Report 2016-124 Recommendations

When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below, is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor's assessment of auditee's response based on our review of the supporting documentation.

Recommendations in Report 2016-124: Department of General Services and California Department of Technology: Neither Entity Has Provided the Oversight Necessary to Ensure That State Agencies Consistently Use the Competitive Bidding Process (Release Date: June 2017)

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Recommendations to General Services, Department of
Number Recommendation Status
1

To improve its oversight of the State's noncompetitive contracts, General Services should immediately ensure that agencies enter accurate and complete contract information into FI$Cal. For example, General Services should regularly select contracts from agencies and verify the accuracy and completeness of the related entries in FI$Cal.

2

To improve its oversight of the State's noncompetitive contracts, General Services should within 90 days, modify FI$Cal to include a standard amendment indicator to identify an item as an amendment, including the amendment number with respect to the contract, that agencies can use regardless of whether they make their procurements using FI$Cal. This indicator should ensure that General Services can reliably analyze and report on the number, values, and types of exemptions from competitive bidding of the State's contract amendments. General Services should notify all agencies of this change and ensure that the notification provides appropriate guidance for the use of the amendment indicator.

3

To improve its oversight of the State's noncompetitive contracts, General Services should Within 90 days, create plans for regularly performing statewide analyses to identify potential abuse or overuse of noncompetitive contracts. These analyses should include, but not be limited to, calculating the proportional value and number of the State's competitive and noncompetitive contracts and amendments, examining trends in agencies' use of noncompetitive contracts and amendments, and identifying unusual patterns among vendors receiving state contracts through noncompetitive means.

6

To clarify the allowable reasons for using noncompetitive requests and to ensure that agencies understand these reasons, General Services should, within 180 days, enhance the criteria in the State Contracting Manual to include examples of appropriate and inappropriate circumstances related to justifying a noncompetitive request. In particular, it should clearly reiterate that poor contract planning is not a sufficient justification for a noncompetitive request for all acquisition types. Further, General Services should develop specific criteria for what constitutes an appropriate noncompetitive request for non-IT services acquisitions. General Services should notify all agencies of the clarifications in the State Contracting Manual and should reiterate that all noncompetitive requests must meet the enhanced criteria.

7

To ensure that the State receives the best value for its contracts, General Services should immediately begin performing the following:
For contracts that are exempt from competition by policy or statute, including noncompetitive requests for contracts, General Services should require agencies to justify that the price is fair and reasonable. This should include a current price analysis pointing to competitive pricing from another contract, such as a statewide agreement, or a comparison of rates to other available vendors, or another valid price analysis with objective evidence.

8

To ensure that the State receives the best value for its contracts, General Services should immediately begin performing the following:
For noncompetitive requests, General Services should require agencies to quantify and substantiate their cost savings or averted costs.

9

To ensure that it holds agencies accountable for implementing the corrective action plans that they submit with noncompetitive requests, General Services should immediately begin tracking all outstanding plans and following up to ensure that agencies complete them. For example, General Services should require an agency to include key dates in its corrective action plan that the agency plans to meet to conduct a competitive procurement and report its progress to General Services. Further, General Services should inquire about the steps that agencies have taken before the contract expiration dates in their most recent noncompetitive requests.

10

To ensure that it consistently and appropriately responds when agencies fail to justify their noncompetitive requests, plan sufficiently to avoid the noncompetitive process, or follow their corrective action plans, General Services should create an escalation process within 90 days that outlines the order and severity of enforcement mechanisms it will use. The mechanisms it applies should escalate according to the number or severity of offenses it identifies. For example, General Services could begin by sending a warning letter to high-level agency executives, followed by reducing or revoking an agency's purchasing threshold for specific types of acquisitions—for example, IT services—and finally by reducing or revoking an agency's purchasing threshold for all acquisition types in scenarios of repetitive noncompliance.

Recommendations to Legislature
Number Recommendation Status
5

To promote accountability for and transparency of the State's noncompetitive request process, the Legislature should require General Services and Technology to submit an annual report of all noncompetitive requests they approve with values over $1 million. This report should include performance metrics such as the percentage of procurement dollars approved as noncompetitive requests. This could be a published annual report or the two agencies could provide this information publicly on their websites. In addition, the Legislature could require agencies to publicly justify their noncompetitive requests in Legislative hearings when it sees fit. For each noncompetitive request listed in the annual report, General Services and Technology should include—at a minimum—the following information:
- Contracting agency.
- Original contract value (if applicable).
- Noncompetitive request value.
- Numbers and values of noncompetitive amendments (if applicable).
- Mechanisms applied to enforce compliance.

Recommendations to Technology, California Department of
Number Recommendation Status
4

To improve its oversight of the State's noncompetitive contracting related to reportable IT projects and telecommunication procurements, Technology should create plans within 90 days for regularly performing statewide analyses of FI$Cal data to identify potential abuse or overuse of noncompetitive contracts. These analyses should include, but not be limited to, calculating the proportional value and number of the State's competitive and noncompetitive contracts and amendments, examining trends in agencies' use of noncompetitive contracts and amendments, and identifying unusual patterns among vendors receiving state contracts through noncompetitive means.

11

To ensure that the State receives the best value for its noncompetitive requests, Technology should immediately begin to require that agencies justify that the price is fair and reasonable. This should include a current price analysis pointing to competitive pricing from another contract, such as a statewide agreement, or a comparison of rates to other available vendors, or another valid price analysis with objective evidence. Further, Technology should require agencies to quantify and substantiate their cost savings or averted costs.

12

To ensure that it holds agencies accountable for implementing the corrective action plans that they submit with noncompetitive requests, Technology should immediately begin tracking all outstanding corrective action plans and following up to ensure that agencies complete them. For example, Technology should require that an agency include key dates in its corrective action plan that the agency plans to meet to conduct a competitive procurement and report its progress to Technology. Further, Technology should inquire about the steps that agencies have taken before the contract expiration dates in their most recent noncompetitive requests.

13

To ensure that agencies do not repeatedly submit inappropriate noncompetitive requests after receiving a warning, Technology should track and follow up on instances in which it has issued a warning letter. Further, when appropriate, Technology should follow through with the consequences it includes in its warning letters.



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