Nebraska needs to do far more to incentivize state agencies to hold to a high standard in managing contracts. The state could have much greater success in attracting additional qualified companies to bid on major projects if it remedied the shortcomings in its procurement process, including the handling of appeals by unsuccessful bidders.
A 2017 article for the Nebraska state bar bluntly described problems, saying the state’s current appeals procedures “fail to account for the potential that agencies awarding state contracts sometimes make mistakes or fail to follow applicable agency rules, laws, official guidance or the term of the RFP at issue.”
The appeals process for unsuccessful bidders contains “no discernible standards of any kind, nor any limits on (the deciding agency’s) discretion,” the article stated. Nebraska could greatly boost the competition for bids if it remedied such problems, the article said.
Several years ago, the state needed to create a large-scale replacement of its Medicaid claim management software. The state chose a small Arizona company for a $50 million contract over a Fortune 100 company with extensive experience in such software. The Arizona company ultimately failed at its duties, and the state pulled the plug midway through the contract — after $7 million in state tax dollars had been spent, for naught.
A similar failure involved another terminated computer project, with $5 million in state losses. Including federal dollars, the losses on the two projects totaled $60 million.
Last month Kerry Winterer, a former head of the Nebraska Department of Health and Human Services, testified before a legislative committee to voice strong support for legislation to address flaws in the state’s procurement process.
Legislative Bill 21, by State Sen. Mark Kolterman of Seward, would insist that the state follow a sounder appeals process. Unsuccessful bidders on projects exceeding $5 million would have a clearer, formalized process to present evidence and advocate their cause to the state.
An unsuccessful bidder would be able to appeal to District Court. More than half the states, including Iowa, Missouri and Colorado, use such an approach. Having an independent agent, a judge, scrutinize the state’s procurement process would go far to spur state agencies to adhere to rigorous professional standards for contracts, Kolterman and other testifiers told the committee.
Opponents say that allowing a court appeal would cause delays and increase costs. The fiscal note for LB 21 is about $200,000 annually for handling appeals.
But the state is already experiencing delays — an example is the on-again, off-again status of state contracting for child welfare in the Omaha area. And the current system already can have high costs, as shown by the $12 million in state funds in wasted spending on the computer contracts.
The committee should forward LB 21 to the full Legislature so state senators can debate the pros and cons on this important issue. Nebraska state contracting deserves such scrutiny by the Legislature. LB 21 provides an important opportunity to understand the current problems and decide whether Kolterman’s proposal is the best solution.