Analysis: Hubris at the Board of Public Works?

By Charlie Hayward

Charliehayward@marylandreporter.com

Whether you call him the new sheriff in town, or the public-sector incarnation of the muscle-bound wrestler “Hulk” Hogan, Governor Larry Hogan has meted out his own brand of “whoop ass” on flat-footed state bureaucrats while presiding over his first six meetings of the Board of Public Works, a three-member panel that approves major state procurements.

Since taking office, Hogan and his like-minded budget hawk, Comptroller Peter Franchot, have punctuated board meetings with countless quotable barbs: Spending is “out of whack;” officials are “sort of cavalier [about $35 million more spending];” it’s “very irritating” that a vice chancellor doesn’t show up to explain spending; “a murky presentation [by state bureaucrats] two weeks ago has gotten even murkier….” And so on.

That’s Hogan’s way of implementing campaign promises to change the state’s spending culture, by using his bully pulpit at the powerful board to deter questionable government spending. This probably will be good for taxpayers.

Longstanding procurement problems feed the board’s pipeline

No one would argue the State of Maryland’s procurement process is operating efficiently or effectively—and Hogan has rightly promised to revamp it.  He’s directed Lt. Gov. Boyd Rutherford, Comptroller Peter Franchot, and Treasurer Nancy Kopp to study the process and identify fixes.

But fixing the process will be neither easy nor quick. Procurement shortcomings are deep-seated because they’re rooted in outdated policies; disjointed procedures; patchy technical expertise creating huge risk throughout the buying life cycle; and difficulty finding enough competition for what bidders should view as prestigious work on behalf of Maryland taxpayers. Existing practices will need thoughtful and creative evaluation. Solutions need to be implemented not only by the administration but also from the legislature. Perhaps most important, Hogan and Rutherford need to figure out how to get state workers to buy into major cultural change.

(Let’s hope Hogan’s procurement reform brings BPW scrutiny to the Health Benefit Exchange procurements, whose Fiscal 2016 budget is $78 million; but an astonishing $36.3 million [or 47%] is earmarked for sole-source, emergency, or no-bid procurements. These would surely animate the board.)

Multiple board meetings needed to resolve mistake regarding the Motorola contract

Motorola Solutions, Inc. has an eight-year, $485 million contract with the State for communications’ infrastructure (such as towers, related hardware, and high-speed cabling) including mobile communication devices (resembling satellite radios; they cost more than $6,000 apiece) in the 700 MHz band to provide Maryland by 2016 with a state-of-the-art interoperable public-safety communication system. Most of the assets are proprietary, binding the state to Motorola’s pricing throughout their useful lives.

The state identified the need for $20 million extra to pay for Operations and Maintenance (O&M); specifically “System Support [for] the Statewide Radio Infrastructure but not subscriber equipment” because the 2010 procurement failed to require bidders to furnish O&M for infrastructure put in service early in the contract (2012), whose two-year warranty periods would expire before infrastructure work was completed in 2016.

Officials from the Department of Information Technology and State Police (MSP) first brought this $20 million extra before the Board on February 18. Approval was deferred. On March 4, it was again brought to the board. Approval was denied. Finally on April 15, the overrun was again brought before the board; this time as a “no-cost” transaction where the $20 million for O&M would be paid for by reducing the contract line item for radios.

BPW liked the idea so much its two chief budget hawks, Hogan and Franchot, did a happy dance, declaring they’d saved state taxpayers $20 million, even though Major Hasenei, MSP’s project manager, cautioned the board that Motorola had yet to complete major portions of the infrastructure (two of five regions yet to go) so it might need more money later.

Savings not guaranteed

There’s only one problem with those savings claims. The board was trading its approval of $20 million of extra O&M costs for $20 million fewer radios whose savings might be offset between now and 2016 by cost overruns from finishing the infrastructure, even while Hogan said he is eying those savings to pay for extra troopers and new barracks the legislature refused to consider late in this year’s legislative session.

Call it horse-trading; or chutzpa; or hubris. But keep a balanced scorecard, and don’t call it savings. Not yet, anyway.

Charlie Hayward recently retired after 30 years’ experience with performance, IT, and financial auditing of a wide variety of government programs and activities.