April 19, 2015

Rascovar: Procurement disgrace in Annapolis

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Hogan Franchot Kopp Board of Public Works

Photo above: Board of Public Works members Treasurer Nancy Kopp, Gov. Larry Hogan Jr. and Comptroller Peter Franchot meet in Annapolis.

By Barry Rascovar

For MarylandReporter.com

Maryland’s system of contracting for services through competitive bids is in shambles. It has been that way for years — and is getting worse.
It’s an embarrassment to taxpayers. Yet a long list of procurement debacles hasn’t been enough to spur sweeping reforms.

That seems likely to change, thanks in part to a royal screw-up on a food-service contract that all three members of the Board of Public Works strongly denounced last week.

Gov. Larry Hogan Jr. described the badly botched prison-food procurement as “one of the most disgraceful displays of mismanagement” he’s seen in his long business career.

Comptroller Peter Franchot, a persistent but lonely critic of these contracting disasters, called it “the most troubling procurement” in his eight years on the board.

Treasurer Nancy Kopp, ever the diplomat who chooses her words with care, said she was “sorely troubled.”

Contracting efforts gone awry

Nearly every month, the board hears nightmarish tales of state contracting efforts gone awry, of contractors who submit lowball bids only to seek costly add-ons later, of inept procurement officials who misapply contracting rules, tilt the playing field, make a mess of the bid-and-award process or fail to use common sense.

Hogan and Franchot earlier this year repeatedly skewered University System of Maryland officials for ineptly explaining cost overruns and excessive spending on university capital projects.

Now the prison-food contract horror story has led board members to the brink of action.

It’s a tale of stupidity by corrections officials under former Gov. Martin O’Malley.

It’s a tale of a contractor using the threat of cutting off food deliveries to Baltimore inmates to secure a whopping 54 percent boost in state payments.

It’s also a tale of misleading statements that now are coming back to haunt the winning bidder.

Franchot called the misadventures of this contract award “highly irregular.” He urged the governor to ask Attorney General Brian Frosh to investigate and determine whether this was the result of “staggering incompetence — or something else.”

Franchot also should have asked the governor to appoint a blue-ribbon panel of outside experts to study recent procurement disasters and recommend ways to fix a dysfunctional system.

Meals estimate at issue

In short, here’s what happened on the prison-food contract.

State corrections officials made the inexcusable mistake of erring on how many meals are served to Baltimore prison inmates each day.

This should have been basic math, backed up by recent meals-per-day figures.

Yet corrections officials requested that contractors submit bids for serving 23,000 daily prison meals. The actual number should have been closer to 15,000.

That’s a huge difference because the contractor is paid on a price-per-meal basis.

The incumbent contractor, based on its seven years of experience at the Baltimore prisons, estimated it would cost $89 million over three years to fulfill the food contract. The other bidder came up with a stunningly low figure of $37 million.

That’s a whopping difference — a gap in bids so gigantic it should have set off alarm bells. Something was very wrong with the state’s request for proposals (RFP).

Contract extension granted with threat of stopped service

Instead of catching the mistake early, state prison officials went ahead and awarded the contract to the low bidder, which hadn’t even taken the basic step of inspecting the prison kitchen facilities before bidding.

Such naiveté never surfaced when the board, under O’Malley, approved this contract in early January. Instead, the company called itself award-winning and pledged to do a great job.

Almost immediately that promise collapsed.

The prison kitchen facilities needed hundreds of thousands of dollars in upgrades that the contractor hadn’t figured on. Health inspectors listed 11 pages of required remediation.

The vendor was serving nearly 8,000 fewer meals per day and losing $70,000 a week.
On Feb. 24, the company informed the state it would stop serving inmates on Feb. 28 — just four days later — unless its compensation was boosted immediately by 53 percent.

Faced with the prospect of inmates going without food, new corrections secretary Stephen Moyer had little choice but to give the vendor what it wanted — an emergency, six-month, $6.6 million contract that dramatically jacked up payments to the vendor.

Moyer wisely cancelled the original contract award, which is supposed to be re-bid in about six months. Good luck on that one — especially since the department that bungled the first RFP-and-award process is still running the show.

Franchot called the winning vendor’s explanations “deplorable.” “You essentially deceived us,” he told the company’s owners last week.

But whose fault was it? The state is so culpable that legal action against the winning bidder may not be possible.

Experts should vet procurement policies

In reality, it is a systemic problem.

From top to bottom, Maryland’s procurement laws and procedures need a thorough vetting by experts. The process is too easily manipulated by contractors and by state officials.
Hogan has grown increasingly irritated by the flawed and costly contracting mistakes that have come before the Board of Public Works since he took office in late January,
Enough already.

Actions to revamp and improve the system will speak far louder than angry words of disgust.
Barry Rascovar’s blog is www.politicalmaryland.com. He can be contacted at brascovar@hotmail.com

  • SF

    Start with prison industries….another sham

  • Dale McNamee

    This shows that the lower echelon of government is full of incompetent persons who should have been fired years ago…

    And who is responsible for allowing the governmental department who bungled
    the contract to still handle it ?

    And where were the Health Dept. and DCPS all those years ?

    If I were governor, I’d be getting ready to fire outright everyone involved !

    No severance, no pension, no reassignment… Nothing for such incompetence that borders on criminality !

  • Macwell52

    It’s not incompetence, more it is a matter of political connections and corruption.
    It procedure is complicated and burdensome and weighs heavily on lower level employees involved with relatively minor procurements. Do not believe for a second that a prince George’s food service company was awarded contract without complicite politicians, lobbyists and the need for political favors and paybacks

  • MD observer

    The RFP’s meal-count error was serious but not the fatal error, of which there were two: (1) the procurement people didn’t pick up the phone to understand the reasons for the huge price difference; and (2) Crystal didn’t perform sufficient due diligence and risk assessment associated with the job.

    As with most MD procurements gone bad, both parties screwed up. Reminds me of the health exchange’s saga involving Noridian.

  • Josh Friedman

    Prisoners in Sheriff Joe Arpaio’s jail eat for 56 cents a day. Why should the low bid in this case have raised alarm bells? It was still twice as much as Sheriff Joe pays? And how does overstating the meal needs result in the company not getting enough money to provide for fewer meals? And imagine if the media got wind that DPSC had passed over a Maryland business for a company that bid twice as much for the same service?

  • BOB WEITZEL

    GOVERNOR YOU SHOULD ASK ALLLL DEPT HEADS TO SUBMIT THEIR RESIGNATION AT ONCE…CLEAN OUT THE DEAD WOOD, AND THEIVES.