By Tom Aldred and F. Cartwright Weiland
Published by the San Antonio Express-News, March 8, 2015
During the last fiscal biennium, the state of Texas managed roughly $170 billion in state and federal funds, some of which were paid to private companies, large and small, hired to deliver government services. To give some idea of the scale, Texas enters into roughly 5,000 contracts worth $1 million or more each year, according to a report by the Legislative Budget Board.
Given the legislative debate on contracting, this marks an opportune time to re-evaluate how Texas regulates procurements, and what reforms could make the regulatory framework more effective at securing contracts for the highest quality services at the best price.
Of course, that last word, “price,” is always the sticking point. When it comes to government contracting, state regulations often equate “best value” with lowest cost.
“Best value” can be defined in many different ways depending on the eye of the beholder, but generally, it speaks to guaranteeing the state gets the best service it can for a fair price, considering both short- and long-term impact, the quality of goods and services purchased, the ability of a provider to deliver on time and under the terms of a contract, and other factors. Taking a low bid sometimes ensures best value. But sometimes, to quote the old axiom, the state gets what it pays for—and may end up with a contract that is lacking in terms of quality and dependability.
Despite state law demanding best value, practice often demands low price, causing, at times, contract manipulation and project failure.
So, if changes to procurement are to be made, one important step is to recognize that a contract with the cheapest price is not necessarily the best one for Texas. Relevant portions of the Government Code should be amended to deemphasize price as the primary criterion when deciding between competing bids, as explained in TCCRI’s March 2013 white paper “Contracting for Best Value.”
Apart from that statutory change, more rules are not necessarily the answer. Over time, implementation of the state’s procurement practices has become more compliance and process driven — the thought being that so long as many perfect rules are in place, and they’re followed, then citizens will receive best value. Some basic rules are surely important — especially those regarding conflicts and ethics — but what matters as much are, first, the quality of the contractor, and, second, the skills and abilities of state employees who implement the statutes.
The two are interrelated. Texas contract professionals are relatively low-paid compared to industry standards, which limits the state’s ability to attract employees with the necessary skill sets for these positions. The state would benefit from a smaller total number of more highly skilled procurement officers who a higher compensation level would attract. Their talent, in turn, could result in more informed decisions regarding “best value” among competing bids.
Another possible avenue of reform is the Vendor Performance Tracking System (VPTS). The Comptroller of Public Accounts currently administers the VPTS, through which state agencies can evaluate vendor performance and assess risk. Essentially, the VPTS allows agencies to track one company’s performance across all contracts it signs with state entities. But VPTS is underutilized, despite being statutorily mandated. Agencies should make greater use of the VPTS to improve its effectiveness.
In other, related areas, agencies deserve discretion: the minimum threshold for subjecting contracts to competitive bidding — currently $5,000 — should be raised to $25,000 so that personnel can devote more time to larger, more high-risk procurements.
Finally, the Legislature should review the Government Code for roughly 20 different “preferences” and exemptions for certain types of contracts. Those preferences almost never come into play when an agency makes an actual contracting decision, do little to advance best value, and add unnecessary complexity to the process.
State procurement practices can be significantly improved. Higher salaries for fewer, better-trained professionals are a good place to start.