Off The Books, Part Two: Contractor Conflicts

Lawmakers have tightened the reins on lobbyists who peddle services to state agencies, cutting their commissions and forcing them to register with the Texas Ethics Commission.

But state contractors – many of whom get paid top dollar to advise Texas agencies – are largely immune from such reporting requirements. In some cases, information technology contractors are working for the state while helping private companies bid on government contracts within the same agency.

“It’s a chronic problem… that we seek expertise from the private sector, only to later realize decisions they make may have been influenced by private business relationships,” said Tom “Smitty” Smith, who runs the non-profit watchdog group Public Citizen. “It is especially likely to happen in areas like high tech and investments, where most people don’t have the sophistication to understand these relationships.”

IT contractors say everything they do is above board, and that they’re careful about conflicts of interest, perceived or real. The law says contractors who design or select agency projects can’t bid on them -- so contractors say they try to stay out of agencies’ procurement processes all together.

But watchdogs say the lines are rarely that clear.

They say the network of IT contractors and their technology clients is so interwoven that it’s impossible to weed out influence. At least a dozen companies that provide contract IT workers to state agencies also bid on technology and telecommunications projects at those agencies.

And some agencies do occasionally use IT contractors in the procurement process.

The Health and Human Services Commission (HHSC) said it has used contractors who work for Gravitant – a company that has historically bid on state contracts -- to help design or select bids. After being asked about this procedure by The Texas Tribune, HHSC officials said they would now require any contractor who works on bid requests to list their clients.

“We’ve done that on some of our major procurements, but we haven’t done it on every one,” spokeswoman Stephanie Goodman said. “In the future we will.”

Mohammed Farooq, the longtime state IT expert who runs Gravitant, said regardless of agency policy, he and his employees adhere to a strict moral code.  He said in 2007, when he wanted to expand his business into private sector consulting, he stopped bidding on new HHSC projects for two years, other than staffing and advising services. And he said his contractors always make sure to sign “non-disclosure agreements” – which would put them in legal hot water if they shared agency details. HHSC officials confirmed both statements.

“The way I look at it, ethics starts with the self,” Farooq said.

The contract worker who spent a year and a half as the procurement project manager for the Department of Information Resources’ biggest telecommunications contract is a former subcontractor for Active Strategies, a staffing services and consulting company run by former state telecommunications chief Steve Parker. Parker, a longtime technology consultant, declined to say who his private sector clients are, citing confidentiality agreements. He said the contractor left his company the month before she was assigned to the procurement job.

DIR agency officials say there’s no ethics problem: State law permits vendors to do business with private sector companies while they hold a state contract – and doesn’t require them to report anything.

“If somebody’s looking to say there’s a problem with the model, that’s one thing,” Parker said. “But don’t crucify people for playing by the rules.”