- Associated Press - Monday, January 11, 2016

RALEIGH, N.C. (AP) - North Carolina agencies can do a better job at writing contracts for private firms that provide government work to ensure the state is getting better service and more savings, a legislative report says.

The study presented Monday to an oversight committee of the General Assembly found agencies consistently lack key elements to ensure the work will be successful and cost-effective.

The legislature’s Program Evaluation Division examined 133 “high-service” contracts of the past five years, valued at more than $1.2 billion. The work ranged from cafeteria services and tourism marketing to lab testing and the state’s gambling addiction helpline. Private maintenance contracts for a few state prisons have led to recent controversy within Gov. Pat McCrory’s administration and public scrutiny.

The report found agencies that awarded nine service contracts valued at $64 million couldn’t tell General Assembly investigators how much they ultimately paid out. And while the state’s Division of Purchase and Contract policy limits contracts to three years, nearly half of the contracts reviewed exceeded that length. The purchasing division oversees contracts, but it’s up to each agency to comply with procurement rules.

Competitive bidding is required in state law, with some exceptions. Within the 133 contracts reviewed, full competition was lacking in awards totaling 41 percent of the contracts’ value, or $511 million. The purchasing division waived competition requirements, allowed multiple contract winners or allowed no-bid amendments to already approved contracts.



“Our message here is that we’re trying to get a good deal from the private sector,” principal study author Chuck Hefren told legislators, and “competition is the primary tool we have to get a good deal.”

The report recommends that lawmakers require an agency seeking to issue expensive contracts to formally make the case why privatization makes business sense. The budget office should also identify which government services can be performed better by the private sector.

An upgraded electronic management system is also needed so the Division of Purchase and Contract can keep better tabs on contract compliance by agencies, the report said.

In written responses, two of McCrory’s top lieutenants generally agreed with the findings and recommendations, although both suggested meeting the recommendations would require more workers or funding. They said some improvements already were underway. Department of Administration Secretary Bill Daughtridge, who oversees the purchase division, said a bid request for an upgrade contract management system was expected this month.

State Budget Director Lee Roberts wrote that his office recently recommended that the “state adopt a standard methodology for comparing public and private costs when making decisions on whether to contract for services.” Roberts’ office had analyzed costs of the prison maintenance contracts that got attention last fall because the contractor was a McCrory friend and donor.

The oversight committee recommended legislation be drafted based on the report, although members wanted to avoid changes that could discourage agencies from pursuing privatization. The General Assembly reconvenes in late April.

“Our mission is making sure the taxpayer gets their money’s worth,” said Rep. Craig Horn, R-Union, a committee co-chairman.

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