Audit Finds California Agencies Didn’t Follow Bid Rules

SACRAMENTO, Calif. (CN) – Two California agencies routinely handed out lucrative projects to vendors without going through the state’s competitive bidding process, the state auditor announced Tuesday.

The California State Auditor report says the state – currently operating on a $122 billion budget – struggles mightily with justifying the prices of the agreements it signs with vendors and loosely handed out billions in noncompetitive contracts from 2011 to 2015.

The audit specifically focused on the California Department of General Services and Department of Technology.

It found that databases intended to track the state’s procurement and cash management processes were filled with errors, including a missing state contract worth $163 million.

“Further, 12 of 31 contracts and amendments we reviewed were missing from [the State Contract and Procurement Registration System, or SCPRS] because the agencies had failed to enter them,” the report states. “When the data do not accurately and completely represent agencies’ procurements, General Services has no way to ensure that those agencies are not avoiding or minimizing noncompetitive contracting.”

The state auditor’s latest report outlines the Department of General Services and Department of Technology’s penchant for allowing noncompetitive projects. The agencies are responsible for overseeing the state’s procurement of goods and services, including major information technology and transportation projects.

While state law requires agencies to use bidding processes when possible to encourage competition and save taxpayer dollars, they often skirt the bidding process to quickly extend contracts with favored vendors. State agencies must first submit noncompetitive requests to justify forgoing the bidding process.

According to the audit, the Department of General Services and Department of Technology are “potentially putting the state at risk” by failing to ensure they are properly abiding by state bidding laws. It found one-third of the noncompetitive requests reviewed could have been avoided.

“General Services and Technology approved noncompetitive requests that lacked adequate justification for bypassing the competitive bid process, such as demonstrating that it conducted market research to substantiate that no competition existed,” the 50-page audit concludes.

In one instance, General Services approved a $3 million contract extension for financial consulting services from the agency managing California’s estimated $64 billion high-speed rail project, just 17 days before the existing contract was set to expire.

The audit says the California High-Speed Rail Authority couldn’t justify the need for retaining a specific vendor and that the decision to grant the request potentially hurt taxpayers. Auditors identified another instance where the rail authority submitted a noncompetitive request to amend the same contract.

“By approving this noncompetitive request that could have been competitively bid, General Services prevented other vendors from competing for this contract, potentially resulting in the State not receiving the best value,” the report states.

The audit also revealed that the Department of General Services and Department of Technology haven’t required agencies to follow up on action plans aimed at preventing future use of noncompetitive contracts.

In one scenario, the Department of Health Care Services delayed accepting bids for its Medi-Cal dental program for 18 months, even after amending the contract seven times, including one $835 million amendment.

“We find it particularly troubling that General Services did not follow up on Health Care Services’ corrective action plan regarding an amendment worth hundreds of millions of dollars,” the audit states.

State Auditor Elaine Howle recommends that the Department of General Services and Department of Technology submit an annual report to lawmakers on all noncompetitive bids valued over $1 million.

She also says the state should increase oversight over agencies’ corrective action plans to force the use of competitive bidding.

“Until General Services and Technology create consequences for agencies that habitually overuse noncompetitive requests, these agencies will have little incentive to change,” Howle wrote Tuesday in a letter to lawmakers.

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