Las Vegas Sun

June 27, 2017

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state government:

Companies, individuals make $1.7 billion from Nevada no-bid contracts

On 2,305 occasions in the past four years, Nevada skipped its usual competitive bidding process when awarding state contracts to private companies for equipment, supplies and services.

Records show that the no-bid deals totaled $1.7 billion, representing about 27 percent of the state’s total number of contracts over that time period.

It’s a practice with no shortage of critics, who say that eliminating the requirement for companies to compete against each other for jobs essentially gives them a blank check by removing incentive for them to keep costs down. It also raises the specter of government officials channeling money to companies in sweetheart deals, critics say, and possibly getting kickbacks or campaign support in return.

But Greg Smith, administrator of the Nevada Purchasing Division, which administers around 16 percent of the state’s no-bid contracts, says the process is regulated tightly and scrutinized closely in Nevada.

“With regards to no-bid, I get it,” said Smith. “... But it’s an acceptable public procurement practice with very stringent parameters that we have set up to make things work for the state. If we take advantage of it, it’s an exclusion that can be taken away by the Legislature.”

In a competitive procurement process, multiple companies submit price estimates as part of individualized contracts containing stipulations designed to set their bid apart. By Nevada law, agencies award contracts to companies they believe will provide the best all around product or service for the best price. The state awards contracts to facilitate needs in myriad areas — there are more than 200 executive branch agencies that the purchasing department serves.

Under law, the state can apply the no-bid process in emergencies, when no other company bids and when individuals or companies have an expertise or equipment not abundant in the marketplace, Smith said. Agencies can award no bids — without limitations — when they hire architects, accountants, engineers, expert witnesses and attorneys.

The Sun was able to pinpoint 390 companies or individuals who worked with Smith’s office to receive no-bid contracts for state work. The data in records from the department of administration did not disclose the names of architects, accountants, expert witnesses, engineers and other professionals who won contracts outside of the state’s purchasing department.

Catamaran PBM, formerly title Catalyst Rx, received at least $62 million worth of no bids. The company facilitates prescription drug plans under the state’s Public Employees’ Benefits Program — a competitively bid deal worth $143 million — but won the no-bid contracts for fulfilling federal work on mental health and AIDS programs with the state’s health department. It was the only company that submitted bids for the work.

A heating and cooling contractor, Automated Temperature Controls, and the Nevada Broadcasters Association each won at least 12 separate no-bid contracts, the most in the state.

Automated Temperature Controls won at least $653,585 worth of jobs at state and federal buildings to do a variety of work: installing HVAC systems and making repairs on federal and state property. On at least nine occasions, no other company bid for the job.

Notable tech companies have won no-bid contracts in the state. At least one went to Deloitte, a company that competitively won more than $52 million to implement the Affordable Care Act in Nevada. It won a $1.5 million no-bid in 2014 for consulting the state’s health insurance exchange. The state sidestepped a bid and chose Deloitte because of its reputation in the field. Since 2010, Dell earned more than $1 million in no-bids. On one contract worth nearly $1 million, the state chose Dell because not doing so would “put information at risk.”

IBM won a no-bid for $736,970 to update a state-owned mainframe computer system. The state justified its no-bid status for compatibility, citing the state’s existing use of IBM products.

The IBM contract underscores the advantages companies have once they win an initial deal with the state. In July, the state almost doubled IBM’s contract to a deal worth $1.1 million. The state does not disclose contract amendments on its list of no bids, creating a gap between the visibility of a contract’s life span.

The state’s board of examiners, a group comprising the governor, attorney general and secretary of state, signs off on all contracts over $50,000 — whether they are no-bid or not. In other states, agency heads can approve high-dollar contracts without the oversight Nevada law warrants. Barring the legal exceptions for specialty positions, agency heads can only approve contracts up to $2,000.

At the state level, newspaper investigations have sparked scrutiny on no-bid contracts in at least three places. Reporters at the Jackson (Miss.) Clarion Ledger found Mississippi handed out at least 3,370 no-bid contracts worth $6.5 billion in the last four years. Mississippi gives agency heads lots of room to allow big-money deals. If exceptions don’t apply, they can approve contracts up to $100,000 before a review board steps in.

New Mexico handed out at least $150 million worth of contracts over 2013 and 2014, according to Albuquerque Business First. New Mexico has a loose structure that calls for agency review at $20,000 and notification to the governor on certain types of deals.

In Texas, the Austin American-Statesman recently found health officials skirted procurement laws in brokering a $20 million contract with 21CT to detect Medicaid fraud and reported that an agency contract with AT&T Global Services was originally listed as a $1 million deal, but ballooned to $105 million over seven years.

In January, Pennsylvania Gov. Tom Wolf issued an executive order banning no-bid contracts to law firms, citing a need for more transparency in the state.

The National Association of State Procurement Officials, a nonpartisan group that represents officials like Smith, could not comment on no-bid contract reforms, problems and figures nationwide.

Krista Ferrell, NASPO director, said no-bids are not an attempt at circumventing competitive bidding. She defined it as a “tool” meant to “protect persons and/or property from harm.”

At the federal level, the Iraq War is an oft-cited example of the no-bid option gone awry and the impetus for much of the left-wing angst aimed at contractors like KBR, which oil company Halliburton once owned. Cast as a windfall of war, the federal government awarded KBR a $568 million contract without a competitive bid under the aegis of an emergency provision that led to a U.S. Justice Department lawsuit.

In 2005, a former high-level contracting official with the Army, Bunnatine Greenhouse, filed suit against the Pentagon for terminating her after she publicly criticized a handful no-bid contracts with KBR. She ended up winning $1 million in lost wages.

"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper abuse I have witnessed" in 20 years working on government contracts, Greenhouse said at a D.C. forum on the Iraq War.

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