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An organizational hearing with invited testimony was held on Feb. 17. Invited testimony was provided from the following agencies: Comptroller of Public Accounts, Department of Information Services, Health & Human Services Commission, Legislative Budget Board, Sunset Advisory Commission, and the State Auditor's Office.
 
Legislative Budget Board, Ursula Parks and Julie Ivie

  • Presentation was reviewed which gave a procurement overview including central management with exemptions & delegations, oversight shared by multiple entities, and limited centralized reporting
  • New rider in HB 1 puts in language regarding contracting of state agencies and institutions of higher education
    • Provision covers all sources of funds and methods of finance – even if all federally funded
    • An extensive new provision to provide substantial oversight and monitoring
  • Discussion on Strategic Fiscal Review (SFR) conducted by LBB
    • 20 different agencies, central element is transparency and accountability
  • In 2007 as part of GEER there was a report called reduced risks associated with state contract management
    • Concerns included some similar concerns that exists today
    • Those recommendations were not adopted in 2007 but procurement responsibilities did transfer to Comptroller and TPASS was established
    • Compliance is still voluntary today
    • Landscape has changed a little bit from 2007 report
  • High risk contracts would be considered over $10 million but office would be allowed to define high risk (maybe previous performance issues)
  • Chair Elkins asked several questions: what is being done to minimize waste, what is being done to ensure HUB status’ are being verified, compliance with ethical behavior or social accountability?
    • Comptroller training does cover some of ethical compliance
    • There is another component which makes sure state agencies have in house resources to do the job appropriately and that has to do with agencies and institutional understanding what will be expected  
  • Chair Elkins asked what does state do to ensure environmental compliance, what does it do to ensure supplier practices good safety a better choice than cheap supplier with poor safety, what are we doing to make sure state is not on hook for vendor issues, to make sure vendors are in compliance with workers comp, to ensure we are not contracting with supplies on debarred list or terrorist watch list and ensure they are not using subcontractor on that list, etc?
    • Defers to TPASS for answers
    • Can also check with other agencies and get back to members with those answers
  • Rep. Turner asked about compliance and enforcement
    • LBB said it is an important component and conversation could be had about the most effective course of action
  • Rep. Leach asked about page 7 on presentation regarding oversight
    • Exemptions in Higher Ed and TxDOT are statutory
    • TxDOT does an enormous amount of contracting and repetitive and maybe volume may be the hindrance
  • GEER report of 2007 recommended setting up an office to review state contracts
    • LBB could be an appropriate place but at time of recommendation procurement was in TFC and has now been transferred to the comptroller’s office

 
Office of Comptroller, Chuks Amajor Interim Director, TPASS, Texas Comptroller of Public Accounts

  • Began presentation
  • Texas falls inbetween decentralized and central-led on the procurement spectrum
  • Over 90% of TPASS purchasing dollars since FY10 are spent towards contracts that are not overseen by DIR or CPA
  • Chair Elkins asked where these contracts were actually negotiated
    • There is not a clear answer considering the organization is decentralized
  • Almost $7 billion passed through the various contract types administered by TPASS
  • Over 77 percent of expenditures are spent on term contracts on an annual basis
  • TxSmartBuy 2.0 is TPASS’ e-commerce solution to allow customers to purchase goods in a manner similar to amazon.com – vendors are charged a 1.5% fee on all transactions
  • Agencies are required to report their evaluation of vendor performance under TPASS contracts on a scaled of 0-100% – reporting is statutory but compliance could be improved
  • Rep. Leach asked for clarification on the statutory rule
    • Agencies are required to report but there is a resource issue in taking the time to report
  • Chair Elkins proposed the idea of withholding payment until the reports are submitted
    • TPASS does not recommended – could slow down the process
  • For most of the largest TPASS contracts, enhanced monitoring is employed to immediately identify and address issues
  • Chair Elkins was confused why the Contract Advisory Team (CAT) and review process were created when agencies are not required to participate – best practices need to be set in place and followed up with an audit process
    • More available data to analyze would be appreciated
    • 224 contracts reviewed in 224 ($5.2 billion), 252 in 2013 ($1.5 billion), 256 in 2012 ($2.3 billion)
  • Texas Multiple Award Schedule (TXMAS) is a collection of contracts that were competitively bid by a governmental entity other than TPASS – 649 contracts with 2/3 involving commodities and 1/3 services

  Q&A continues:

  • Under what circumstances does TPASS entertain No-Bid contracts?
    • TPASS does not allow no-bid contracts. However, statue requires agencies to purchase certain goods from TIBH and the Texas Correctional Institution (TCI)
  • Are you complying with Governor Abbott’s recent letter to State Agencies on contracting?
    • TPASS was already in compliance with most of the requirements but will continue to work internally to ensure full-compliance
  • How are contracting opportunities advertised to the public?
    • All TPASS contracts are advertised to the public via the Electronic State Business Daily (ESBD). Vendors can also sign up for the Centralized Master Bidders List (CMBL), which automatically emails subscribers when relevant contracts are solicited
  • Stated they are working on getting recommendations to the committee
    • Chair points out the need to get them recommendations quickly since requests for new legislation have to be submitted by Friday

 
DIR, Martin Zelinsky

  • Presentation
  • Does not receive GR
  • Handle enterprise contracts and cooperative contracts program
  • All contracts are awarded after public procurement process
  • 99% of sales to state agencies are less than $1 million
  • Written testimony includes written recommendations
  • Chair Elkins accessed about deliverable based information technology services (DBITS)  part of cooperative contracts program
    • Deliverable needs to be carefully defined and contract is paid for on deliverable
    • Require agency to provide statement of work
    • There are 9 categories and they are all technology related
  • At one point had like 50k computers working on Windows XP
    • Believe referring to legacy system, software no longer maintained by provider and it is a concern
  • Date security and data breaches on every one’s mind and with Texas having 50k on XP – really need to get a handle on it said Chair Elkins

 
Kim Levine, Director of Sunset Advisory Commission

  • Presentation
  • Contracting has changed a lot over the years 
  • SOA has come in after and done great work following up on individual contracting
  • Sunset began seeing contracting problems a while back and began working on some set of standards
  • Legislature has required several contract management guides
  • Procurement in Comptroller’s office is excellent product and they have further developed best practices and management
  • Sunset expects agencies contracts are done according to best practices
  • HHSC was under Sunset this time and resulted in contracting being addressed in the report

 
Karl Spock, Senior Manager with Sunset Advisory Commission

  • Sunset review does cover major contracting responsibilities and how they carry out that function
  • They have developed a model – best practices for contracting and are for the most part common sense recommendations
  • Comptroller’s office has published a guide as well and were also listed in the Sunset standards
  • Not picking on agencies they are using as an examples could happen to any agency
  • Spotlight on best practices include:
    • Agency should have a strong centralized contract function – don’t want different divisions of agency doing contracting practices, consistency is needed
      • HHSC agency structure can result in blurred lines of authority
      • Starting in 1999 HHSC and assorted agencies within it – developed a consolidated contracting database, contracting management handbook and risk assessment and these three things are still in development
      • Sunset asked for a list of all contracts and it took over 3-4 months to get a list and Sunset was not able to rely on the list
      • Systems/functions never got to stage where they can talk to each other like they need to
  • Sunset did not focus on conflicts of interest but focused on oversight
  • HHSC recommendations by Sunset to improve include:
    • Finish contact management handbook, risk assessment and complete contract database
    • Have contracts that are major come up through Executive Commissioner’s sign off so there is accountability at the top
    • Require a formal policy for an ongoing reporting structure – corrective action plans mandated by the agency, status of contracts, liquidated damages and ability to flag problematic contracts before agency gets to the point of cancellation
    • More technical assistance and more active training (historically training has had loose oversight)
    • Keep a focus on contracting as it goes through
  • Agency needs to have sensible policies such as the ones listed above
  • Standards of disclosure – speak to fairness in contracting practices to help make sure contracts are above board
  • No major problems at Port of Houston but principals laid out in document are important
  • Solicitation process discussion
    • Situation at TxDOT that required newspaper notifications and legislature changed provision as to how an agency may advertise or notify
  • Evaluation Standards needed to rank proposals fairly and effectively
  • Importance of training as standard is also important  – referred back to earlier HHSC examples
  • Model standards can work but need to be careful when applying to all agencies – these models need to be talked through with agency
  • Comptroller’s Contract Management guide is a great starting point
  • Chair Elkins said contracting is a dynamic activity, it is not static so there is a framework need to focus on best practices and not put agencies in a box
  • Agencies are already told they should follow the Comptroller’s guide as best practices
  • Chair Elkins points out this is the second law today mentioned that no one is following
    • Elkins – If no consequences, no enforcement mechanism then no one will follow
    • Elkins – start withholding funds from agency until they get compliant
  • Levine notes we have a bond review board but we don’t have anything like a contract review board but that function is not there then perhaps an oversight function is needed
  • Rep. Walle asked if Sunset has seen any other issues
  • Levine said may want to refer to State Auditor’s office since they actually select specific contracts to audit

 
State Auditor’s Office, Jennifer Weiderhold

  • Testimony/Presentation
  • Staff pointed to recent report which gave overview of contracting in state
  • SAO regularly conducts audits at state agencies
  • Entities audited generally complied
  • Of 14 contracting audits, Chair Elkins asked if TxDOT and Lottery were only ones full compliance
    • They had complied with those four areas

 
HHSC, Kyle Janek and Ron Pigott  

  • Walked through presentation
  • Have a lot in the pipeline so need to be careful of changes in regards to things already in the pipeline
  • Started consolidation in 2013
  • It is an ongoing process
  • If asked how many contracts they have, would have to ask what kind of contracts
    • Managed transportation contracts (for example)
  • Cannot have breaks in the operations with those providing services
  • Procurement types reviewed including emergency procurements
    • It is a procurement for emergency purchases to take care of immediate threat
  • Solicitations process reviewed; they use best value for state
  • Almost all technology going through DIR
  • Open enrollment contracts would be for pharmacies, hospitals and nursing facilities
  • Emergency procurement – working to make true emergency’s
    • Xerox was used as an example were there was a well-publicized “break up”  but the few more months that were left on the contract left a transition period were HHSC needed to find a vendor to take over the function
    • So they did an emergency procurement with Accenture  
    • Rep. Leach asked how long does it take to do the contract – 5 or so years but eventually it should not take that long
      • If intend to do the same thing it can be done in a shorter period of time
    • Vendors may push contract negotiations so you come to the wire and Janek would rather do an emergency contract than rush a contract  
  • Chair Elkins speaks how it may be easier for agencies to maintain the legacy systems than move forward
  • Discussion continued on time frame for procurements – how long it takes, depends on the type of contact Janek concludes
  • Ongoing improvements include incremental changes to keep business moving
  • HHSC is disclosing emergency or sole-source contracts and citing reasons for those
  • Reviewing existing contracts for conflicts of interest
  • Any contract over $1 million either needs Executive Commissioner of Chief Deputy’s signature
  • Any purchases over $25k  will be treated as mini-solicitation process and that policy has been in effect since Jan 5, 2015
  • Looking to see if purchases on commonly purchase items that could be on TPASS or DIR
  • Reviewing ethics disclosures
  • Continuing to enhance expertise of Procurement and Contracting Services divisions (need more CPTM’s)
  • HCATS system now being required so there is one database to contain information from all 5 agencies
  • Janek noted he asked for auditor on TMS contract and offered clarification on the estimation of contract  

 
Committee adjourns but notes during next meeting they will look closer at cooperative contracts and DBITS.