State audit finds serious flaws in Texas Education Agency contracting process

State auditors said the Texas Education Agency seriously mismanaged the processes of procuring two major education contracts over the last couple of years, including a no-bid special education contract that lost the state more than $2 million.

In an audit released Wednesday morning, the State Auditor's Office reviewed the education agency's work and found it failed to follow all the required steps before offering a no-bid $4.4 million contract to SPEDx, which was hired to analyze how schools serve students with disabilities and help create a long-term special education plan for the state.

"The Texas Education Agency first initiated a top-to-bottom review of contract processes in November of last year. It has resulted in a massive set of process changes, personnel actions, and steps to address proper documentation," said Texas Education Commissioner Mike Morath in a statement this week. "The changes we are making are designed to ensure an agency culture of efficient compliance."

State auditors also said the TEA failed to "identify and address a preexisting professional relationship" between a SPEDx subcontractor and the agency's "primary decision maker" for the contract. Penny Schwinn — that decision maker and the agency's deputy commissioner of academics — did not disclose that she had received professional development training from the person who ultimately became a subcontractor on the project.

Schwinn argued she "was not privy to or involved in SPEDx's subcontracting decision," the audit said. But the subcontractor had been included on emails between Schwinn and SPEDx's CEO discussing the pending contract.

Auditors recommended the TEA commit to following all required steps for entering into a contract, including getting approval from the state comptroller's office for non-competitive contracts, developing a cost estimate, and requiring employees to disclose potential conflicts of interest.

Many of these criticisms are not new to the agency. The TEA's previous special education director, Laurie Kash, filed a federal complaint alleging agency misconduct in awarding the contract. A day later, the TEA fired her, claiming she had withheld allegations of covering up sexual abuse of a minor at a former job.

Parent advocates consistently called on the agency to reconsider its financial relationship with SPEDx, a relatively new company that had never before performed a project of the scope the TEA was requesting. They said they didn't want this company to mine the data of their children's individualized education plans, which detail the specific educational needs and goals for a child eligible for special education — especially without reassurance that the data was safe.

The TEA conducted two internal audits, one after it suddenly terminated its contract with SPEDx in December 2017, after paying $2.5 million and receiving just $150,000 worth of deliverables. After the second audit, the agency began to review the way it procures contracts.

TEA officials told state auditors recently that they still believe the contract "could have produced valuable information which would have noticeably improved how Texas schools support these students." Since 2017, the agency has undergone a serious overhaul of its contracting processes, including replacing its director of contracts, hiring more qualified attorneys to ensure compliance, and developing a five-phase internal process for entering into contracts.

State auditors also found serious mistakes with a contract awarded this January, this time for a company that helped develop the agency's new website for presenting school districts' accountability ratings in a more user-friendly format.

Despite the fact that the company Tembo, Inc. failed to submit a required plan for how it would subcontract with businesses run by women or people of color, the TEA gave Tembo high marks and allowed it to proceed in the evaluation process.

The TEA also advanced Tembo's proposal to the final round over a proposal that had scored higher in its two-round process. Late last fall, it gave Tembo's the contract over another vendor with the same final score, without explaining why.

Top officials at the TEA all provided "conflicting information about who ultimately selected Tembo," the audit said.

"Although the procurement process resulting in the Tembo contract award had several procedural weaknesses, the agency did endeavor to secure best value for Texas taxpayers," TEA officials said responding to the audit. "The selected vendor has produced a new tool to bring much needed clarity to performance information about public schools, providing parents, educators and taxpayers an unprecedented ability to support students."