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The House Appropriation Subcommittee on Budget Transparency & Reform met on March 6 to discuss contracting in Texas and concerns from the Legislative Budget Board.

Jacob Pugh, LBB Contract Oversight

  • Broadly, two strategies are to identify cost-containment strategies or identify specific inefficient or ineffective contract
  • As of January 2017, 32,000 contracts @$95.3 billion
  • SB 20 (84) directed comptroller to study statewide purchasing
  • Contracts Database run by LBB has operated since 2007, all information is self-reported
  • As of February 2017, 70 agencies and 94 higher education institutions, though some smaller higher education institutions have not submitted contracting information
  • Most Database contracts are short-term purchasing contracts, though there are many long-term contracts
  • Emergency contracts total $1.3 billion
  • Rep. Simmons – How do you define emergency contracts?
    • Defined by statute as those needed to prevent immediate harm to life or property, e.g. in the wake of a natural disaster
  • Leading contracts include TxDOT transportation contracts and IT contracts in other agencies
  • TxDOT road construction contracts are not reported with a specific end date as
  • Out of expiring contracts, 26 are eligible for renewal, 15 were procured noncompetitively, 126 were amended; expiry present opportunities to review contract purpose & evaluate efficacy
  • $11.1 billion in active procurements currently
  • 8,575 were issued for all state contracts for total increase of $6.2 billion,
  • Accenture contract has seen 11 amendments increasing cost from $25 million to $75 million, other problematic contracts have included DSHS WIC WIN
  • Rep. Roberts – Would like a copy of the Medicaid managed care capitation contract & a meeting with someone from the LBB versed in this and the Vendor Drug rebate program; also wants certain excerpted information of contract details for various contracts
  • Rep. Roberts – Do agencies have to clear audit notes?
    • There are some reviews of performance and contract compliance
  • Rep. Roberts – Do we have contract management and procurement personnel?
    • Comptroller is responsible for contract training in the state
  • Rep. Capriglione – Would like an explanation for terms and statuses of contracts
  • Rep. Capriglione – Looking at DIR, where does the revenue come from?
    • DIR does have a fee for Data Center Services
  • Rep. Capriglione – Looking at the ~250 contracts over $10 million, what does the range look like if contracts are looked at for $1 million and up?
    • Expands as the dollar amount goes lower
  • Rep. Capriglione – We need to look at this issue from general procedure reforms and what tools are available to the state to find cost-savings on existing contracts
    • LBB believes the easiest way would be to look at contracts needing renewal
  • Rep. Capriglione – Some contracts have clauses that allow us to terminate though, correct?
    • Yes
  • Rep. Capriglione – Need to look at what we can do with change orders as well
  • Rep. Simmons – Do all of our contracts have an appropriation clause?
    • They should
  • Rep. Simmons – Is there a system to look at all contracts for specific provisions like this?
    • Would be difficult to do this
  • Rep. Simmons – There should be law firm software that can do this, should be able to this given money spent on IT
  • Rep. Capriglione – Is procurement something that can be done as budget riders or does it need a separate bill?
    • Depends on how you want to do this, e.g. with QAT we only approved a project for 2 out of 8 steps, allows agency to make a decision to continue or not
  • Rep. Simmons – Could have a hold on contracts that don’t meet certain minimum requirements
  • Rep. Howard – Will LBB have data that can help us go through this?
    • Can require things like specific deliverables before release of funds, or breaking up large procurements into smaller and easier to approve chunks
  • Rep. Howard – How can you break it up once it’s already started?
    • Have looked at amendment approval procedures for contracts in process, didn’t break it up, but did fix some errors
    • Needs to be a mechanism to stop expenditures of funds if problems not fixed
  • Rep. Capriglione – Is there some way to ask agencies for top 2 or 3 contracts that can be ended?
    • There is a way to do this, if this question is asked it could send a message to vendors that these contracts are watched
  • Rep. Capriglione – Curious as to what type of training is available from the Comptroller’s Office
    • Amy Comeaux, Comptroller’s Office – Purchasing personnel, anything over $25,000 requires certification, recommend for purchasing $25,000-$5,000
    • Comptroller is in the process of rewriting all of our training, should be ready by the end of the FY
    • Also looking at SAO audits to identify gaps
  • Rep. Howard – What about the oversight part?
    • Looking to train employees better on receipt of deliverables and paying when proper
    • Comptroller has training for this when employee duties encompass certain things
  • Rep. Howard – Where are the biggest issues in contracting
    • Rep. Capriglione – Seems like the entire process, in scope, formation, procurement, etc.
    • Comeaux – DIR oversees projects, QAT will see solicitations in relation to projects and forward to DIR
    • However, there is a difference in cost overrun in project and in the contract
  • Rep. Capriglione – Will look into riders that can be attached to current budget, perhaps look at expiring contracts through a supplemental bill
  • Rep. Simmons – Could also look at egregious contracts and pausing these contracts until fixed
  • Rep. Howard – Also need to poll LBB for workable contracting information
  •  Rep. Capriglione – Would like a description of CAPPS, who is cashing the check, what the timeline is, etc.
    • HB 3106 (80) directed a revamp of the statewide system of accounting
    • Legislature approved a staged roll-out plan
  • Rep. Simmons – What agencies have implemented CAPPS?
    • Agencies can implement the accounting side or the HR payroll side, can deploy one side based on need ahead of the other
  • Rep. Simmons – Did we know this was going to be a 13 year program?
    • Yes, knew this was going to be a long-term contract
  • Rep. Simmons – How many more agencies are left?
    • Don’t have the exact number, with stable FY18-19 funding we will hit ~100 agencies
    • Funding for CAPPS deployment is in Comptroller budget
  • Rep. Simmons – Would be helpful to get recommendations on number of personnel needed to run CAPPS for agencies
    • Difficult for us to answer as each agency handles workload differently
  • Rep. Simmons – Would like breakdown of current agencies with current implementation, do you like at if an agency actually needs the personnel requested?
  • Rep. Capriglione – What if CAPPS rollout doesn’t get funded in FY18-19
    • Comptroller employs a significant number of contractors that would need to be let go, would
  • Rep. Capriglione – What about HHSC?
    • HHSC is a hub on the HR payroll side, in the process of deploying CAPPS on the financial side
  • Rep. Capriglione – So HHSC has outsourced HR and they have CAPPS?
    • They are using CAPPS, but they have an outsourced payroll/HR office
  • Rep. Capriglione – And the third party uses CAPPS?
    • Yes