Ohio Passes New Rule Requiring Competitive Bidding for All IT Projects

No longer can the state award no-bid contracts on specified purchases, including those involving technology projects.

by Randy Ludlow, The Columbus Dispatch, Ohio / June 13, 2017
Shutterstock

(TNS) -- After four-plus decades, the Ohio Department of Administrative Services no longer will award no-bid contracts on certain purchases, including many information technology projects.

The Controlling Board voted 5-2 on Monday, June 12 to grant Administrative Services its routine waiver of competitive selection to forgo formal bidding, but with a major change sought by the agency.

Amid a Dispatch investigation and criticism from lawmakers, the waiver now requires the agency to obtain at least three price quotes before awarding certain contracts and, if two or fewer quotes are received, to submit contracts for Controlling Board board approval.

The agency previously maintained that the annual waiver allowed it to award no-bid contracts for specialized services and sidestep Controlling Board approval despite an internal policy requiring the solicitation of at least three price quotes from pre-qualified vendors.

A Dispatch investigation published April 2 revealed that Administrative Services officials for years awarded millions in no-bid information-technology contracts — to two companies in particular — over the objections of the department's own employees who protested the lack of bidding and competition as a violation of agency policy.

Jennifer Leymaster, chief financial officer of Administrative Services, told the board that the agency would produce an online quarterly report on each agency's purchases from more than 500 pre-approved vendors and require reports listing the justifications for failing to accept the lowest-cost bids or proposals.

However, under another waiver for cloud computing and internet-based voice, data and telecommunications services, the agency won authority to award unbid contracts as well as authority to extend many existing contracts.

Sen. Bill Coley, R-West Chester, and Rep. Jack Cera, D-Bellaire, complimented the agency on its moves to ensure transparency. But citing a pending inquiry by the state auditor's office into the no-bid contracts uncovered by The Dispatch and an unrelated investigation by the inspector general's office, Cera said he could not vote for the waiver. His vote of protest was joined by Sen. Charleta B. Tavares, D-Columbus.

The action comes after the House approved a state budget amendment — in response to The Dispatch's stories — that would require the agency to seek bids on all information-technology contracts and submit them for Controlling Board approval. The amendment, prompted by lawmaker concerns over price competition and transparency, is pending in the budget before the Senate.

The Dispatch also reported that the Advocate group of companies based in Columbus, now known as TSG Partners, has received at least $14 million in unbid contracts since mid-2011. Many of Advocate's employees assigned to work with the state Office of Information Technology formerly were senior state employees who worked closely with top Administrative Services IT executives. In addition, Stonyhurst Consulting of Middleburg, Virginia, received more than $3 million in unbid information-technology contracts.

Separately, the Controlling Board today unanimously approved a $71 million, no-bid contract with the Greek company Intralot to operate the Ohio Lottery Commission's gaming systems. The extended contract, which begins in mid-2018, includes lottery options to renew the deal every two years through mid-2027. Intralot has been paid $259 million by the state since winning its first contract in 2009.

The lottery's request was pulled amid questions last month.

A pair of lottery consultants disagreed over renewing the contract, with one saying "optimal results" would be achieved by rebidding after 2021 and another saying Intralot gives Ohio one of the best deals among lottery states. The disagreement prompted questions from lawmakers over whether the contract should be rebid.

Nicole Kostia, a Lottery Commission deputy director, told the board that it was the "right time and right move" to renew the Intralot contract to lock in a low rate while considering down the road whether to rebid the contract. It would take two and-a-half to three years to select a new vendor and install its equipment, she said. Lottery profits provide $1 billion annually to the state's K-12 education system.

In a letter Friday, an Intralot competitor, Scientific Games, of Alpharetta, Georgia, urged the lawmakers to reject the contract extension and seek bids, writing that the Ohio Lottery "is missing the opportunity to achieve significant growth in sales and revenue." Intralot's Byron Boothe, a vice president for governmental relations, said the firm "will continue to increase its investments in Ohio" under the extension.

©2017 The Columbus Dispatch (Columbus, Ohio) Distributed by Tribune Content Agency, LLC.