“Neil Armstrong said it pretty well when they asked him what worried most about being on top of the booster rocket is that both the rocket and the capsule were built by the lowest bidder,” said Hugh Smith, the executive director of the California Association of Public Procurement Officials. “There’s a lot truth to that. You want to make sure the specifications are tight enough that the low builder is still doing a certain quality.”
Such is the dilemma that faces local governments when it comes to the procurement and contracting process. It’s a challenge that can be further complicated by the involvement of bad actors.
“The RF process through public agencies, we try to be diligent as far as controlling quality, there’s very little that most agencies can do to keep any adverse companies from participating in the process,” said Smith.
“Our processes and our RFP package is full of requirements and things that may seem bureaucratic,” said Ron Vienna, Director of the Orange County Procurement Office, “but they serve a purpose. Those are definitely tools that help put people on an equal playing field.”
The County of Orange also requires contractors to prescribe to the county’s procurement ethics guide. That guide helps the county ensure “open, arms-length, competitive procurements” and ensures “that it spends the public’s money wisely.” That guide bans subversive behaviors such as collusion, cheating, or offering public officials and county employees gifts.
In situations where the field is skewed – either by deceit, kick-backs or other corrupting factors – the wrong company can be selected for the worst reasons with disastrous results.
Bad actors might turn in sub-par work, use fraudulent billing practices, or take part in illicit behaviors. These ‘business’ practices result in gross cost overruns, court cases, and in the worst cases – jail sentences.
It’s a situation that can be highlighted by a recent story out of Texas, where a company is accused of winning contracts by making under-the-table payments and loans to politicians. The allegations were brought forward publicly by the brother of the owner of DRC – Disaster Response Corporation. He’s alleged that he was short-changed by more than $1.7 million in promised salary and commissions, and the company used the unspent compensation to pad the pockets of local officials. It’s now coming to light that those accusations of bribery and deceit may just be the tip of the iceberg.
The United States Government has filed a lawsuit under the False Claims Act against DRC relating to a $12.6 million contract awarded to the company for work in Honduras. According to the suit, the company falsified their application, claiming to have equipment and capabilities it did not. The government also asserted that DRC submitted fraudulent invoices worth millions of dollars. The government is seeking the return of the $12.7 million, saying the entire contract was awarded based upon a fraudulent application.
In California, San Bernardino continues to struggle with the case of a developer who allegedly donated more than $400,000 to pet projects and PACs associated with county board of supervisors who voted in favor of a $102 million settlement. That case was settled in 2006. Now, six years later, the county is still seeking the return of the $102 million settlement. One county supervisor and his aide have either pled guilty or no contest.
In Northern California, a company called NEO Consulting has been accused by Hercules of fraud. The company was owned and operated by former Hercules city manager, Nelson Oliva. He told the city that he sold his stake in the company before awarding it a multi-million dollar contract. However, it now appears that he may have continued his relationship with the company, appearing at times on behalf of the company to pitch business before other cities. It was also revealed that the people who took control of the company after his alleged divestiture were his daughters, only teenagers at the time.
The question is simple: what steps can be taken to protect yourself and your community? The answer is both simple and immensely complicated. Simply stated, it is important to recognize and appreciate that not all companies are made equal. Oftentimes, discerning between companies who take a win-at-any-cost approach to business and those who are driven by ethics and integrity, can be a challenge. However, successfully selecting partners for a project can sometimes be determined by diligence early in the selection process.
“The correct way to (write an RFP) is to be sure you’re specifying what it is you want,” said Smith. “You can’t think about the product, whether its something you can see or its something that’s theory, you can’t work on it while its happens, you have to work on it before it happens. You have to know what you want.”
Identifying what you want can include specific services, or even specific types of companies with the proven track records and experience to deliver the required services.
Some RFPs take specify qualifications for work – such as number of years a company has existed, years of experience on relevant personnel, even questions about ethics violations or legal judgments against the firm in the past.
“The problem is that it may have a tendency to look like an agency is trying to sole source,” said Smith. “You have to be able to justify why someone was left out of the process, not only to the city council or county supervisors, but also to the general public and the state of California.”
According to Vienna, the County almost always includes some verification for qualification on larger jobs, but has a lower threshold for establishing capabilities on smaller projects. It’s a way that the Board of Supervisors ensures their procurement process remains open to local and small businesses.
“This county makes a strong effort to get not only get the larger firms in, but to get local and smaller firms in the door as well to share contracts and not just award to the large firms all the time,” said Vienna. “Our Board of Supervisors is very focused on helping the small business community as well.”
However, on the larger dollar contracts, minimum qualifications are spelled out in the RFP, other times the county will issue a separate RFQ – or request for qualifications.
“There also are requirements for those larger projects to do individual RFPs,” said Vienna. “(That’s) where we have that level of high level experience and ability you’re looking for.”
Some of the boilerplate language used in Orange County asks for specific cases where a project was terminated by the contracting agency and why. Other questions delve into the financial standing of the bidder.
“At a basic level, we ask that proposals be signed by two corporate officers,” said Vienna. Their testament to the veracity of the information included in the proposal is then verified through research that can include inquiries with the Better Business Bureau, state websites, and even a Google search. References are also checked.
“It’s fairly standard practice,” Said Vienna. But due to the amount of research and the number of proposals received, the process of reviewing and evaluating proposals can take as long as a year.
Other RFQs require evidence that the company has previously worked on projects of a similar scale. It’s akin to ensuring that a company that specializes in pouring concrete for driveways isn’t awarded a contract to build a dam.
Oversight on projects remains essential despite even the best-written RFP, and some form of ethics committee or oversight body helps ensure that all negotiations take place with open doors and above the table.
There’s also the threat of corrective action. Vienna said that Orange County uses rigorous termination language that allows the County to terminate a contract with or without cause.
Should that fail, the courts are a last choice option in every situation. Time and again, the process proves slow, costly, and cumbersome.
Instead, using a thorough qualification and transparent selection process can help ensure quality performance from honest partners.