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No-bid contract criticism spreads

| Sunday, March 23, 2008

Gov. Ed Rendell has awarded more than $1 billion in contracts without seeking competitive bids, state records show.

State lawmakers say Rendell's heavy use of no-bid contracts, often in secret and some to his former law firm, must be investigated. The governor's practice has some lawmakers proposing tighter requirements under a more public approval system.

"The dollar figures have almost been eye-popping," state Rep. Doug Reichley, R-Allentown, Lehigh County, said.

Reichley is among an increasing number of lawmakers upset with Rendell's use of no-bid contracts, especially those tied to the governor's proposed lease of the Pennsylvania Turnpike. Republicans and Democrats chastised Rendell for keeping details involved with the leasing proposal secret, including the hiring of the governor's former law firm, Ballard Spahr Anderson & Ingersoll, last March. Key lawmakers learned only last week that the Rendell administration hired the firm, which also has strong ties to the governor through departed staffers.

The billion dollars spent by Rendell between 2003 and 2008 cannot be compared to spending of previous governors because state officials say they can't find the records. The Department of General Services claims the records were lost during a change in a computer system -- or past administrations never maintained them.

Most state contracts must be competitively bid. There are exceptions, including one that allows state officials to award contracts without competition when it's "in the best interest of the commonwealth," according to state law. Other exemptions from requiring bids include when federal or state law specifically exempts the contract or when only a single supplier is capable of providing the product or service.

What makes Rendell's practice different is the large dollar amount of no-bid contracts, his unwillingness to disclose certain details and the May 2007 contract to Ballard Spahr for $1.8 million.

A $400 million, five-year, no-bid contract was approved earlier this month for Unisys of Blue Bell in Montgomery County for managing the state's Data Center in Harrisburg.

The amount of no-bid contracts -- $246.3 million approved by the Department of General Services so far in 2008 -- is higher than any other year since Rendell took office, agency records show.

"What is beyond the pale is the level at which the Rendell administration has engaged in this," said Reichley, who is the Republican Caucus' point man on contract issues.

More control under Rendell?

Curt Topper, a deputy secretary in the department, said no-bid contracts are a small portion of overall contacts, less than 1 percent of the Department of General Services' annual total.

Even though records of other governors can't be found, Topper said, the Rendell administration provides tighter control and review of no-bid contracts than provided in the past. As a result, the administration is driving down the number of no-bid contracts, he said.

State government can benefit when a public official has a personal connection to private companies, said Craig Shuey, executive director for the Senate Transportation Committee and spokesman for Sen. Roger Madigan, R-Bradford.

"However, when the sums of public funds grow into the millions and beyond, one has to question who is the greater beneficiary of the relationship," he said. "Sometimes it's the public, sometimes it's the public official, and that's where the concern lies because it is difficult to completely eliminate the appearance of special treatment."

The Ballard Spahr hiring has become a lightning rod in the past week with an increasing number of lawmakers questioning the contract not only because of Rendell's relationship to Ballard Spahr, but also because two former Rendell aides now are Ballard Spahr partners -- Adrian King and John Estey.

"We have barely scratched the surface of that contractual situation," Reichley said.

Estey was Rendell's chief of staff and a senior adviser until last month and King was deputy chief of staff until 2005. Estey, as chief of staff, recommended hiring Ballard Spahr, according to Rendell's General Counsel Barbara Adams. King now is working on the turnpike lease for the law firm.

Estey and King are brothers-in-law. Estey declined to comment, and attempts to reach King were not successful.

Stricter guidelines

House Minority Leader Sam Smith, R-Jefferson County, last week said the Ballard Spahr contract has the "appearance of a conflict." Smith said he was bothered by the lack of concern of Rendell officials.

Rendell has defended the hiring, saying the firm is uniquely qualified because the company has experience in tax-related issues. Adams said she selected the firm because it is a Pennsylvania firm and because of its reputation. She said she was not told by the governor to hire Ballard Spahr.

House Minority Policy Chairman Mike Turzai, R-Bradford Woods, Allegheny County, said legislation is being written that would prevent Rendell, and future governors, from doling out high-priced contracts -- greater than $100,000 -- without greater scrutiny.

"We are in the process of researching and drafting a bill that would subject such contracts to an open bidding process," he said. "We intend to hold a policy committee hearing."

State Senate Majority Whip Jane Orie, R-McCandless, Allegheny County, wants to use legislation she co-sponsored last fall to establish stricter guidelines. The bill is modeled after a law Philadelphia Mayor Michael Nutter pushed through in 2005 as a councilman. The law makes businesses ineligible for no-bid city contracts if they contribute more than $10,000 a year to a city official's campaign.

Even Democratic leaders are upset with Rendell's spending and hiring of Ballard Spahr, including state Rep. Joe Markosek, D-Monroeville, Allegheny County, chairman of the House Transportation Committee, and state Sen. Barry Stout, D-Bentleyville, Washington County, minority chairman of the Senate's transportation committee.

"I didn't know Ballard Spahr had been retained by the administration," Stout said.

"We know the need for funds to help maintain our roads and bridges, and money that's unnecessarily spent for other things will impact the money we have available to us," he said.

What happens next depends on whether lawmakers follow through with cries to hold hearings and push reform legislation.

Rendell meanwhile continues to craft the lease proposal, which he says is a necessary move to generate billions of dollars to pay for critical road and bridge improvements statewide and establish steady subsidy streams for mass-transit agencies such as Port Authority of Allegheny County.

A turnpike lease would have to be approved by the Legislature. A similar proposal failed last year due to a lack of legislative support. Lawmakers passed Act 44, which called for leveraging new tolls on Interstate 80 to borrow larger amounts of money to pay for transportation projects.

Some say Act 44 would not generate enough money to meet the state's needs. Others are skeptical federal officials will approve the I-80 tolling plan. As a result, Rendell revived his lease proposal.

Records missing

The Department of General Services' records on no-bid contracts prior to Gov. Ed Rendell taking office in January 2003 are virtually nonexistent, an agency official said.

The department recently claimed that Rendell has "reformed" no-bid contracts -- reducing the frequency. But there are no records available from other governors, the agency now says, to provide a historic comparison.

Curt Topper, a deputy secretary, said the department could not locate the vast majority of records from the administrations of Republican governors Tom Ridge and Mark Schweiker.

"We do not have records prior to 2003," he said. "Those records simply don't exist anywhere in the department."

Topper said he discovered there was data missing only during the past three weeks while trying to fill the Tribune-Review's request for information. When Rendell took office in 2003, there were "summary records" showing 800 no-bid contracts had been approved in 2001 and in 2002 -- with no corresponding dollar amounts.

Topper said the historical records might have been lost in a switch to a new computer system before Rendell took office.

"Detailed central records of sole source approvals either were not maintained by the previous administration or they were lost when the Commonwealth made the transition" to a new computer system, the department said in a statement. "As a result, we are unable to produce a listing of sole source contracts, the suppliers, or the contract amounts prior to fiscal year 2003."

"It's a curious explanation to say the least," said David La Torre, Schweiker's former press secretary. "The Schweiker administration was a firm believer in the competitive bidding process as a means to ensure taxpayers' dollars were used in the manner that Pennsylvanians would expect from their government."

No-bid contracts

More than $1 billion dollars in state contracts have been awarded without competitive bidding under Gov. Ed Rendell from 2003 through 2008. The state Department of General Services approved $873 million worth of contracts without competition for various state agencies. Also, the Office of General Counsel awarded $213 million in contracts to outside law firms.

Source: State records

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