NC process in awarding private contracts found lacking

North Carolina’s routine in awarding private contracts doesn’t ensure taxpayers are getting the best for their money, says a new report that is prompting a call for legislative tightening.

Agencies aren’t considering all competition before awarding such contracts, aren’t documenting the reasons for using private providers, aren’t charting the results and don’t consistently word their agreements to ensure the contractor delivers a quality performance, said the 51-page report from the Program Evaluation Division, a nonpartisan watchdog agency at the General Assembly.

The stated intent of hiring private firms to perform government services is to get better service at lower cost.

“We identified systemic issues in the process which we think are limiting the state’s ability to achieve best value,” said Chuck Hefren, a division evaluator who presented the findings this week to the Joint Legislative Program Evaluation Oversight Committee.

The division over the past few months reviewed 133 recently awarded contracts totaling $1.24 billion, and found that $511 million was awarded without considering all the competition.

“It puts the state at risk of issuing contracts through a non-competitive process,” Hefren said.

State law requires competitive bidding in procurement of high-value services, though the Department of Administration can waive that process if there are few providers of the service.

Among the contracts reviewed were 14, worth $118 million, for private services ranging from environmental testing to marketing, for which the department waived the bidding procedure.

The division’s report also notes that a lack of competition may reduce pressure on those companies to deliver quality work.

Agencies also skipped the bidding process in awarding 113 amendments, totaling about $170 million, to 33 contracts. Amendments may be vital course corrections in contracted work, but they also can change the scope of work into something that should have gone through a competitive process, division officials said.

When the report’s authors asked state agencies for documentation on the results of contracting, only the Department of Information Technology delivered a business case. Meanwhile, some agencies had a hard time producing expenditure data with private contracts. The Department of Health and Human Services couldn’t come up with accurate totals “without extensive research,” the report said.

“We didn’t get in this position overnight,” said Rep. Craig Horn, R-Union, chairman of the oversight committee. But as a start, its members voted to request legislation — based on division recommendations — that could set new requirements for state agencies, such as evaluating market competition and submitting business cases as prerequisites.

That request came with a caveat, though. Sen. Ralph Hise, R-Mitchell, was among lawmakers who warned against making the contracting process too rigid. He said that could discourage state agencies from seeking out sensible private sector help.

State agencies including the Department of Administration and the Office of State Budget and Management said they agree with the report’s contents, though they said the recommendations might require additional hires or training.

This story was originally published January 12, 2016 at 2:29 PM with the headline "NC process in awarding private contracts found lacking."