- The Washington Times - Monday, December 13, 2004

The D.C. Office of Contracting and Procurement is a relatively small agency with immense power: a $1 billion-per-year operation that oversees the purchase of goods and services from road repair to parking tickets and health insurance for the poor.

When the contracting office runs smoothly, it serves as an invisible intermediary for as many as 60 city agencies and thousands of private vendors.

But the contracting office has come under close scrutiny by city investigators and the D.C. Council over a series of missteps and scandals that have raised questions about how and to whom the District awards its contracting dollars.

In October, the office’s senior managers revoked more than $1.3 million in construction contracts after learning that the projects — the construction of a parking lot and the renovations of a senior citizens center and a firehouse — were awarded to a businessman recently convicted of racketeering and bank fraud.

Weeks earlier, the contracting office was stung by a city audit that found the office’s property-disposal division had been selling used firetrucks and emergency vehicles at prices far too low, including one firetruck worth about $125,000 that sold for $25.

Since last year, the contracting office has come under fire for abuses in the city’s credit-card program and failures to justify sole-source, or no-bid, contracts. Critics also contend that the office routinely skirted city laws that require D.C. Council approval for contracts worth more than $1 million.

“Every aspect of government is touched by contracting and procurement, and it’s extremely important that we have a system that is fair, consistent and adheres to the law,” said council member Vincent B. Orange Sr., Ward 5 Democrat and chairman of the Committee on Government Operations, which oversees the agency. “I don’t think that’s always been the case.”

In the wake of the firetruck audit, Jacques Abadie III resigned as the District’s chief procurement officer, the top job at the contracting office and one of the most powerful but little-known positions in city government.

The procurement chief heads a seven-year-old agency of approximately 150 employees and an annual budget of about $12 million — less than 5 percent the size of the city’s health department, city budget figures show.

However, the Contracting and Procurement Office also oversees outsourcing for most city agencies, last year handling nearly $1.1 billion and more than 20,000 contracting transactions, agency records show.

Mayor Anthony A. Williams appointed his deputy mayor for operations, Herbert R. Tillery, to head the agency on an interim basis. Mr. Tillery has pledged a sweeping restructuring of the office.

“People are buying into the process, but it’s not a short-term process,” Mr. Tillery said. “There are issues on top of issues, and there is a culture that has to take hold.”

Contracting officials won’t comment on any personnel shake-ups since Mr. Tillery’s appointment, but five of the six top positions in the office are held by individuals serving on an interim basis.

Mr. Tillery said he has devised a four-point reform plan to provide more contracting opportunities for local and small businesses, improve customer relations, streamline operations and review all jobs and contracts.

Other reforms, he said, include increasing training and creating a sole-source-contract oversight panel.

Observers say Mr. Tillery faces serious challenges in righting the troubled agency. For one thing, the controversy may not be over.

The D.C. Office of the Inspector General is planning at least five separate inquiries of various contracting and procurement practices in city government, according to the agency’s annual audit plan.

Previous audits have uncovered “recurrent and pervasive areas of waste, mismanagement, cost overruns, inferior products, shoddy workmanship and fraud,” interim Inspector General Austin A. Andersen said in the annual report, which was sent to city officials earlier this year.

One inquiry will focus on the District’s use of sole-source contracts. In a sole-source agreement, the government buys directly from a vendor rather than putting out contracts for goods and services to competitive bidding, which usually results in a better price for taxpayers.

City law allows for sole-source contracts in certain situations, such as in emergencies and when only one available vendor supplies a certain product.

According to public records, more than 30 percent of the city’s contracting dollars go to contractors hired through sole-source, or no-bid, deals. The contracting office last year awarded 569 sole-source contracts worth $368 million, records show. Of those contracts, 190 — worth a total of $103 million — were awarded under the “single available source” category.

“We’ve had a problem with sole-source contracts that don’t appear to have been reviewed as to why the sole-source arrangement was entered into,” Mr. Orange said.

Mr. Tillery said he has ordered the creation of a sole-source-contract oversight panel to ensure that contracting officials have justified the need to enter into a sole-source deal.

The contracting office also is reviewing a practice that has long been a source of grumbling on the D.C. Council: the routine awarding of contracts for $999,999 — $1 below the threshold requiring council approval.

Records show that the agency last year awarded more than 140 contracts for $999,999 each, a move council members said skirted city contracting law to avoid legislative oversight.

“It’s a joke,” council member Carol Schwartz, at-large Republican, said during a recent hearing. “It makes a joke out of our whole process.”

Mr. Tillery said the contracting office is ready to change the practice, but he said most contractors didn’t receive $999,999. He said the $999,999 amount represents a cap and that contractors often received less money.

“There was a perception that this was a way to circumvent the council,” Mr. Tillery said. “It was just a ceiling, and not many contractors got to that ceiling.”

Nonetheless, an internal review of contracts since 2001 has turned up instances in which more than $1 million was spent on contracts or contract extensions without council approval — a violation of city law. Mr. Tillery ordered the review.

Since 2001, the contracting office has paid tens of millions of dollars in unapproved expenditures on 23 contracts, including payments to Affiliated Computer Systems (ACS) of Dallas — the company that runs the District’s red-light traffic-enforcement program and processes parking tickets for the D.C. Department of Motor Vehicles.

In each of the 23 cases, the review shows the expenditures on contracts or contract modifications exceeded the $1 million cap that requires approval from the D.C. Council.

The contracts with unapproved expenditures paid ACS for the red-light traffic-enforcement program and for a separate contract for parking-ticket processing.

Mr. Tillery faulted a “failure to pick up the phone and communicate” for the situation, but he also pointed out that the 23 contracts were among more than 20,000 handled by the contracting office each year. “We had a process error,” he said.

Mr. Tillery also said money was already in the budget to fund the contracts and that no funds were diverted from other programs to pay the contractors. The contracting office is preparing legislation to get council approval on the unapproved expenditures for the 23 contracts, though the money has already been paid, he added.

Mr. Orange, a longtime critic of the contracting office, said he is encouraged by the measures Mr. Tillery has taken in recent months to fix the situation. But he said the contracting office resisted calls for major restructuring for too long.

“I’ve been on them for the past two years,” Mr. Orange said. “But it was always falling on deaf ears. It’s not until something explodes that you get the attention of the executive branch.”

Mr. Orange said the inspector general’s audit on the sale of used city firetrucks forced a leadership change in the agency, but Mr. Tillery disagreed.

“I would not say that the firetruck incident forced the administration to take action,” Mr. Tillery said, adding that Mr. Abadie resigned voluntarily. Mr. Abadie could not be reached for comment.

Despite mounting problems in recent years, the agency until recently had been winning high praise for its work.

Among more than 60 agencies, the contracting office alone took 13 of the 20 awards handed out during the mayor’s annual customer-service awards ceremony in 2002. That same year, more than 70 employees at the contracting office — about half of the staff — took home performance bonuses.

Still, dissatisfaction with the Contracting and Procurement Office had been simmering within the council, among vendors who say they have trouble getting paid on time and accurately, and among contractors who complain that the city seems to favor some contractors over others.

Gregory Maryn is president of Maryn Consulting, a small D.C.-based technology firm whose last contract with the District ended a year ago. His firm is listed on the D.C. Supply Schedule, a clearinghouse of contractors who are preapproved for city contract work.

The supply schedule is designed so that the city can hire contractors faster and avoid long delays that sometimes can happen when goods and services go out to bid, contracting officials say.

However, Mr. Maryn said his and other small firms seem to have trouble winning contracts while some of the other firms on the supply schedule are hired year after year.

“We need to rotate people every three years or so to give vendors a real opportunity and a chance,” he said.

Some D.C. Council members agree.

“Why is it that a very select group get … the overwhelming majority of the work?” council member David A. Catania, at-large independent, said at a hearing earlier this year. “There is a practice within this government to pick your favorite vendors — who happen to be well-connected — then to lavish contracts on them.”

Mr. Maryn said he hopes the office’s leadership change will improve contracting opportunities, but added that management turnover is a consistent problem.

“All you see is people coming and going, and you don’t know why,” he said. “They throw money at other things, but when it comes to paying their own vendors here in the city, they don’t bother.”

Many of the supply schedule contracts are awarded at $999,999 each, city records show. Some of the vendors have strong political ties.

For example, two $999,999 contracts last year went to Arrington Dixon Associates Inc. Mr. Dixon, a former D.C. Council member, has given more than $6,000 to city politicians and their political causes since 2000 through personal and corporate donations, according to D.C. Office of Campaign Finance reports.

Another $999,999 contract was awarded to Group 360 LLC, a marketing and media firm founded by Max Brown, former legal counsel to Mr. Williams. Mr. Brown and his firm have given more than $5,000 to elected officials and lobbying groups since 2000.

City officials say there is no concerted effort to exclude certain vendors, but acknowledge they have heard complaints similar to Mr. Maryn’s.

“It’s certainly the case that there are always vendors who want more opportunities,” said Lisa Mallory-Hodge, director of the city’s newly created Center for Innovation and Reform.

Ms. Mallory-Hodge said the center conducted more than 100 interviews of city officials and vendors during an ongoing review of operations at the contracting office that began four months ago.

“Folks were saying we need to streamline this process,” she said.

“Once we establish our credibility that we can effectively procure goods and services,” Mr. Tillery added, “then we won’t have so many people so quick to say, ‘Contracting and Procurement did it again.’”



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