By: Paul Emanuelli
This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In 2019 and 2020, the Office of the New York State Comptroller (Comptroller) released a series of reports that found widespread non-compliance in the New York State local government sector, including conflict of interest, fragmented purchasing, improper sole-sourcing, and outdated procurement policies and procedures identified in multiple municipal organizations, colleges, and school boards. These reports highlighted the need to regularly update procurement policies and practices in the public sector. The following discussion summarizes the highlights from that series of governance reports and serves as a useful reminder to public institutions across all jurisdictions of the importance of maintaining and updating procurement policies and practices and ensuring that all staff are trained on those rules.
In the April 2019 report on Cayuga County, the Comptroller found a failure to aggregate spending and seek competitive bidding and raised concerns that contract-splitting was undermining value-for-money. As the report stated, County officials did not seek competition “for aggregate purchases from nine vendors totaling approximately $746,000 or from 14 professional service providers totaling $2.7 million.” The Comptroller recommended improvements to consolidated spending, stating that the County should consider “the aggregate amount to be expended for the same or similar type of goods or services when determining whether competitive bidding is required and develop procedures for procuring professional services.”
In the May 2019 report on Etna Volunteer Fire Department, the Comptroller found that the Department failed to document whether it obtained quotes for low-value purchases and also raised concerns over conflicts in the awarding of a contract to a company owned by a Department official. As the report stated,
Department officials “generally did not document their efforts to obtain competition for purchases.” Furthermore, the Department’s board “did not establish policies or procedures for the procurement of goods and services”, and certain officers “did not disclose their interest in contracts.” The Comptroller recommended that Department officials “seek, and maintain documentation of, competition for purchases” and also adopt “policies and procedures for the procurement of goods and services” that include a code of ethics consistent with the New York State General Municipal Law.
In the June 2019 report on the Village of Bainbridge, the Comptroller raised concerns over conflict of interest after finding that a trustee who owned a private hardware store entered into 19 contracts with the municipality and sold it goods totaling just under $5,000 during the audited period. Even though the Comptroller found that the pricing for the goods was reasonable, this report underscored the strict standards that apply to prohibition of conflicts in public procurement, stating that although the review “did not reveal any irregularities in pricing, when officials, in their private capacities, conduct business with the village for which they serve, the public may question the appropriateness of these transactions” since such transactions “may create an actual conflict of interest or, at a minimum, the appearance of impropriety.” The report recommended that the Village adopt “procedures to help detect and prevent prohibited interests in contracts.”
In the August 2019 report on the Town of Van Etten, the Comptroller found that the Town failed to obtain quotes for small purchases. As the report stated, Town officials “purchased a fire truck for more than $300,000 without competitive bidding and did not seek competition for goods that fell below the bid limits or for professional services.” Furthermore, the report found that the Town supervisor “did not provide oversight of the bookkeeper’s recordkeeping and reporting of financial activity.” The Comptroller recommended that Town officials and employees “follow competitive bidding statutes, and policy requirements to solicit and document competition when making purchases” and that the Town provide “adequate oversight of the bookkeeper.”
In the September 2019 report on The Town of Seneca Falls, the Comptroller found that the Town failed to obtain quotes for contract awards. As the report stated, Town officials may not have appropriately procured “nine single or aggregate purchases over the competitive bidding thresholds (totaling $1.13 million)” and did not seek competition “for eight professional service contracts totaling $384,400.” The Comptroller recommended that Town officials consider “revising the procurement policy and procedures to specify documentation requirements, and ensure officials and employees follow competitive bidding statutes and policy requirements.” The report also recommended that the Town develop “procedures for procuring professional services to award contracts above a reasonable limit only after soliciting some form of competition, and provide guidance as to how such competition should be solicited, including written requests for proposals, written quotes or verbal quotes.”
In the October 2019 report on the Village of Red Hook, the Comptroller found that the Village failed to obtain required quotes or review the procurement policy on an annual basis as required by governing rules. The report found that Village officials failed to follow “the adopted procurement policy when acquiring goods” and failed to issue “request for proposals for professional service providers who were paid $191,575 for the audit period.” The Comptroller recommended that the Village adhere to the procurement policy and revise it “to include a competitive process for obtaining professional services.” The Comptroller also found that the Village board was not aware of its responsibilities under the General Municipal Law (GML) to review its procurement policies on an annual basis, stating that the board “did not review the procurement policy annually as legally required” and that the Comptroller’s review of the policy “showed that it was not up-to-date because the adopted policy thresholds for competitive bidding did not conform to the current higher GML bidding thresholds.” The report noted that “if the policy had been reviewed and updated as required it is likely that officials would have been aware of the requirements for bidding and obtaining quotes.”
In the October 2019 report on Genesee Community College, the Comptroller found that the College failed to obtain competitive quotes on multiple occasions, stating that officials “could not demonstrate that they complied with competitive bidding statutes when awarding two contracts totaling $549,000 and did not seek competition as required by the procurement policy for five professional service contracts totaling $2.8 million and nine purchases totaling $125,000.” The review also found that the College president “received approximately $142,000 in monetary benefits over six years that were not clearly stated by his employment contract.” The Comptroller recommended that the College purchasing agent “monitor compliance with the procurement policy and statutory bidding requirements”, that the College ensure “cash disbursement duties are adequately segregated and/or adequate compensating controls are in place”, and that the College clearly document “all Board-approved compensation and benefits in the President’s employment contract.”
In the December 2019 report on Herkimer County Community College, the Comptroller found that the College had an outdated purchasing policy and failed to obtain quotes as required in the award of contracts. As the report stated, the College purchasing policy “is outdated and inconsistent with purchasing procedures and is not communicated to all College staff involved in the purchasing process”, and the College policies and procedures “do not address the solicitation of competition for professional services and insurance.” The report also found that the College “purchased goods and services totaling $474,514 and professional services totaling $702,016 without seeking competition.” The Comptroller recommended that the College review and update its purchasing policy and procedures “to ensure they are consistent, and provide detailed guidance for procuring professional services and insurance” and ensure those updated policies and procedures “are distributed to all staff involved in the purchasing process.” The report also recommended that “College officials and employees use competitive methods when procuring goods and services in accordance with General Municipal Law and the College’s purchasing policy and procedures.”
In the February 2020 report on Sauquoit Valley Central School District, the Comptroller found that the District failed to obtain quotes or establish a proper procurement policy. As the report stated, District officials did not seek competition “for seven professional service providers who were paid $325,131 during our audit period” and failed to obtain written or verbal quotes “for the purchase of goods and services from five vendors paid $267,306.” The report also noted that the District board “did not review and update the District procurement policy.” The Comptroller recommended that the District use “a request for proposal (RFP) process or solicit quotes to seek competition when procuring professional services”, that it obtain “verbal and written quotes as required by the procurement policy”, and that it document “all purchase decisions including the justification for using sole source vendors.” The report also stated that the District should “review the procurement policy and update it as needed” on an annual basis.
In the March 2020 report on the Town of Cicero, the Comptroller found that the Town failed to seek bids on multiple occasions. As the report stated, Town officials “did not competitively bid contracts for paving services and brush collection totaling $471,700”, that they did not “seek competition for 10 professional services totaling $1.1 million”, and that they did not “obtain quotes as required by the procurement policy for eight purchases totaling about $115,000.” The Comptroller recommended that the Town establish “procedures to ensure that officials and employees follow competitive bidding statutes and procurement policy requirements” and that the Town review and update “the purchasing policy and procedures to ensure they include detailed guidance for procuring professional services at reasonable intervals.”
In the March 2020 report on Brewster Central School District, the Comptroller found that the District sole-sourced contract awards for professional services. As the report noted, “District officials did not seek competition for professional services from three of the 10 professional service providers reviewed. These providers were paid $696,291 during the audit period.” The Comptroller recommended that the District board ensure “that officials comply with the purchasing policy when procuring professional services” and that District officials conduct “a periodic review of professional service providers to determine the need for new requests for proposals (RFPs).”
In the March 2020 report on Buffalo Academy of Science Charter School, the Comptroller found that the School failed to follow a proper contract approval process and engaged in improper sole-sourcing. The report recommended that the School’s board establish proper procurement policies for internal approvals and for seeking quotes before awarding contracts, even for smaller purchases. As the Comptroller noted, School officials “made 26 purchases totaling $289,500 without using quotes, as recommended by the School’s procurement procedures.” The report also recommended an update to the procurement policy, noting that while the “procurement policy identifies certain responsibilities and functions of School officials involved with the procurement process, it does not provide comprehensive guidance on methods of procuring and approving the purchase of goods and services.” The Comptroller rejected the assertion made by School Board members that “obtaining quotes for purchases below $20,000 is unreasonable and time-consuming, despite this being recommended in the School’s procurement procedures”, finding that “when officials do not seek appropriate competition and the Board does not properly approve contracts, they lack assurance that the procurements are made in the most economical manner.” As the report concluded, value-for-money considerations trump expedience in public procurement.
In the March 2020 report on Copenhagen Central School District, the Comptroller found that the District failed to seek quotes for low-value purchases. As the report stated, the “review of 24 purchases totaling about $128,000 found that District officials did not seek competition by obtaining oral or written quotes for 18 purchases (75 percent) totaling $81,500.” The Comptroller also found that District officials “did not seek competition for services from five of the six professional service providers reviewed” and that these providers “were paid $457,700 during the audit period.” The Comptroller recommended that the District obtain “written and verbal quotes as required by the District’s procurement policy and ensure that all proper documentation is maintained” and that it periodically “issue requests for proposals (RFPs) to solicit competition when seeking professional services.”
In the March 2020 report on Kings Park Central School District, the Comptroller found that the District failed to periodically seek quotes for professional services as required by applicable procurement rules. The report noted that District officials “did not periodically seek competition for services from five professional service providers who were paid a total of $911,795 during our audit period.” The Comptroller recommended that the District comply with its procurement of goods and services policy when procuring professional services and that it consider “updating the procurement policy to establish a reasonable interval for how frequently proposals should be solicited when procuring professional services.”
As these reports from the Office of the New York State Comptroller illustrate, non-compliance in public sector procurement remains a widespread concern. Public institutions need to update their procurement policies and practices to better ensure compliance with their legal obligations in the expenditure of public funds and award of contracts. This series of reports serves as a useful reminder to public sector institutions across all jurisdictions of their obligations to ensure compliant procurement practices.
