board of Public Works, a three-member panel that includes Gov. Martin J. O’Malley and state Treasurer Nancy K. Kopp. The board, among other duties, approves contracts with state agencies.

Franchot is critical of a system that he contends yields too many single-source bids, rewards incumbent contractors, forces the state to accept bad deals and seems designed to benefit favored bidders.

Franchot, whose reputation has shifted from being a so-called Takoma Park liberal to a populist moderate watching the public pocketbook, said he believes last month’s election delivered him an ally in Hogan.

“The governor-elect and I have mentioned procurement reform to each other and he is interested in it,” Franchot said. “It has a lot of appeal because almost immediately he could improve the state’s business climate and save the taxpayers literally tens of millions of dollars by implementing some common-sense procurement reform measures.”

A spokeswoman for Hogan did not respond to a request for comment for this story.

Since the election, Hogan has repeatedly declined to discuss specific policy matters until after he is sworn in on Jan. 21.

“There’s only one governor at a time,” Hogan has told reporters at several news conferences since the election.

Franchot said the lack of focus on state contracting costs taxpayers money but that Hogan could move to fix the problem on his own almost immediately after taking office.

“The key is that you do not have to get involved in the legislative process in order to have significant changes that result in a better business climate in Maryland and a better deal for taxpayers because there’s more competition,” Franchot said. “You can, through two votes on the board, or not putting items on the agenda, you can do a lot through the Board of Public Works to help the state of Maryland. It’s a target rich environment.”

The comptroller said a review of contract awards where there was only one bidder found that the state paid out more than $800 million over a five-year period.

“We get way too many sole source, single source contracts,” Franchot said. “The majority of these are due to loose procurement policies and the public is never going to know if they got a good deal regardless of what the contract figure is. There’s just one bid.”

Additionally, it is not uncommon for agencies to come to the Board of Public Works asking for emergency approval of contracts and extensions.

“Mostly, generally, they are at a premium and we lose money there,” Franchot said, adding the emergency and last-minute requests pose an equal problem.

“I would be a rich man if I had a dollar for every time an agency stood before (the board) and said ‘We acquiesce to your criticism but you don’t have a choice,’” Franchot said. “The way to deal with that is to send back those and say, ‘We’re not going to purchase services for the state under that kind of demand.”

But sending contracts back rarely, if ever, happens.

“There haven’t been two votes but come January, there may be instances where the governor-elect, who will be governor, will put his foot down and it would be entirely appropriate to send some of these contracts back and say, ‘You guys have to take ownership of your broken-down procurement process,’“ Franchot said.

“If we have two votes on the Board of Public Works, the agencies pretty soon will get the message that there is a new sheriff in town,” the comptroller said.

Last week, Franchot voted against three deals out of the Department of Juvenile Services that were billed as “retroactive approvals.” In reality, the agency told the three-member board, the contractors had been doing the work and being paid — in some cases for nine months — because its previous procurement officer left and the contracts were only recently found sitting on the former employee’s desk.

Franchot was the lone vote against. State Treasurer Nancy K. Kopp provided the decisive vote to approve.

“They need to be done,” said Kopp, who consistently votes for such contracts, citing the need to complete the work or pay for work that is already being done.

The procurement process has been an issue not only for Franchot. Last week, the Office of Legislative Audits issued a report criticizing the Maryland Insurance Administration. Auditors said they found an improper procurement process in which an employee who had a previous relationship with the successful bidder while working for another state “exercised excessive control” over the contracts within the insurance administration.

Franchot added that in many cases, state agencies repeatedly award contracts to incumbent contractors.

In May, Franchot sharply criticized Morgan State University officials over a five-year, $35.1 million food services contract awarded to a Reston, Virginia, company that was the current contractor.

The comptroller said the university didn’t do enough to ensure the contract was competitively bid. The contract was brought to the board just a month before the current contract was set to expire.

“This looks like it was fixed for the incumbent,” Franchot said at the May meeting.

In an interview last week, Franchot said such contracts make other potential bidders wary of doing business with the state. The lack of competition hurts Maryland’s business climate and raises concerns that taxpayers are paying too much for services.

“A lot of people believe the system is weighted towards incumbents or pre-selected winners,” Franchot said. “To the extent that a lot of businesses feel that way, they are not going to compete.”

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