July 10, 2012

Contracting report shines light, casts shadows

A belatedly issued report on the state’s hiring of outside contractors is raising fresh questions about the integrity of the process.

“It’s no wonder that the Department of Administration tried to delay this report as long as possible,” state Sen. Julie Lassa, D-Stevens Point, said in a news release. “It shows that the state’s reliance on outsourcing to private contractors grew dramatically last year.”

The 2011 “Contractual Services Purchasing Report” was released July 2, more than eight months after its statutory due date and less than a week after the Wisconsin Center for Investigative Journalism wrote about its tardiness. Earlier inquiries from state lawmakers, union officials and the Center had gone unanswered.

DOA Jocelyn Webster blamed the University of Wisconsin System, which “was late in turning their submission for this report and DOA did not receive it until May 2012, which delayed the report.”

David Giroux, spokesman for the UW System, gives a different account:

“It looks like DOA requested the contractual services data from UW System in early December 2011, and we responded right away,” Giroux wrote in an email. Subsequently, “we discovered some formatting errors in our report that were affecting the final results. Those errors were corrected and the reformatted data was submitted to DOA in early March.”

Webster did not respond to a request to explain the discrepancies in these accounts.

The new report shows state agencies spent $363.8 million on outside service providers, a 26 percent jump, while the UW System’s spending on outside service contracts fell slightly, to $125.1 million. Giroux speculates that “reductions in contracting are the result of overall spending cutbacks at UW System institutions.”

State Sen. Julie Lassa: “It’s no wonder (the state) tried to delay this report as long as possible."

Leading the pack was the Department of Health Services, which spent $167.4 million on outside services in fiscal 2011, up from $111.1 million the year before. DHS spokeswoman Beth Kaplan said the department’s top two outside vendors were Hewlett Packard and Deloitte, hired to handle eligibility and claims processing tasks.

Kaplan noted that the Legislative Audit Bureau recommended in a December 2011 report “that DHS consider reductions in its outside contracted services as a possible cost savings option,” and said the department was taking steps in this direction.

As in years past, the report does not tell which companies got contracts, or list compensation rates. (Union officials have identified cases where contractors were paid upwards of $200 an hour.) And tens of millions of dollars are lumped into oblique categories like “Professional Services – General.”

But this year’s report, as posted on the DOA’s website, is even less user-friendly than usual. It bears no date, obscuring its tardiness. And the report was apparently printed out and scanned back in as as image file, making it impossible to copy and paste data. Special software is needed to extract this information.

“Seriously, do we want to have people jump through hoops to get at this stuff?” asks Duane Konkel, chief steward with the Wisconsin Professional Employees Council, a union representing state employees.

The DOA’s Webster responded that there was “no particular reason” why this was done other than ease of posting, and emailed a regular PDF version (posted here by the Center). The scanned version remained online.

The report lists 350 cost-benefit analyses done last year. In half the cases which include numbers for both contractors and state employees, contractors were the more costly option. But, as in years past, the report doesn’t say what the state decided.

Moreover, Lassa said the huge disparities in some estimates “makes me question whether state agencies are making a serious effort to do accurate comparisons.” In one case, the Department of Transportation put the cost of using state employees for a given job at $55.7 million, compared to $120,000 for an outside contractor.

It’s too bad this private contractor was not named, for the benefit of state residents who could use some cheap help around the house.

2 thoughts on “Contracting report shines light, casts shadows

  1. Beth Kaplan’s characterization of DHS regarding its use of contractors leaves out some important information.

    In August 2011, the USDA indicated that DHS was out of compliance with federal law and USDA was prepared to withhold millions of dollars of FoodStamp funding from DHS if DHS did not downsize its use of private contractors for this program by 40% by Dec. 1, 2012 (DHS had proposed only a 20% reduction).

    Here is an article about this:
    http://host.madison.com/ct/news/local/govt-and-politics/capitol-report/under-threat-of-losing-millions-state-decides-against-using-private/article_fa313361-8c2a-58bb-9e72-27f7dbf3549d.html

    In December 2011, the WI Legislative Audit Bureau published a report on the DHS Medical Assistance Program. This report found 1100 contractors working on the program in June 2011 (FTE equivalents).
    http://legis.wisconsin.gov/lab/reports/11-15full.pdf

    The report includes some disturbing information about irregular use of contractors in the program, and found that DHS expanded contracts very considerably without rebidding them. The LAB report specifically mentioned that they were concerned the state was not getting the work done in the most cost efficient way.

    Here’s a quote:
    “Neither the State’s accounting system nor the internal accounting
    system used by DHS contain sufficient information to apportion all
    Medical Assistance expenditures by subprogram. Specifically,
    neither accounting system could identify on which subprograms
    $2.0 billion in Medical Assistance funds, including over $1.4 billion
    in federal funds and $551 million in GPR, was spent in FY 2009-10.
    As noted, we had to rely on expenditure estimates from
    HP Enterprise Services and other sources to allocate estimated costs
    among the various Medical Assistance subprograms.”

    DHS continues to hire more contractors. In June 2012, a job advertisement for a contractor position at DHS related to Medicaid was listed on Craig’s list. (It has now been removed).

    Here is one blogger’s view of the situation:
    http://bdgrdemocracy.wordpress.com/2012/06/04/audit-shows-cost-misappropriation-lack-of-oversight-in-walker-dhs-privatization-push/

    We should ask whether DHS’ policy decision to make such heavy use of contractors, and wasteful private contracts, is in effect taking money away from programs for poor people.

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