Contracting Measure Goes to Abbott; Another Made It Into Budget

In light of a series of scandals drawing concerns that state agencies were awarded sweetheart deals to private vendors, state lawmakers proposed more than a dozen bills this legislative session aimed at boosting oversight of state contracts.

By Sunday, the two most sweeping measures still alive were each a vote away from being sent to Gov. Greg Abbott’s desk. Senate Bill 20, from Senate Finance Chairwoman Jane Nelson, R-Flower Mound, breezed through the House on a 140-2 vote. House Bill 15, from House Appropriations Chairman John Otto, R-Dayton, fell short in the Senate, yet much of it had already been approved as a rider in the budget and will thus be implemented, according to Ursula Parks, director of the Legislative Budget Board.

Together, SB 20 and HB 15 were designed to provide more layers of oversight both before an agency signs a large contract and once the contract is in place.

Contracting concerns have focused largely on the Health and Human Services Commission following revelations regarding several questionable contracts, most notably a $20 million Medicaid fraud tracking software deal with Austin-based 21CT that was not competitively bid. That deal led to a string of resignations and prompted multiple investigations, including one by the FBI.

SB 20 makes dozens of changes to how state agencies approach contracts, including:

• Barring agencies from contracting with firms when any member of that agency’s leadership or a family member of an agency official has a financial interest in the firm.
• Barring state employees involved in contract negotiations with a company from taking a job with that company for two years.
• Requiring agencies to grade vendors and allow the comptroller’s office to ban those with a history of poor ratings from contracting with the state.
• Requiring agencies to shop around when making purchases of $50,000 or more through the Texas Department of Information Resources Cooperative Contracts program, a centralized list of approved state vendors that HHSC used to hire 21CT.
• Prohibiting agencies from making purchases worth more than $1 million through the Cooperatives Contracts program.

"Texas citizens rely on state contracts to receive services they need, and we must ensure that those contracts are awarded fairly and transparently,” Nelson said in a statement. “This legislation will protect taxpayer resources and make our agencies more transparent."

With HB 15, Otto intended to create a contract management team at the Legislative Budget Board to review contracts worth more than $10 million and those valued at less than $10 million that have “high-risk” factors such as those with agencies that have had recent contracting problems. The bill also empowered the team to recommend to the governor and comptroller that troubled contracts be canceled. The LBB estimated the team would review approximately 60 new contracts each year worth more than $10 million and another 175 contracts that are smaller than that but considered high-risk.

State Sen. Kevin Eltife, a Tyler Republican who served as HB 15's Senate sponsor, said some senators didn’t approve of LBB handling all of the additional contract oversight.

“With all the problems we’ve had with contracting, the more oversight we have the better,” Eltife said. “I think it’s a good bill. We just couldn’t get it over the finish line.”

Yet Otto, the House’s lead budget writer this session, managed to include most of the bill in a budget rider that will allow LBB to move forward on boosting its contracting oversight over the biennium, Parks said. It will be up to lawmakers in the next legislative session in 2017 to decide whether to continue those measures, either by maintaining the rider in the next budget or passing a bill.