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.

Leave a Comment » | City government, County Government, El Paso Independent School District, Purchasing, State Government | Permalink
Posted by jcurrey

Why rig a bid when you can fool City Council?

November 19, 2012

This link is to the City Council agenda backup item requesting 677,000 dollars for a new chiller for city hall.

It was bought through a buy board, The Cooperative Purchasing Network (TCPN).  There were several other vendors awarded at the same time as this vendor.

There was significant community input at the council meeting asking that the item be bid out.

Council’s vote was unanimously in favor of the no-bid long-lasting chiller.

City staff explained that they did not bid it out because they were in dire need of a new one and bidding would take too long.  Staff further explained that they wanted to get a chiller that would give them the longest life.

A review of the TCPN evaluation shows that 30% of the contract award decision was based on price.  How can that be a bid?  Then looking at TCPN’s web page for this contract, we can see that it says “Contact Vendor for Pricing”.  You think I’m kidding?  Look here!   As final proof that this deal was wired by staff be aware that the council meeting was September 12, 2010.  The vendor’s contract from TCPN was not effective until September 13, 2010.  I wish I was clever enough to make this stuff up!

They replaced the chiller in 2011.

A long lasting, no-bid chiller for a building that we are going to tear down now turns out to be a waste of our money.

By the way, TCPN gets 4% of whatever is awarded.  Don’t tell me that buying from the buy board was about efficiency.  The City of El Paso probably could have conducted its own bid for the $27,080 dollars that Houston based TCPN got as it’s cut on this, but then again staff wanted to pick their own vendor.  They waited for their favorite vendor to get its contract before they brought this to City Council.

We deserve better.

Leave a Comment » | City government, Purchasing | Permalink
Posted by jcurrey

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.

3 Comments | City government, County Government, El Paso Independent School District | Permalink
Posted by jcurrey

Another Hidden Tax

November 17, 2012

The financial community spent some time this week looking at Walmart’s potential liability relative to possible violations of the Foreign Corrupt Practices Act.  Some have come to believe that Walmart will probably be put in a position where they have to pay a substantial fine to the United States.

We see a lot of fine paying today.  The problem that I have with it is that you and I (the consumers) are in reality the ones paying the fine.  The Department of Justice or the Securities Exchange Commission or some other agency wrestles a company to the ground and gets them to cough up a large sum of money for some sort of wrong doing.  The company pays the fine as though it is simply a cost of doing business.  The cost of doing business gets passed on to the consumer.

If our government wants to punish wrong doing it should not involve money that consumers end up paying.  Charge the stockholders?  That could be more fair in that they are the ones that hired management.  Sanction the company?  Maybe the government should negotiate a settlement where the company or the individuals involved  cannot participate in some activity for a period of time.  Fine the individuals?  That could be an option.  Put people in jail?  If humans can be proven to have broken the law, maybe so.  The problem with jail terms is that the government does not fight fair and many simply plead guilty to some lesser charge because they feel they cannot win against the government.

The problem with these fines is that you and I end up paying them.  That to me is just another form of tax.

I am not talking about reimbursement here.  If a company does financial harm to an individual or another company reimbursement may be in order, as long as the reimbursement goes to the party that was harmed.

The government now is little different than a bounty hunter.  They want the money.  Justice in government circles is pronounced “Just Us”.

We deserve better.

Leave a Comment » | Federal Government | Permalink
Posted by jcurrey

Jumping to Conclusions

November 16, 2012

The headline of the El Paso Times Wednesday (Nov. 14, 2012) was “Region 19 director grills EPISD trustees”.  The article however did not report any heavy questioning from the Region 19 director.  There evidently was some lecturing on his part though.  From what I have been able to figure out about this school board mess, the director was spot on.

My issue with the headline is that it is misleading, but then again I have a dictionary.  Intense questioning was in order and I would have liked to read about it.

Unfortunately the article went on to say that the Region 19 director asked “How do you get a company and don’t find out that they don’t know how to do what your’re paying them for?” in referring to a $375,485 contract the district was required to issue “to oversee and monitor test administration and test security for this school year…”.  The director evidently told the board that the leader of the company they awarded the contract to called him after the contract was issued  and asked Region 19 to provide training to the company.

That sounds pretty bad.  It appeared that the board issued a sizable contract to a company to perform a critical function and that the company did not know how to do it’s job.

Then on Thursday the Times headline was “State test-monitoring company followed EPISD bid requirements” which I took to mean that the bid was defective.  The rather long article did a pretty good job of explaining that the contract required the vendor to receive some kind of training from the director’s education service center.  I suspect that some lawyers helped the El Paso Times understand the need for clarification.  It appears that the vendor was doing what was required of them.  Then it turns out that the education service center does not offer that kind of training.

So what did they do?  “Representatives from [the vendor] participated and observed EPISD training on these procedures on November 1”.  Let’s get this straight.  The company that is supposed to oversee and monitor the process gets trained by the group that they are supposed to oversee and monitor.  Only at EPISD.

The bidding process was defective.  Only one bid was received.  This is typical.  The school district wrote a bid request that could not be complied with and that was so restrictive that only one firm responded.  In all probability any local CPA firm would have been able to do the work, but then again they probably don’t want to get involved with the school district.

So what do we have here?  First we have a newspaper that goes through the motions of helping watch a defective school district but relies on emotion instead of fact.  Second we have the director of an education service center making highly misleading accusations.  Third we have the EPISD that has thoroughly failed in the past and that cannot even handle a bid fairly.

By the way, I remember when is was called Region XIX Education Service Center.  I guess somewhere along the line they stopped teaching children Roman numerals.  For all I know they don’t teach where Rome is anymore either.

Our children deserve better!

1 Comment | El Paso Independent School District, El Paso Times | Permalink
Posted by jcurrey

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