Right now, it is a troubled process. State auditors found that the state had overpaid by $41 million on a $95 million software contract with Oracle. Furor over the sole-source deal was further fueled by a $25,000 contribution from Oracle to Governor Gray Davis' reelection campaign. In the wake of those and other revelations, Davis appointed the panel to review purchasing processes.
According to a recent study by the San Francisco Chronicle, no-bid contracting has been widely used in California for several years. Newspaper investigators found that in the past three years, California bought more than $2.4 billion worth of goods and services without seeking competitive bids. Some agencies skirted state rules to make those purchases. For example, agencies are not required to bid contracts worth up to $100,000 ($500,000 for information technology) so long as they buy from a schedule of pre-approved vendors. To get around the dollar limits, agencies let multi-million dollar deals by breaking them up into smaller pieces, the Chronicle found.
California is hardly alone in making no-bid purchases. Non- competitive contracting is increasingly common in state and local government. There are often good reasons to take this route. Sometimes, a vendor is selling a unique product. Or, in the case of computers and software, open bidding can take so long that the technology is obsolete by the time it's delivered. A cut-the-red-tape push in recent years has given public purchasers more discretion, replacing the old government obsession over getting the lowest price with the idea of "best overall value." That's a good thing, according to Mississippi purchasing director Don Buffom. "We can spend 400 man- hours trying to save 10 cents," he says.
With this new flexibility, however, comes room for abuse or plain old mismanagement. So even as the purchasing pendulum shifts toward discretion, it occasionally gets jerked back toward control. Arkansas, for example, is clamping down on sole-source deals with attorneys, engineers and other consultants. The problem, says purchasing chief Joe Giddis, is that these deals often morph into open-ended commitments that get renewed year after year. Arkansas recently shifted oversight for consulting contracts to Giddis' department and required agencies to do a more thorough job in justifying their needs. Subsequently, sole-source deals are down and competitive deals are up. "It's getting agencies to sit down and think through what exactly they want consultants to do," Giddis says.
Over the years, California has helped drive the move toward more flexible procurement rules. It could also pop the trend into reverse. "There has to be balance," says Richard Thompson, Maine's top purchasing official. "You want to have the most efficient purchasing process. But it has to be an open and competitive process that can withstand scrutiny."
