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Despite Controls, Texas Contracts Plagued with Scandal

Lawmakers now are considering giving more training to workers and creating a central contracts database.

(TNS) – A renewed effort to evaluate Texas contracting oversight could end up illustrating an uncomfortable reality, former lawmakers and government watchdogs say: Even the strictest of safeguards will not work if not taken seriously by agency officials. Despite an avalanche of negative attention on high-dollar contracting irregularities, the state does have some controls in place, including a decade-old Contract Advisory Team and a two-decade-old Quality Assurance Team. Part of the problem, the experts say, lies with state officials who have ignored the rules or exploited loopholes.

For example, the Texas Health and Human Services Commission officials behind a scandal-plagued Medicaid fraud detection deal misused a state purchasing program to avoid competition and oversight – and both review teams.

Another illustration that has gotten far less attention concerns a little-known section of the Texas Government Code that requires the health commission to give the attorney general a chance to review plans to outsource health services worth $250 million or more.

Records suggest a meaningful review never has been conducted. The commission has failed to provide any notification of several plans – including for some projects that recently sparked scandal. And each time the commission has given notice, the attorney general has declined even to look at any documents.

"It is certainly true that legislators depend on state employees at these agencies to actually follow the bills that we pass, and it can be a problem," said former state Rep. Dianne White Delisi, R-Temple, who wrote the 2005 law establishing the attorney general review process. "Lawmakers can do whatever they want in Austin, but it ultimately comes down to the agencies."

She and others also pointed to the review teams, as well as mandatory audits, contract management training and requirements that agencies report deals to the Legislative Budget Board.

Sen. Judith Zaffirini, who carried Delisi's bill in the upper chamber and has been working on contracting since 1995, acknowledged the challenges, but said she hopes the bills under consideration this year will be different.

The Laredo Democrat cited momentum from the $110 million Medicaid fraud contract, which the commission gave without competition to Austin technology company 21CT despite it having no experience in Medicaid. The scandal has led to three resignations, a criminal probe and attention from top state officials, including Gov. Greg Abbott.

Several other deals also have come under scrutiny, including a botched state hospital privatization, a telephone deal with AT&T that grew from $1 million to $105 million, and a Medicaid claims processing deal awarded on an "emergency basis" that could last five years and cost $965 million.

Lawmakers now are considering giving more training to workers and more teeth to the Contract Advisory Team, creating a central contracts database and limiting the Cooperative Contracts purchasing program, which provides less oversight and was used for the 21CT deal.

More could be in the works after a House committee this week launched its own contracting review. Rep. John Kuempel, R-Seguin and chairman of the General Investigating & Ethics Committee, requested data on no-bid and emergency deals given by 10 large state agencies. Kuempel, who declined to comment, set a deadline of next Monday.

Several agencies said they welcome the review.

Zaffirini said that if all the contracting proposals are passed, "we'll be in much better shape in terms of controlling what is going on."

Others are not as confident.

Tom "Smitty" Smith of the Austin-based advocacy group Public Citizen Texas, said for 30 years he has seen a cycle after scandal: "things get tight for awhile, and then you have a progression of agencies becoming laxer, and then there are complaints that the regulations are too burdensome and then there are exceptions and then it's time to do it all over again."

The Cooperative Contracts program, in which products and services are pre-approved to save agencies from lengthy and expensive competitive bidding processes, exemplifies the danger of creating exceptions, watchdogs said. The law that created the program exempts its purchases from otherwise-required reviews, which is how the 21CT deal avoided scrutiny.

Then there is the attorney general review.

In the past decade, the Attorney General's office said, it has gotten a chance to review eight health commission projects, in addition to some 3,000 state agency contracts with outside lawyers, a dozen highway toll deals and seven other health-related efforts.

The office declined to comment or provide records, citing attorney-client privilege, but emails from the transportation department and Employees Retirement System of Texas showed significant changes have rarely, if ever, resulted from reviews of their project planning documents, known as requests for proposals.

Health commission spokeswoman Stephanie Goodman could not say why the agency did not notify the attorney general about some projects, including the controversial Terrell State Hospital privatization and the Medicaid claims processing project.

The eight projects in which notification was provided included huge efforts to find health providers for millions of Medicaid recipients, she said.

The attorney general's office responded to each with a letter that did not request any documents, she said. In some cases, the commission sent the notices late in the process, providing a narrower window for the attorney general's office to review lengthy and complex documents, added Goodman, who would not provide the actual documents of the attorney general's responses.

A spokeswoman for Gov. Greg Abbott, who then was attorney general, rejected any characterization of his office's review as lax.

"This report is based upon pure conjecture regarding the contents of documents the reporter has no firsthand knowledge of, and is unfounded and irresponsible," spokeswoman Amelia Chasse said.

©2015 the Houston Chronicle. Distributed by Tribune Content Agency, LLC.