House of Delegates members have killed Gov. Earl Ray Tomblin's purchasing reform bill that would have outlawed a controversial bidding practice that was used to buy high-capacity Internet routers for $24 million.
Tomblin aides said Thursday, though, that the administration would voluntarily phase out the "secondary bid process," which allows state agencies to buy products and services quickly, bypassing formal and comprehensive purchasing rules.
Tomblin proposed the bill (SB363) in response to a scathing auditor's report released in February. State auditors found that high-ranking government officials circumvented purchasing regulations when they used federal stimulus funds to buy more than 1,000 routers as part of a statewide high-speed Internet expansion project in 2010. The audit concluded that the administration wasted at least $7.9 million - and more likely $15 million - by purchasing oversized routers using secondary bids.
Tomblin's office plans to put an end to the practice - even without legislation.
"We're taking the position we'll just stop doing it," said Jason Pizatella, Tomblin's legislative liaison. "We're doing what the Legislative Auditor asked us to do. We don't want to fight with the Legislature on this."
Tomblin's bill passed the Senate on April 3, but the legislation died in the House Finance Committee this week after companies with state contracts complained about the prohibition on secondary bids, according to House members. The companies stood to lose state business.
The bill included other purchasing reforms. Some of those measures - such as allowing companies to sell products via an online auction - have been added to other bills.
Also, the House of Delegates passed a resolution to create a task force that will study purchasing regulations throughout the year. The task force plans to analyze the American Bar Association's "Model Procurement Code" and may adopt purchasing reforms outlined in the document.
"Clearly, there will be changes in purchasing," said Sen. Herb Snyder, D-Jefferson. "The governor has decided we won't use secondary bidding anymore. Competitive bidding is the gold standard."
State agencies typically use the secondary bid process for routine, day-to-day purchases. The agencies use existing statewide contracts to buy smaller items, such as computers and office furniture that cost hundreds or thousands of dollars.
However, in July 2010, government officials spent $24 million on Cisco 3945 series routers, using secondary bids on a 2007 contract for Internet telephone equipment. The contract made no mention of routers.
The 2007 contract specified "Cisco or equal" equipment, but someone changed the wording to "Cisco only" when the state Office of Technology solicited bids on its online "bulletin board," according to the audit. The change shut out Cisco competitors, such as Alcatel-Lucent and Hewlett Packard."
The request also was never publicly advertised, and the Purchasing Division and Department of Administration never reviewed the bids.
The audit said former Chief Technology Officer Kyle Schafer tried to halt the router purchase, but his objections came too late.
Homeland Security Director Jimmy Gianato has defended the router purchase, saying the administration followed "normal procedures for procuring such equipment," according to a letter he sent to the auditors.
Administration lawyers have said they believe the secondary bid process is legal, although a specific ban on the practice was a key part of the governor's purchasing-reform bill.
The administration is installing the routers at "community anchor institutions" - schools, libraries, health centers, courthouses, State Police detachments, state agencies and other government facilities. The routers cost $22,600 each.
In late January, the Purchasing Division implemented new rules that require state agencies to get written approval before using statewide contracts to buy goods and services that cost more than $250,000. The change brings greater scrutiny to high-dollar purchases, such as the $24 million router buy.
Reach Eric Eyre at firstname.lastname@example.org or 304-348-4869.
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