No-bid contracts by Howard schools under scrutiny

Propelled by recent concerns of waste and inefficiency, state Del. Warren Miller is seeking to halt non-competitive contracts awarded by Howard County Public Schools.

The proposed change to state law comes in the wake of a state audit of Howard schools that found senior school staff awarded nearly $13 million for 15 contracts without proper justification — a practice flagged in a state audit seven years ago and found in other school systems in the state.

Miller's proposal singles out no-bid contracts above $5,000 in Howard schools only. The proposal needs a majority vote from Howard's 12-member state delegation to vie for consideration in the General Assembly next year.

"The time has come for us to take adequate control and make sure our taxpayers aren't being thrown away on sole-source contracts to do who knows what," said Miller, a District 9A Republican. "I don't care if it's a 10th of one percent of their total budget. If they were spending less on sole-source contracts, they'd certainly have more money for the classrooms. Is it a billion dollars? No. It is a smarter way to do business. It is generally accepted as such."

School officials gawked at Miller's proposal, which schools purchasing director Doug Pindell said stymies a common practice in procurement the school system only uses as "a last resort." State and school policies allow schools to seek one company or provider for a job when it is impractical to seek competitive bids.

"The hoopla over sole-source contracts is partially unfounded," Pindell said. "Vilifying sole-source as a bad word is not productive."

School officials said no-bid contracts allow the system to save time procuring services, especially when they need to meet immediate needs, even though those contracts lack competitive bidding, a process used to drive prices down and ensure the best quality vendors are selected.

In a prepared statement, schools spokesman John White said placing unique constraints on Howard schools could cause "unintended consequences, such as increases in costs and the time it takes to purchase critical goods and services when responding to school emergencies."

Roughly 3 percent, or $13 million, of the school system's contracts are awarded without competitive bids, according to school system data.

In contrast, Howard County government awarded less than 1 percent of its yearly contracts without competitive bids in the last two years, according to county data. The school system receives roughly 70 percent, or $562 million, of its money from Howard taxpayers.

David Clarke, the school system's internal auditor, said the proposal, which bars all no-bid contracts above $5,000, is like "killing a fly with a shotgun." The cost and burden of seeking competitive contracts for urgent services could exceed the cost of a no-bid contract, Clarke said.

"While it won't grind us to a halt, it certainly will slow down our ability to get things done," Clarke said.

Recent contracts, partially awarded without competitive bids, have thrown the school system into hot water.

Notably, school staff awarded $300,000 to District Management Council without a competitive bid to study special education programs in June 2014 — double the amount Montgomery County, a jurisdiction triple the size of Howard County, paid its consultant through a competitive contract.

Despite repeated requests for the full report, the school system released a 26-page summary called "Highlights for Sharing," standing in stark contrast Montgomery's 144-page report detailing findings.

Frederick County schools terminated its contract with District Management Council this year following pressure from parents, the school board and staff amid complaints that the firm provided a generic report that wasn't specific to the community's needs.

Howard's school system defended its contract with District Management Council, which school system officials awarded after negotiating with the firm. Schools budget director Beverly Davis said Howard's contract was not comparable to Montgomery's because it had a different scope for different services.

Paper trail

School policies require written justification to accompany all no-bid contracts above $25,000. The school board approves those purchases.

But a Howard County Times analysis of written justification over the last two years shows the school board approved contracts with limited written justification beyond a description of the service sought and broad references to school procurement policies. State auditors raised similar concerns in its review of school records last month.

Between fiscal years 2014 and 2016, the school system awarded around $13.2 million in no-bid contracts, the largest of which were passed from state contracts and joint contracts with other school systems, according to records obtained by the Howard County Times.

Other examples of no-bid contracts include a $392,000 contract with an early retirement planning consultant and $137,000 contract for teachers' professional development.

Part of a new payroll system that supports a business process management software that had a rocky roll-out this year and has posed problems over seven pay periods for staff was procured through a no-bid contract. Employees received incorrect payments this school year. However, the overall system, WorkDay, was procured through a piggyback contract.

Given recent scrutiny on no-bid contracts, Davis said the school system will provide more detailed documentation in the future. "We wouldn't argue that we can't improve in that area," Davis said.

Clarke said no guidelines indicate how to document written justifications for no-bid contracts.

"There's nothing anywhere that says what we did was wrong, illegal or inappropriate," Clarke said.

State auditors have also raised concerns about no-bid contracts by other school systems. In May, auditors questioned lack of documentation in a $900,000 no-bid contract by Montgomery County.

Miller said he is open to increasing the maximum amount allowed for no-bid contracts.

"If [the school system] wants to come in and communicate with us and make a case for a certain dollar threshold, we'll listen to them," Miller said. "It's a basic lack of trust in their leadership and what they're doing as an institution that requires elected officials to take a closer look."

The Howard County delegation will hear testimony on proposed state legislation on Dec. 21 at 7 p.m. in the George Howard Building.

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