WEB EXTRA: Memo Confirms Contract Questions
by Phil Williams
Chief Investigative Reporter
NASHVILLE, Tenn. -- A recent meeting of the legislature's Fiscal Review Committee, called to consider three questionable state contracts, ended up being a highly orchestrated endorsement of the Haslam administration.
The governor's chief of staff, Mark Cate, had met privately with members of the contracts watchdog committee prior to the public session. And, by and large, committee members responded with effusive praise. Some suggested that, in this case, the media had got it wrong.
But a staff report, not shared with the full committee, told a more complicated story regarding at least two of the three state contracts.
Read the memo.
"Staff did not find evidence in the documentation reviewed that any violation of state law occurred," the Fiscal Review Committee's executive director, Lucian Geise, wrote in a July 15 memo to the committee's chairman, Sen. Bill Ketron, R-Murfreesboro.
"However," Geise concluded, "an emphasis on expeditiously completing procurements resulted in actions that may have reduced competition."
And that was what our NewsChannel 5 investigation had suggested in the case of contracts awarded to Enterprise Rent-A-Car and Bridgestone Retail Operations.
Ketron never shared the staff memo with the rest of the committee.
A spokesperson for the Senate Republican Caucus said that the memo was written for Ketron's "personal" benefit because he had been out of the country.
"He was not asking for information as chairman of the committee," she said. "Rather, he asked for information in light of the fact that the stories appeared during his absence."
She added that "Sen. Ketron urges all members to ask questions of Director Geise, as he does very often."
In the case of the Enterprise contract, NewsChannel 5 Investigates reported that the Haslam administration outsourced the state's motor pool without giving any other company a chance to compete for the work. That came after the Department of General Services hired a former Enterprise executive to head the Motor Vehicle Management (MVM) division.
Instead of soliciting bids, the administration took a smaller contract that Enterprise had signed with the University of Tennessee and turned it into a statewide contract. As NewsChannel 5 reported, the Fiscal Review staff memo noted that even UT had not used the Enterprise contract to outsource its own fleet of on-call vehicles.
"Although the Department has stated that the same vendors would have been included in the procurement, different vendors might have participated due to the added car-sharing component," Geise wrote.
"A procurement conducted by the State for a program to replace the MVM dispatch fleet could have resulted in a more beneficial contract because of potential greater volume and the different needs of the State."
The memo noted that General Services' own analysis showed that the prices under the UT contract were, in some cases, higher than rates for other states, although it concluded that staff could not say "with certainty" that the state would have received better rates or service if it had put the project up for bids.
In the case of the Bridgestone contract, the memo confirmed that the bidding process for vehicle maintenance was structured in such a way that Bridgestone ended up being the only bidder.
It noted that, as NewsChannel 5 Investigates reported, a key pre-bid conference was rescheduled for Bridgestone's benefit after an exchange of emails with company officials.
"Emails between Bridgestone and the Department indicate that a dialogue concerning the forthcoming Invitation to Bid was conducted, but – according to the Department – this type of dialogue occurs during procurements and is not unusual," Geise wrote.
Still, he added, "No additional emails between the Department and other vendors were produced."
The Invitation to Bid was issued July 11, 2011, with interested parties being given just a week to put together a bid, the memo noted. The bids were evaluated just 11 days later on July 22, 2011.
While General Services officials have claimed that approximately 20 bidders were invited to submit proposals, Geise's memo noted that "the list of potential bidders supplied by the Department contained a minority of bidders that appear to be able to provide statewide service."
In addition, "the specifications required bidders to be ‘primarily engaged in the business of providing vehicle maintenance, safety inspections and repair services.' A number of the potential bidders are motor vehicle dealerships."
During the Fiscal Review Committee hearing, Chairman Ketron noted that the Department was in the process of rebidding that contract.
No one on the committee questioned the process that led to Bridgestone getting more than $2 million in taxpayer money.
Still, Geise's memo applauded the Department of General Services' plans for the new procurement.
"The new specifications require the bidder to have the ability to supply or perform products and services, instead of requiring repair and maintenance to be the primary business of the bidder," he wrote.
"The services sought are broken into categories. Bidders are required to bid on specific categories and to bid on a regional, rather than a statewide basis. Numerous potential bidders that were not included on the 2011 Invitation to Bid are included in the Invitation to Bid issued this year."
He concluded, "These factors indicate that the current Invitation to Bid should result in a higher response rate and a more competitive procurement."
Jones Lang Lasalle contracts
A separate memo from the Fiscal Review Committee staff briefly analyzed the contracts entered by the Haslam administration with Jones Lang Lasalle – the first contract for facilities assessment and master planning, the second contract to manage all state facilities.
"Based on our review," Geise wrote, "there is no evidence that the Department violated any law, policy or procedure during the procurement of the contracts with JLL."
The memo did not analyze a number of objections, first reported by NewsChannel 5 Investigates, raised by various state officials about the contracting process.
For example, the Department of General Services took a $1 million contract given to JLL to analyze the condition of the state's buildings and began to expand the contract through a series of amendments – without giving other companies a chance to compete for the work.
Mark Cate told the Fiscal Review Committee that, when the contract was awarded, it was always anticipated that the additional work would be going to JLL.
But minutes from the State Building Commission, which had to approve the amendments, show that officials there expressed concerns that they did not want to get into a habit of doing business that way.
"This approval of this first amendment of the JLL contract is an exception to the State Building Commission competitive procurement policies for this amendment only," Treasurer David Lillard insisted when the first contract amendment was approved.
Secretary of State Tre Hargett added, "If we approve today's extraordinary item, that doesn't construe that that's a new policy on our part."
In addition, our investigation discovered that the Comptroller's Office raised questions about another amendment to allow JLL to charge a 4 percent commission to any landlord who wanted to lease the state a building.
"A commission to JLL at first blush seems very wrong," Comptroller Justin Wilson emailed his staff. "I am suspicious to say the least."
He was suspicious because, when JLL put in a bid for the state's business, they were asked how much extra they would charge to work on leases.
Their contract said: $0.00.
Notes from contract reviewers in the comptroller's office show that an attorney working for General Services Commissioner Steve Cates "agreed that there was no statute, rule or policy that authorized the commission, nor did the contract authorize it. It was her understanding that, since the Lessor and not the State was paying JLL the commission, it was OK."
Recalling a February 2012 meeting, that attorney told contract reviewers that "everyone ... knew that JLL was going to make their money charging such a commission."
Contract experts in the comptroller's office disagreed.
"I responded that we knew that is what they (DGS & JLL) wanted to do, but we thought they understood from the meeting that JLL could only be paid via the service rates proposed in their cost proposal," an unidentified contract reviewer wrote.
No one from the Fiscal Review Committee asked a single question about any of those objections.
In addition, our NewsChannel 5 investigation raised questions about claims that the Haslam administration had made in justifying their decision to demolish the historic Cordell Hull state office building.
At the Fiscal Review Committee meeting, the governor's chief of staff took that issue off the table – at least, temporarily.
"Because of the interest in this building and because of the importance of it -- its location, again its perceived historical nature -- we think it's probably wise to have yet another set of eyes on this again," Mark Cate told committee members.
It is not known how long that review will take.