The list goes on

November 22, 2012

Today is Thanksgiving Day.

Instead of writing this weekend, let me post an index of some of what I have been writing about local purchasing.

Managing Our Money addresses local governments using buy boards

City Management talks about the two step that they use down at City Hall

Sole-source or favoritism or laziness? gives an example of how the City lies so they can buy sole-source

There They Go Again chronicals a major waste of money

More No-Bid Spending shows how buy boards should be used

Jumping to Conclusions shows how EPISD cannot write an RFP even when they try

Saying it does not make it so exposes the lie that bid board contracts are competitively bid 


Saying it does not make it so

November 20, 2012

I have been writing a lot about buy boards that our local governments have been using.  Contrary to what some of our local officials are claiming, the contracts on these boards are not competitively bid.  Some may be but most are not.  That of course is my opinion.  Read this post and draw your own conclusion.

The ones I have written about recently are run by government agencies like the State of Texas or the Harris County Department of Education (Houston).  They  let other agencies (like our City and County governments and school districts) buy under their contract without conducting a separate bidding process.

The buy boards do this to make money for themselves.

They do this for a fee that is paid by the vendor.  Some of them charge 4% of the value purchased. The vendor pays the fee to the buy board.  The 4% is a cost of doing business for the vendor.  It makes sense to me that if the vendor did not have to pay the 4% the price that is charged to the buying agency we could buy that much lower.

They pick the brand they want

The buy board goes through the process of issuing a request for proposals (RFP) and then awards contracts to the companies that they judge to be worthy.  Often they do not award a contract only for the proposal that they judge to offer the best value, but to several companies that they judge to be worthy.

An RFP should provide specifications for a product or service that the agency wants to get.  “A four door two wheel drive sedan” is an example.  The buy boards typically do it differently.  They ask “how much will you charge us for your product”?  You and I both know that a Chevrolet sells for less than a Mercedes.  Here is an example of an awarded contract.  The vendor simply promises to sell a particular brand of equipment for a percentage of discount off of list price!

With this example the next thing we would see is some local government official driving around in a Mercedes.  They would claim that they got it through a competitive bid!  (I did not want to call out anyone in particular so I used this example because I do not know of anyone driving around here in a government owned Mercedes).  But our local governments actually do use these buy boards to pick the brand they want instead of the most cost effective brand.  This costs us money.

The court says

 There has not been a lot of action in the courts over this issue recently.  That is probably because the 1951 Texas ruling in Sterrett v. Bell was pretty clear.  In discussing competitive bidding the court wrote:

“Its purpose is to stimulate competition, prevent favoritism and secure the best work and materials at the lowest practicable price, for the best interests and benefit of the taxpayers and property owners.  There can be no competitive bidding in a legal sense where the terms of the letting of the contract prevent or restrict competition, favor a contractor or materialman, or increase the cost of the work of of the material or other item going into the project”

Let’s see:

  • They pick the product they like
  • The price may be higher than the competent competition
  • The price is inflated (at least by the buy board’s fee)

I cannot see how this can be competitive bidding.

We deserve better.


On Governance

November 18, 2012

Our local “leaders” at the El Paso Independent School District (EPISD), at City Council, and at Commissioners Court are right when they comment that they do not have the authority to tell anyone in the organizations that they represent to do anything (in other words manage the staff directly).

They are members of governing organizations that must exert control as a group.  (I will refer to these governing organizations as boards in an effort to avoid getting too wordy.)  A single member of any of these boards does not have the right to speak for his group without the express permission of the group.  They must govern by building a consensus with the other members of their board.  The organizations they represent are managed on a day-to-day by other people.  In the case of the School District and the City it is through a paid manager.  In the case of the county most of the managers are other elected officials like the Sheriff and the County Clerk, so the commissioners have even less direct control over operations.

They should not intervene with the running of any department directly.  They should be declaring policy and controlling the person managing the organization.  That is what they are not doing.

They have the power to ask questions.  They can bring their manager before their board and ask questions when they believe something is wrong.  They have the power as a group to tell the manager what they want done.

They have the power of the budget.  They may not be able to tell a department how to operate but they certainly can control how much money the department has and how the money will be used.

These hired managers work for their board.

This is the way that business boards run and it can be quite effective.  Our City Representatives on the other hand seem to think that they work for the City Manager.  If a representative votes the wrong way the representative has to bear the wrath of the City Manager who writes that they are “crazy” or that they have the beginnings of “dementia”.  Even worse, the City Manager may deny the representative’s district some funding until the representative gets back in line.

Our problem is that we have elected people to these boards that have never run anything substantial.

The EPISD board has seven members–two that are professional educators (similar to the inmates running the asylum), a PTA activist, a retired army officer, a federal official, an insurance agent, and a person who has run a metal shop.

Our City Council has a former property manager, a former aid to a Mayor of El Paso, a former city department head, a retired army first sergeant, a private physician, a representative who says he is a small businessman (I have not been able to figure out where), a lawyer, and a person who was evidently a stock broker for a short while.

The County Commissioners Court offers us a lawyer who worked for the county for a number of years, a body shop owner, a lawyer who was appointed to the position of commissioner, and a person who works in real estate.

Are we nuts?  No wonder we are in this situation.  EPISD has about 10,000 employees, the City has about 6,000, the County almost 3,000.  I am not sure that I would hire any one of these “leaders” to run a bubble gum stand.

Please understand that I am not trying to be critical of these professions.  My point is that these people do not have the experience necessary to control their manager.  If they did we would not be where we are.

Having a couple of people on each of these boards that have run significant operations themselves and that know how to ask questions would do us a world of good.  Many qualified candidates will not do it because they do not want to put up with the environment they would be thrown into.  We need to ask them for help.

We deserve better.


More No-Bid Spending

November 11, 2012

Tuesday’s City Council agenda has another bunch of no-bid purchases totaling just short of 1.2 million dollars on it (item 12B).

These are primarily for computers and related equipment that the City wants to “refresh”. With all of the other expenses related to moving City Hall I would think that they could hold off on this for a while, but it is possible that getting new equipment at this point makes financial sense. I won’t get into that argument today,

I do want to talk about how they are doing it.

Once again they are using a buy-board without soliciting competitive bids. Why? Favoritism? Laziness? Arrogance? Some of each?

What they should do is request competitive bids and then make the buy-board offer one of those that are evaluated. If after evaluating the offers the buy-board offers the best value the City should then buy
from it. Remember that market conditions change and that we might get a better deal today then we got when the buy-board contract was negotiated. That is how the Federal e-rate program requires it to be done. The City, County, State, school districts and other governments should do it the right way too.

We deserve better.


SPENDING OUR MONEY MORE WISELY

November 10, 2012

The State of Texas through it’s Department of Information Resources (DIR) operates what is commonly called a buy-board for technology devices and services.

Here is how it works. DIR starts by posting a notice that it would like to receive offers for a certain type of equipment (lets keep it non-technical and say they are looking for Chevrolet sedans). Companies respond with their offers. DIR negotiates prices and terms and ultimately enters a contract under which governmental entities can buy Chevrolet sedans for some percentage off of sticker price. They may also go through the same process for Cadillacs and Fords or other sedan brands.

Governmental entities then use this process to buy sedans instead of conducting competitive bidding to get the best value for themselves.

These contracts allow the entities to choose the brand and model that they want even though a fair competitive bidding process might provide better value for the taxpayers. The entity can choose Cadillacs instead of Chevrolets or Fords simply because they have a favorite brand or dealer.

This is not competitive bidding. It is often favoritism. If the entity would conduct the bid process fairly, receive bids, and then include a DIR offer in it’s analysis we could get much better value for our money. Circumstances change and many times the price a company will charge will be lowered, for example at the end of a model year or if sales are too slow. We should be smart buyers and get the beter price.

Why do they do this with our money? Probably sometimes because it allows them to use favoritism. Probably sometimes because it is easier and less transparent to use the buy-board. It is a way to eliminate competition.

It is legal in the State of Texas. It should be changed.

We deserve better than this.