Development and Management of State Contracts in Virginia

Source: Commonwealth of Virginia, Joint Legislative Audit and Review Commission, Report no. 482, June 13, 2016

From the summary:
Report on the state contracting process, from procurement through contract administration, with a focus on maximizing value and minimizing risk to the state. …

WHY WE DID THIS STUDY
In 2014 the Joint Legislative Audit and Review Commission (JLARC) directed its staff to review the development and management of state contracts. Interest in this topic was prompted by problems that arose from several recent high-profile contracts. Staff were directed to evaluate whether the state’s policies ensure that contracts provide good value to the state and mitigate the risks to agencies and the public.

ABOUT STATE CONTRACTING
State entities in Virginia spent more than $6 billion through contracts in fiscal year 2015, mostly for goods and services related to transportation, construction, and information technology. Several laws and policies govern how agencies procure and use contracts, but the most prominent is the Virginia Public Procurement Act. The contracting process is decentralized, as most contracts are procured, developed, and managed by individual agencies.

WHAT WE FOUND
Some contracts deviated from original expectations Approximately 10 percent of contracts analyzed for this study—12 contracts valued at $1.8 billion—fell significantly short of meeting agencies’ original expectations. Some less significant deviation from original expectations is to be expected, especially with complex contracts. Almost two-thirds of the contracts were at least slightly behind schedule, over budget, or did not meet agencies’ needs. These contracts were procured under different state statutes and therefore the authority of different oversight agencies. In some cases, the public was negatively impacted. Most performance problems appear to be within the control of agencies or vendors and may therefore be preventable through more robust contracting processes.

Some policies can limit agencies’ ability to make quality purchases at reasonable cost ……
Risk management is not sufficiently emphasized to adequately protect the state ……
Many contracts do not contain provisions to allow for contract enforcement ……
Lack of focus on contract administration policies undermines adequate contract monitoring and enforcement ……
Vendors are generally satisfied with state contracting but have difficulties filing complaints when warranted ……
Centralized oversight of state agency contracting is too limited ……
Comprehensive information on contract performance is lacking ……

WHAT WE RECOMMEND
• Legislative action Develop criteria for identifying high-risk contracts and implement a process to oversee them.
• Direct DGS and VITA to develop a centralized approach to tracking contract performance.
• Direct DGS and VITA to develop a comprehensive training program on effective contract administration.
• Executive action Develop tools and policies that allow agencies to balance cost with the quality of goods and services purchased.
• Develop mandatory training on effective risk management.
• Develop guidelines for assigning staff to administer contracts, particularly those that are high risk or high value.
• Develop guidelines for monitoring vendor performance, reporting performance problems, and using enforcement measures.
• Improve awareness of the vendor complaint process and make it easier to use.
Related:
Procurement study finds risks in state contracting and oversight
Source: Michael Martz, Richmond Times-Dispatch, June 13, 2016

…A new study by the Joint Legislative Audit and Review Commission found that the state’s decentralized procurement system allows agencies to agree to high-risk contracts in many cases without including penalties, incentives, and performance measures to ensure the state gets its money’s worth from the deals, or a termination clause to get out of them. The 152-page report, based on a 15-month investigation that ended in March, also found that few agencies seek legal advice from the Office of the Attorney General, even for contracts that include provisions that are not standard state practice, and when they do, they rarely go beyond the legality of the contract to its protections against risks to the state….

Problems with Virginia contracting system
Source: Associated Press, June 13, 2016

Virginia’s $6 billion-a-year contracting system has serious flaws — including multi-million dollar contracts managed by untrained staff and contracts that are prepared without legal review, according to a new state report issued Monday. The General Assembly’s watchdog agency, the Joint Legislative Audit and Review Commission, said in a report that the state’s procurement system sometimes leads to the state overpaying for services or receiving poor quality goods and services. JLARC said some public funds have been wasted because some state contracts don’t have sufficient built-in legal protections. The report identified one unnamed agency that paid $25,000 for materials and work that were never used and another agency that paid $325,000 for “faulty equipment.” The report said many agencies do a poor job of managing a contract once procured by the state. JLARC found that “many agency staff have no prior contract administration experience or training,” including on some contracts worth $50 million or more…..