NEWS

State contracts, misused in the past, under new scrutiny

Competitive bidding used for everything from tires to toilet paper

Jim Mason of Iowa City unloads condensers from a truck at Plumbers Supply Co., in Iowa City on Thursday, May 7, 2015. The company is one of nearly 450 vendors the state of Iowa contracts with to buy supplies. (Jim Slosiarek/The Gazette)
Jim Mason of Iowa City unloads condensers from a truck at Plumbers Supply Co., in Iowa City on Thursday, May 7, 2015. The company is one of nearly 450 vendors the state of Iowa contracts with to buy supplies. (Jim Slosiarek/The Gazette)
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CEDAR RAPIDS — The State of Iowa has spent more than $200 million with nearly 450 vendors who have master agreements to provide state agencies everything from squad cars and plumbing supplies to cookies and condoms.

The Department of Administrative Services is required to use competitive bidding to get the lowest price on items needed by many state agencies. Think computers, bottled water and toilet paper.

Two of those master agreements — contracts for handguns — are being investigated by the Iowa Department of Public Safety after concerns were raised internally about the fairness of the agency’s procurement practices.

Three high-ranking Iowa State Patrol officials are on paid leave pending the outcome of that probe.

The Gazette took a look at Iowa’s master agreements to see how state agencies are spending public money and talked with local vendors who have state deals. Also checked was Iowa’s progress in addressing recommendations in a scathing 2011 audit of master agreements.

Getting the best deal

Iowa Code requires agencies, in most cases, to seek bids from several vendors before buying supplies, equipment or services and must choose the “lowest competent bid.” Requests for proposals must be posted online to draw in the largest number of potential bidders.

State officials also are allowed to reject all bids and start over.

Iowa has master agreements with vendors in 37 states, with Iowa companies holding the most contracts at 206 and Illinois coming in a distant second at 41. The law requires agencies to buy Iowa products and hire Iowa companies if in-state bids are comparable in price to other proposals and meet specifications.

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Iowa’s largest master agreement, with $45.2 million spent since 2011, is with AmeriSourceBergan Drug Corp., a Kansas City pharmaceutical distributor that provides medications to the Department of Human Services and Department of Corrections, said Caleb Hunter, spokesman for Administrative Services.

Computer Aid Inc., a Harrisburg, Pa., company that provides information technology “staff augmentation,” has the second-largest state master agreement, worth $29.8 million since 2012.

Not all the master agreements are multimillion-dollar accounts, however. Three-quarters of the state’s contracts yielded less than $100,000 for the companies, with about 145 companies not getting any state money.

Contractor Benefits

But there are benefits to being a state contractor, said Sheryl Phelps, business development manager for CJ Cooper & Associates of Hiawatha. The company provides drug-testing kits, such as urinalysis cups or saliva scans, to state agencies that include Corrections and the judicial branch.

These agencies spent about $100,000 with CJ Cooper from January through November 2014, Phelps said.

Winning a state contract lends credibility to the company, Phelps added. Plus, local agencies can use state master agreements to get the same prices.

“I’ve reached out to a lot of sheriff’s departments to let them know we have the master agreement,” she said.

Plumbers Supply Co. of Iowa City has received $332,360 from state agencies since 2013. The wholesaler provides plumbing equipment, fixtures and supplies to state agencies to repair their own plumbing and HVAC systems, said Ben Wunderlich, who does inside sales for the company.

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“Does the master agreement give us an open door? It does,” Wunderlich said. But “it’s still about creating relationships with people.”

Before renewing the master agreement with Plumbers Supply, state officials check with the agencies about the quality of service and products, Wunderlich said. “It puts a check on me as the vendor to provide a high level of service,” he said. “It’s an extra protection for taxpayers.”

Gun Contract Scrutinized

Public Safety Director Roxann Ryan raised questions last month about the fairness of her agency’s contracts.

“Although inadequacies in the procurement process may not necessarily result in disciplinary action, it is nonetheless important to be clear, to be fair and to be complete,” Ryan said in an April 20 email to public safety employees. “The failure to set out clear expectations at the outset is likely to lead to disagreements later, including potential litigation.”

Ryan announced April 30 she put Maj. Todd Misel, Maj. Michael Winter and Lt. Richard Pierce of the Department of Public Safety on paid leave during an investigation of handgun purchases.

The agency chose Smith & Wesson July 2, 2014, to provide M & P 40-caliber semi-automatic pistols for $360 each. Kiesler Police Supply of Indiana was disqualified because the Glock Gen4 40-caliber pistol it offered didn’t have a magazine safety lever, which prevents the gun from firing when the magazine is removed.

DPS since has asked officers to return nearly 800 handguns issued under the contract, agency spokesman Alex Murphy confirmed Friday.

The state awarded a second handgun contract in March to Kiesler.

Improprieties

The State Auditor came down hard on the Department of Administrative Services in a 2011 audit of master agreements.

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“DAS did not have adequate internal controls over master agreement and did not adequately monitor activity against master agreements,” the auditor wrote. “DAS established master agreements for services, but delegated oversight of related procurement to state agencies, resulting in improper use.”

Among audit findings, the Corrections Department improperly referred to a master agreement to get IT services without a contract. From fiscal 2000 through 2010, Corrections paid a vendor $22 million without a contract, the audit shows.

John Baldwin, who was then-assistant director, also signed away licensing fees that were supposed to come back to the state, auditors found.

The state auditor recommended DAS evaluate all master agreements and discontinue contracts awarded to multiple vendors for varying prices and contracts awarded without competitive bidding. Administrative Services shouldn’t delegate purchasing authority unless state agencies prove they can follow the rules, the audit states.

Auditors also told Administrative Services the agency needed to start sharing rebate money with other agencies that bought goods under master agreements.

Since the audit, the agency has hired two analysts to monitor compliance with procurement rules and created a new training program for all purchasing agents, Hunter said. Administrative Services also get copies of agencies’ internal purchasing policies to make sure they match state rules.

“DAS appreciates the content of the audit report, has assigned staff to address the recommendations included in the report and works to implement those recommendations into its procurement processes,” he said.

How vendors use contracts

The State of Iowa has spent more than $200 million with nearly 450 vendors who have master agreements to provide state agencies everything from squad cars and plumbing supplies to cookies and condoms. Here’s how a few agencies are using the deals.

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Contraceptives

Iowa signed a deal in 2013 with Pacific Dunlop Investments of Red Bank, N.J., to provide condoms and lubricants for state public health programs.

“In 2014, the Iowa Department of Public Health distributed about 800,000 condoms through contractors and our disease-prevention specialists,” Public Health spokeswoman Polly Carver-Kimm said. “Condom distribution is a required component of our HIV-prevention grant, and a recommended component of the STD grant from CDC (Centers for Disease Control and Prevention).”

The state contract lists $55,700 spent with Pacific Dunlop since July 1, 2013.

Online auction services

When state agencies want to sell stuff, they can list it on Govdeals.com under a master agreement in place since 2010.

Under a master agreement with the online auction site, Iowa agencies pay GovDeals.com a 5 percent commission on each item that sells and keeps the remainder of the profit. State agencies have paid GovDeals more than $67,000 in commissions over the past five years, state records show.

If total sales for the state top $1 million, GovDeals provides Iowa a rebate to be divided among selling agencies. The state received rebates in each of the past four years totaling $12,800.

University of Iowa Surplus started using GovDeals.com about six weeks ago after previously using only eBay and Heartland Recovery to sell used items, manager Steve Stange said.

“The benefit with GovDeals is the buyer has to handle all the shipping,” he said.

So far, they’ve sold lab equipment, computers, landscaping equipment and band uniforms, among other items, Stange said.

Online Course Material

Florida Virtual School, based in Orlando, is one of three companies with master agreements to provide academic course material to Iowa Learning Online, an Iowa Department of Education program that provides free online courses to students in partnering school districts, Education Department Spokeswoman Staci Hupp said.

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The state program licenses the content and repurposes it to create some of the online courses, which include foreign languages as well as math, science, social studies and English.

“ILO makes it easy to provide a wider variety of courses available for Iowa public, accredited non-public, and dually-enrolled home-schooled students, allowing local schools to provide courses or advanced subjects that otherwise would not be available,” the program’s website states.

Florida Virtual School has received $279,000 so far on this contract, inked last June.

Source: Iowa Department of Administrative Services

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