The Great Tube Steak Debate and Other Procurement Policy Pickles

Jan 1, 2014

Credit WUIS/Illinois Issues

When a September meeting of one of Illinois’ many obscure government oversight commissions turned into a discussion about the proper seasoning blend for making hot dogs, it served as yet another reminder that there are problems with the state’s revamped rules for purchasing goods and services.

The Great Tube Steak Debate of 2013 unfolded at the Illinois Procurement Policy Board, which is charged with monitoring whether state bureaucrats are getting the best deals when it comes to leasing office space or, in this instance, buying the spices to mix with the meat paste that goes into the creation of frankfurters eaten by thousands of Illinois prison inmates each week.

In the meeting, Malcolm Weems, former director of the Illinois Department of Central Management Services, complained that news media reports about possible mismanagement of contracts for wiener spices was overblown and had failed to highlight the real problems with the state’s new purchasing rules.

Plus, Weems told the board, the spice mix in hot dogs made by prisoners, for prisoners, is not something to be taken lightly. If inmates detect that their hot dogs don’t taste quite right because the state’s strict purchasing rules have led to delays or changes in the spice mix, Weems said, they might fear they are being poisoned.

“We have to address hot dog seasoning in an emergency when the Department of Corrections director tells him that there is a potential for a riot in his prison,” minutes of the meeting noted.

The state might never have gotten into this pickle had Rod Blagojevich never been governor. 

In the wake of Blagojevich’s 2009 ouster, the General Assembly went on a reform binge, hoping to wash the taint of the now-imprisoned mop-topped Democrat from Chicago out of state government. A key part of the effort included a measure that imposed sweeping changes on laws governing how the state buys everything from paper plates to the garbage service that picks them up after they’ve served their purpose.

The new law, known as Senate Bill 51, was designed to increase the accountability and transparency of the purchasing process. Key among the changes was placing more oversight of purchasing within a chief procurement office, ultimately overseen by the Executive Ethics Commission. 

The changes, however, triggered a bottleneck. Agencies have sometimes avoided the scrutiny of the chief procurement officer by declaring some purchases as “emergencies,” allowing them to buy supplies without going through the normal bidding process. The situation has been closely monitored by Ed Bedore, an often-outspoken member of the Procurement Policy Board who asked for a tally of those emergency purchases in early 2013.

According to the numbers he received, officials had approved more than $135 million in no-bid emergency purchases during the fiscal year that ended June 30, representing a $34 million jump over the previous year and a 300 percent increase over what was seen during the final year of Blagojevich’s tenure.

To be sure, some emergency purchases are necessary. When a tornado rips off parts of a roof of a prison, it makes sense to move quickly to line up contractors to fix the problem. The same goes when a sewer pipe breaks at a mental health facility. There simply is not enough time to go through a lengthy bidding procedure. But, as Bedore sees it, some of the emergency purchases are caused not only by human error and understaffing but “general incompetence.”

“It’s really sad,” Bedore said when the report was released.

It wasn’t as if the problems were a surprise.

According to an analysis of the new law, a chilly relationship had already been established between vendors and the state after new purchasing rules took effect in July 2010. Laura Minzer, associate vice president of government affairs for the Illinois Chamber of Commerce, found one of the biggest problems was a new clampdown on communications between vendors and state officials.

The idea of limiting contact between vendors and state purchasing agents was designed to make sure that preferred vendors weren’t trying to twist bidding processes in their favor. The result, however, was that it limited vendors from exposing the state to new products that could be beneficial — and potentially cheaper — to state operations.

In many instances, the law barred any vendor who discussed a potential procurement opportunity with a state official from submitting bids. That stymied innovation and attempts to streamline government.

“It created a situation where there was no communication with even current vendors,” Minzer says.

The original law also required bidders to offer more information about their subcontractors, potentially making their own trade secrets public. That led to some vendors choosing not to do business with the state. After just a short time in place, lawmakers were brought back to the negotiating table to rework some of the rules. That led to the passage of Senate Bill 2958, negotiated largely by the chamber on behalf of frustrated vendors.

Within months of those changes, however, more problems surfaced when the Quinn administration in 2011 attempted to remake the state’s health insurance contracts for employees and retirees. Under a bid estimated to save $1 billion over 10 years, the state awarded health insurance contracts to Blue Cross-Blue Shield, shutting out longtime provider Health Alliance of Urbana.

An audit of the bidding process by Illinois Auditor General William Holland found that potential conflicts of interest and other flaws created “serious deficiencies” in the process, making it impossible to conclude whether the best interests of taxpayers had been served. What normally might have been viewed as weakening a tough new ethics law inspired by one of the state’s biggest scandals was cheered by voters affected by the dust-up over their health insurance provider.

It’s not just tougher disclosure and transparency rules that are hampering the new system.

Minzer says there is still a culture problem within some state agencies. She says some vendors believe officials at one agency sometimes interpret the contracting and bidding rules differently from the bureaucrats at another agency. What’s more, some agencies didn’t initially accept the fact that there is an independent oversight of bidding brought on by the inclusion of a chief procurement officer in Matt Brown.

“There was a little bit of a turf war,” Minzer says. “It’s very frustrating from the vendor side. It can be very frustrating to navigate the system.”

On top of all that, there are the normal stresses of trying to run a bureaucracy when the state has little money to invest in improving its own operations. Not only is there understaffing in the agencies, but there is a lack of computerization that could help the process. While the state has for years been attempting to streamline its mounds of paperwork, Bedore suggests government is still in the “Dark Ages.”

Pointing to a picture of one paperwork-strewn state office, Bedore told his colleagues, “All these file cabinets, all these transfer cases loaded with materials, no wonder you don’t know when contracts expire. Would you like to have a conference room with all this junk around you? Well, that is what DHS has.”

Officials in the Illinois Department of Human Services, the largest agency in state government, say they have only about one-third of the number of people needed to manage the billions of dollars of purchasing the agency does on an annual basis. Even if money were made available to hire more workers, officials say it would take up to a year for new workers to be able to navigate the byzantine rules and regulations governing purchasing.

Faced with all of the challenges, officials continue to try to make the new law work. Hoping to again remind purchasing officials to get on board with the new rules, Brown last spring sent letters to agencies, urging them to list all of the contracts that will be coming up for renewal this year. That way, he says, the state will be ready to bid for new contracts before the old ones expire.

The state also is trying to educate vendors on how to work within the confines of the new law. The chief procurement office, for example, has put on workshops for business owners. Brown says the questions from vendors are relatively simple: “‘How do we navigate it? What do we do to be safe? We don’t want to break a law. Tell us where the boundaries are.’

“We’ve actually developed a lot of training along the way. Three years ago, there was no training,” he says.

Brown acknowledges that some agencies haven’t decided to engage in the new practices, resulting in some purchases taking much longer than needed.

“We’re really trying to motivate the agencies ... to make this a priority,” Brown says. The problems, he says, have resulted in some vendors deciding not to do business with the state.

“Those issues do remain,” Brown says. “We get it. Perception becomes reality. Vendors feel stifled, so they don’t talk.”

Brown’s office also has been working on a new $120,000 system that could reduce some of the red tape that vendors face when they bid on state contracts. Rather than fill out redundant ethics-related paperwork every time they submit a bid, they could apply for a so-called “passport” that would show them as qualified to do business with the state.

“From that point forward, when we are taking bids, we are only dealing with business issues, not compliance issues a million times over,” Brown says.

That system will go online some time after January.

Illinois’ Stateville Correctional Center. Prisons are experiencing the results of sweeping changes in state purchasing laws.
Credit WUIS/Illinois Issues

  Meanwhile, the problems with purchasing continue to persist. In October, members of the procurement board heard from officials at the Department of Human Services, which operates institutions for developmentally disabled adults and treatment centers for the mentally ill. Agency officials said an August court ruling dictated that some mentally ill people needed to be moved out of county jails and into state facilities by January, creating a scramble to determine how to upgrade some buildings into higher security facilities. Hoping to avoid declaring an emergency, which would jettison the normal bidding process, officials said they were working to break the transition into smaller chunks to ensure that vendors would get a fair shake at the contracts needed to address the changes.

Brown says additional tweaks to the new law could be crafted in time for the legislature to act on them during the spring 2014 session.

“We have a list of areas that we believe would streamline and would have no negligible effect to due diligence. It’s all mechanical stuff. How do we make the machine more efficient?” Brown says.

“We’ve been developing that list for a few months now. We really have to polish it and make sure that every aspect of it is right and correct before we send it over to the General Assembly.”

Kurt Erickson is the state Capitol bureau chief for Lee Enterprises. 

Illinois Issues, January 2014