Iowa DAS discuss savings and settlement payment sources

DES MOINES – Top Iowa Department of Administrative Services officials told lawmakers Wednesday a 2011 revamp in managing state construction projects has netted nearly $10 million in savings – a level questioned by some Government Oversight Committee members.

Also Wednesday, lawmakers were told federal money could have been used to pay settlements to laid-off DAS employees because payments were drawn from annual management fees state agencies pay to DAS using sources that could have been co-mingled with federal dollars. At least one Democrat said that could result in the state being forced to repay any federal funds that might have been used for that purpose.

DAS chief deputy director Lon Anderson presented calculations to the Legislature's oversight panel indicating savings from operational costs, change orders and avoiding a 15 percent 'markup” by general contractors saved the state 'just shy of $10 million” for two years. He pegged yearly operational savings at $736,000 from an employee shakeup and privatization shift.

Anderson and DAS executives Doug Woodley answered questions from 90 minutes from Democrats and Republicans from the House and Senate who are examining hiring practices, contractual arrangements and employee settlements paid to laid-off state employees – some including pay-for-silence confidentiality agreements that drew an executive order from Gov. Terry Branstad and resulted in the firing of former DAS Director Mike Carroll.

Anderson told lawmakers he briefed Carroll on the employee settlements and attended meetings with the governor's staff where DAS policies were discussed but he said he 'did not have knowledge” of the so-called 'hush money” payments made to ex-state workers who agreed to confidentiality clauses.

'They admitted that they did not know the source of the funds and that federal funds could have been used in the settlements,” said committee member Sen. Matt McCoy, D-Des Moines, after the hearing.

'I think it is interesting because ultimately federal money can't be used to keep confidential settlements so , if in fact it's determined that there was federal funds involved, it can have serious implications on our ability to seek other federal funding as well as keep the federal funding that we have,” he said.

McCoy also said the DAS savings estimate appeared flawed because it projected construction manager fees of $7.4 million when an analysis of DAS operations put the costs closer to $11.75 million. 'They are numbers with no sense of context” without back-up deals, but the fact that they could be as much as 50 percent off the mark 'is a bombshell,” he told reporters after the meeting.

Anderson said the estimates were gleaned from 120 pages of documentation and he offered to follow up with more details to better show the origins of the numbers.

McCoy said he also came away wanting more explanation from Woodley about a request for proposal he helped formulate for a $26 million project at the Iowa Veterans Home in Marshalltown that was offered for a five-day review before the state ended the process and awarded a bid. He also raised concerns over DAS hiring changes that reclassified state merit jobs as at will so they could be filled without being advertised as higher-paying positions with new job titles.

'This all just feels very clubby,” he told reporters after the hearing. 'It feels like cronyism, it feels like a real sense of -- we're going to go out and hire our friends and, damn it, nobody's going to tell us we can't do it. We want to hire our friends because we're in charge and we get to hire whoever we want to hire.”

Rep. Kevin Koester, R-Ankeny, Oversight Committee co-leader, said the panel's hearings have produced valuable information but he expressed concern they're becoming 'a little bit over done in my humble opinion” and more written responses to lawmakers' questions probably would suffice moving forward.

After the meeting, Koester issued a list of 16 questions regarding confidentiality provisions of employee settlement agreements and a DAS data base containing the names of state employees coded with 'ineligible for rehire” status that he has submitted to the governor's office.

'The House Oversight Committee will refrain from participating in additional oversight meetings until they receive answers back and if they deem necessary for follow up,” he said in a statement.

Sen. Janet Petersen, D-Des Moines, chair of the Senate Oversight Committee, said she planned to forge ahead Thursday with a scheduled hearing with Michelle Minnehan, DAS human resources enterprise chief operating officer, and Jim Riordan, chairperson of the state's Public Employment Relations Board to discuss state hiring, firing and employment practices.

'If they want to take a time out and throw some questions the governor's way, then that's their decision to make but the Senate Oversight Committee is continuing its work,” Petersen said. 'We see a number of problems with DAS that is flowing into all agencies and departments and we think we have to continue the investigation. The problems are immense and we're going to keep charging on.”

In the meantime, GOP lawmakers called on the Democrat-run Senate to take up House File 2642, a bill designed to expanding openness, transparency and accountability in state government by making provisions of Branstad's recent executive order in response to the secret settlement revelations part of state law.

Senate GOP Leader Bill Dix of Shell Rock said 10 days have passed since the House acted and he called the Senate's lack of action 'truly distressing,” saying there is 'a difference between governing and grandstanding.”

'Leadership is not raising your voice and beating your chest from the lectern,” he told his colleagues during remarks on the Senate floor, 'this is actually a diversion and a distraction from addressing the true problem at hand.”

However, Petersen said Senate Democrats are drafting a more-comprehensive approach to H.F. 2642 that covers whistleblowers, do-not-hire state employee data bases, hiring and firing practices, and requirements that all state jobs be advertised and publicly posted.

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