But a Houston Chronicle investigation has found that the program meant to ensure the best deal on billions of dollars worth of contracts may be doing the opposite - and may be making it easier for public officials to give taxpayer money to favored companies.
The program, known as Cooperative Contracts, lets companies bid to get on a state catalog of products and services that government officials can buy without holding a competition.
While the program is supposed to be competitive, records show it has allowed most applicants into the catalog, raising questions about whether it is really forcing firms to offer low prices. Some critics say it also calls into question whether the program provides a blank check to officials to give business to anyone they want.
Nearly three-quarters of companies that have applied for the catalog have been accepted, according to a Chronicle data analysis - a rate that surprised even the program's director.
"I think that's too high," said Todd Kimbriel, interim head of the state department that runs the 10-year-old program. "We're going to have to take a hard look at that process and tighten it down."
To critics, the numbers are especially concerning because records show the growing program has relied on a small staff that does not monitor purchases to make sure governments are getting the best deals.
Established in 2005
The program was established in 2005 as part of a push by then-Gov. Rick Perry and the state Legislature to make privatization easier. It received little attention until last December, when it became ensnared in a scandal over a $110 million contract given by the state health agency to an Austin technology company with questionable experience.State officials chose the company, 21CT, without having to consider other vendors because they used the program. The company got into the catalog despite scoring 35th on an evaluation of the 60 companies that applied in its category.
Four health officials have since resigned amid a criminal investigation, but the state and company have said the deal was legitimate because of the competitiveness in the Cooperative Contracts program.
To evaluate that, The Chronicle obtained and analyzed records on hundreds of vendor approvals and all of the nearly five million purchases ever made through the program.
While the now-canceled Medicaid fraud detection contract would have been the biggest by far ever to go through the program, the data show the deal illustrates a trend toward increasingly large purchases being made through a process designed for small ones.
Of the nearly 20,000 projects that used the program last fiscal year, 407 were worth at least $1 million - more than three and a half times as many big items as in its first year. But while the program has grown to more than $2 billion in purchases last year, its staff has remained at just more than a dozen. The staff does not oversee purchases, officials said.
Lawmakers say the evolution of the Cooperative Contracts program has left the state vulnerable to exactly the type of wrongdoing suspected in the 21CT contract, in which the Austin company is believed to have gotten a sweetheart deal from an amenable state official.
Kimbriel acknowledged the program's growth has increased the risk of exploitation by an official, but he said the savings also have multiplied.
"Everybody has to make that trade-off of risk versus efficiency," Kimbriel said. "That's just a part of life, I guess."
State Sen. Joan Huffman, however, said the data shows the risks may outweigh the rewards.
"Let's put it this way: I don't trust at this point how it works," said Huffman, R-Houston. "It's time to fix it, and I think we have an obligation to do it this session."
The formation of the Cooperative Contracts program marked a progression in an idea that had existed for decades.
Texas long has required state and local governments to use competitive bidding to ensure they are getting the best possible prices, although it has left exceptions for emergencies and some purchases, particularly at the local level.
The idea of a purchasing program is for the state to do one competition for popular goods and services, instead of individual ones each time they are needed. The aim is to save time and leverage the ability of a big customer to get a discount.
The technology-focused program also was designed to include less bureaucracy than earlier versions.
Under the program, the Department of Information Resources is tasked with tracking technology trends and determining when a new category of product or service is needed. Then it solicits bids, evaluates the responses on price, experience and references, negotiates and eventually awards generic "contracts" based on a promised discount from the company's market rate.
Once a generic contract is awarded, the product or service is available for purchase by governments with no bidding necessary and no oversight by state contract review boards.
Buyers are encouraged to compare options from vendors authorized in the same category, but they are not required to do so.
There is no financial cap on purchases, except in the smallest category of products.
The law required state agencies to use the program, with some exceptions, and allowed local governments to use it when they wanted. Today, local governments use it even more than state agencies.
Saved $275 million
Officials say the program saved governments an estimated $275 million last year, as well as countless hours of employee work time.But sponsors of the legislation that created the program said it was not expected to grow so rapidly and was meant for small purchases and to have more competition.
"It was supposed to ensure that the state gets the best deal," said a co-sponsor, former state Rep. David Swinford, R-Dumas. "Surely 75 percent don't all have the best deal."
The program was promoted as a way to bring competition to the approval process.
Interviews with representatives of nearly a dozen public entities that have purchased from the program also revealed a perception that it is more competitive.
City of Houston spokeswoman Janice Evans said the competitiveness enabled the city to avoid examining other offers before choosing local telecommunications company DataVox for an $8 million telephone system upgrade last winter.
"When we utilize DIR, the state has already conducted the competitive process," Evans said.
The government purchasers also expressed surprise at the program's growth, which has occurred steadily but has been outpaced by the spike in big projects.
The state health agency has used the program for the most number of million-dollar projects - 184 since 2005, including 35 last fiscal year, according to state records. The next biggest user has been the state Department of Public Safety, followed by the city of Austin.
State Rep. Senfronia Thompson, one of only two lawmakers to vote against the 2005 bill, said the program has become exactly what she feared. She blamed a lack of staff.
"It just seemed to me like an overwhelming responsibility for a very small amount of people," the Houston Democrat said. "You might be able to save money, but you create more problems."
The contract managers are responsible for all facets of the program, including soliciting bids, negotiating deals and whatever contract monitoring that exists.
In the fiscal year that ended last August, 14 staffers oversaw an average of 56 generic contracts, which in turn were used for an average of 46,718 purchases worth $147 million, state records show.
One contract manager, Airy Luangaphay, oversaw 87 generic contracts used for 305,903 purchases worth $653.8 million.
Kimbriel said agencies have a role in oversight, too, adding that contract managers are not supposed to monitor individual purchases.
But the lack of staff has drawn criticism in the state audits.
Transfer recommended
In response, the state Sunset Advisory Commission recommended in 2010 that Cooperative Contracts be transferred to the Comptroller's office, which runs other procurement programs.Perry vetoed the move, which would have taken away responsibility from an agency then led by a former aide, Karen Robinson.
Robinson, who left for the private sector last month, did not return multiple telephone and email messages.
Charles Bacarisse, a vice president for development at Houston Baptist University, who chairs the Department of Information Resources board of directors, declined to comment.
Kimbriel largely defended the program, saying it has followed all state guidelines, but also acknowledged it could be reformed.
He said it would make sense to cap the size of purchases that can be made through the program, as some government watchdogs have proposed. He also said agencies should be required to negotiate with several vendors approved in the same category.
Still, Kimbriel said he hopes lawmakers do not overhaul the program, which he framed as a perfect fit in the state's pro-business climate.
"It's really not surprising how fast it's grown," he said. "It's about being effective and efficient, and if there's one thing that state leadership has been very clear on over the last 14 years, it's keeping government small and that Texas is open for business."
Data reporter Matt Dempsey contributed to this story.
©2015 the Houston Chronicle
