October 15, 2010

Task force looks for ways to simplify contracts with nonprofits and save money

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By Barbara Pash
For MarylandReporter.com

A legislative task force is seeking to make it easier for Maryland nonprofits to contract with the state, as well as save money for the state and for the health and social service providers it hires.

Two new national reports out this month say that problems are common with state and federal procurement of services throughout the country. One report called complicated and archaic procurement procedures “a silent national crisis” for hard-pressed nonprofits stressed by the recession.

The Maryland task force was formed to look at the methods and problems Maryland government faces when procuring services for health, social services and education — three departments that often contract with nonprofit organizations. The task force is supposed to recommend changes making the entire procurement and payment process less costly.

Legislation established the task force in 2008, but it was slow in forming. It was reinvigorated earlier this year by a bill sponsored by Dels. Kirill Reznik, Dan Morhaim, and Joseline Pena-Melnyk that extended the task force’s deadlines. A preliminary report is due Nov. 30, with a final report next November.

Complex process

Since the 1970s, the state has leaned toward hiring nonprofits to deliver health and social services on behalf of state and local jurisdictions, according to Henry Bogdan, public policy head of the Maryland Association of Nonprofit Organizations. Services range from community health centers and domestic violence programs, to job training and child care.

Bogdan said the current procurement process is too complex. He cited ongoing concerns among the nonprofits, many of which are small organizations with limited resources and personnel. “You are using staff time at the provider level and at the state agency level,” he said.

The task force’s main goal is not to save money or to uncover government waste, said Nancy Hall, senior adviser to the Maryland Association of Nonprofit Organizations. Instead, it aims to help nonprofits do government contracting more efficiently and effectively.

Part of the problem, Hall said, is trying to quantify human services in a contract. “It’s relatively easy to draw specifications for a mile of highway or for a new computer the state is buying. It becomes difficult to quantify when you are buying services such as a hotline for abused women or foster care placement,” she said.

Morhaim said the task force’s existence acknowledges that the procurement process could be improved.

However, Morhaim disagreed with Hall on the goal of the task force on cost saving. “If the choices are between raising taxes or cutting vital services, there is a third path,” he said. “That’s finding a way to save money, and that’s the intent of the task force.”

He had no idea how much might be saved, but noted that Maryland and its county governments spend approximately $30 billion annually on all procurements. Saving just 1% of that would add up to $300 million.

At bill hearings in Annapolis, nonprofit leaders complained about varying requests for information and documents — among different state agencies, as well as programs within the same agency. They said that sometimes different agencies asked them for the same documents, without first checking to see if they had been filed elsewhere. They said there was no standardization in state contracts, and requests for proposals continually changed.

“There are ways to simplify and meet all the legal requirements for protecting patients and public money without as much paper and process,” said Bogdan.

Not just a problem in Maryland

On Oct. 7, the Urban Institute’s Center for Nonprofits and Philanthropy, in collaboration with the National Council of Nonprofits, issued a national survey on procurement. The study showed that procurement problems are widespread across the country.

That same day, the National Council of Nonprofits issued its own related report, which called the state and federal contracting systems “archaic” and characterized procurement issues as “a silent national crisis.”

In a state-by-state comparison in the National Council of Nonprofits report, Maryland ranked 32nd worst in the complexity of reporting requirements for state contracts.

Maryland nonprofits also reported that 47% had to freeze or reduce employee salaries, and 41% drew on reserves to continue operating.

Bogdan attributed this to the tough economic times. “Because of the recession, there was a loss of government funding and of corporate and foundation funding as well,” he said.

“I’ll be spending a lot of time on this issue during the year,” said Bogdan, who hopes that a national model can be developed. “I’ll be talking to agencies around the country to find out what they are doing.”