An Evaluation of Transparency in State Electronic Procurement
Wednesday, April 27, 2016
Alex Borowski, Heather Dickson, James Genovese, Brian Gilbert Guy Kamdem Kouam, Tatenda Makanza, Luis Velez Pretelt
Table of Contents Executive Summary ....................................................................................................................... 1 Introduction ................................................................................................................................... 2 The Project ..................................................................................................................................... 2 Evaluation Criteria ......................................................................................................................... 4 Main Findings ................................................................................................................................. 5 Centralization .......................................................................................................................... 6 Access to Information ............................................................................................................. 7 Planning ................................................................................................................................ 10 Bidding .................................................................................................................................. 12 Evaluations ............................................................................................................................ 14 Implementation and Monitoring .......................................................................................... 17 Best Practices ............................................................................................................................... 19 Recommendations ....................................................................................................................... 20 Conclusion .................................................................................................................................... 21 Bibliography ................................................................................................................................. 23 Appendix 1 ................................................................................................................................... 24 Appendix 2 ................................................................................................................................... 26 Appendix 3 ................................................................................................................................... 32
i Table of Figures Figure 1: The 17 Components of Transparency in E-­‐Procurement ............................................ 3 Figure 2: Overall Scores for Transparency in Nine States ......................................................... 6 Figure 3: Degree of Centralization of Nine States’ e-­‐Procurement Systems ............................. 7 Figure 4: State Scores on the Access to Information Category ................................................. 8 Figure 5: Breakdown for Access to information Scores by Subsection ..................................... 9 Figure 6: Scores in the Planning Category .............................................................................. 10 Figure 7: Planning Score by Categories .................................................................................. 11 Figure 8: Overall Scores for the Bidding Category .................................................................. 12 Figure 9: Breakdown of the Subsections of the Bidding Category .......................................... 13 Figure 10: Overall Scores for the Evaluations Category .......................................................... 14 Figure 11: Breakdown of the Subsections of the Evaluation Category ................................... 16 Figure 12: Overall Scores for Implementation and Monitoring .............................................. 17 Figure 13: Implementation and Monitoring Score by Categories ........................................... 18 Figure 14: Best Practices in E-­‐Procurement ........................................................................... 19 Figure 15: Recommendations for Increasing Transparency in e-­‐Procurement ........................ 21 ii Executive Summary Transparency International USA (TI-­‐USA) is a non-­‐profit organization that supports the integrity of governing institutions and combats corruption in the United States and internationally. TI-­‐
USA, having already examined the electronic procurement (e-­‐procurement) websites of the four most populous states, commissioned the assessment of the transparency of an additional nine U.S. states: Georgia, Illinois, Massachusetts, Michigan, North Carolina, Ohio, Pennsylvania, Tennessee, and Virginia. 1 This report will summarize the findings of the transparency assessment of the additional nine states and highlight best practices and recommendations for the states covered in this study. TI-­‐USA will use the results of this report to advocate for greater transparency at the state level and encourage a nationwide understanding of transparent procurement. Using a questionnaire developed by TI-­‐USA, data for this report was gathered through a systematic examination of the nine e-­‐procurement websites and interviews with state procurement officials. Based on the scoring methodology developed by the research team, states were evaluated on a 100 point scale, with 0 points indicating a completely non-­‐
transparent e-­‐procurement website(s) and 100 points indicating a completely transparent procurement website. States were evaluated on six categories: Centralization, Access to Information, Planning, Bidding, Evaluations, and Implementation and Monitoring. Details on the methodology, scoring criteria, and individual state scores are included as appendices. The report identifies the best practices of the nine states in the study. Based on the weaknesses of these states, this report recommends the following guiding principles for improving the transparency of e-­‐procurement systems: 2
• Collect and publish beneficial ownership on the procurement website. All nine states fail to collect and publish beneficial ownership information online.
• Develop an online system for publishing planning information for large value procurements and for handling vendor or public complaints. • Create an online Freedom of Information Act (FOIA) portal directly on the e-­‐
procurement website.
1
TI-­‐USA has already conducted preliminary research on California, Florida, New York, and Texas. 2 Beneficial ownership laws require vendors to declare all the beneficiaries of a specific business, including all owners or partners, even if such partners are indirectly connected through a shell company. The collection of this information is important to fight collusion among bidders, or between bidders and government officials.
1 I. Introduction In 2011 state and local authorities in the United States spent $1.7 trillion to procure goods and services.3 These large expenditures are attractive targets for corrupt actors. Corruption can arise in any phase of the procurement process, and poor e-­‐procurement systems can lead to government waste and detrimental overspending.4 A transparent and open purchasing process is essential to ensure the efficient delivery of public goods and services, maximize the value of public funds, and create fair private sector competition. In an effort to increase transparency, many U.S. states have transitioned to electronic procurement or e-­‐procurement systems, which, in some cases, have replaced the paper-­‐based process. These systems increase the transparency by providing the public access to each phase of the procurement process, beginning with the needs assessment and continuing with the solicitation, evaluation, and execution of the contract.5 As a result of the transition to electronic procurement (e-­‐procurement) in the United States, individual U.S. states have adopted their own unique e-­‐procurement systems with varied levels of public access. Some states use different bidding portals for specific departments and others are subject to distinct laws that require different documents to be publicly available.
This project seeks to evaluate the transparency of e-­‐procurement websites of nine states selected by TI-­‐USA based on population size: Georgia, Illinois, Massachusetts, Michigan, North Carolina, Ohio, Pennsylvania, Tennessee, and Virginia. The first section of the report details the methodology used to assess the e-­‐procurement websites of the nine states. The second section of the report compares and contrasts the procurement systems of each state in six areas that Transparency International-­‐USA (TI-­‐USA) considers as critical for transparency: Centralization, Access to Information, Planning, Bidding, Evaluation, and Implementation and Monitoring. In the final section of the report, we provide 10 recommendations concerning based on the six categories. These recommendations will increase transparency in state e-­‐procurement websites. Detailed information on each individual state and the grading criteria are included as appendices. II. The Project The team collected the data for this project using a combination of online research and telephone interviews with state procurement officials. Based on the team’s online research of state e-­‐procurement websites, team members completed a 38-­‐question survey provided by TI-­‐
3
Daniel Bromberg and Aroon Manoharan, “E-­‐procurement Implementation in the United States: Understanding Progress in Local Government,” Public Administration Quarterly 39, no. 3 (Fall 2015): 361.
4
“Bribery in Public Procurement: Methods, Actors, and Counter-­‐Measures,” Organization for Economic Cooperation and Development, last modified May 31, 2007: 9. http://www.oecd.org/daf/anti-­‐bribery/anti-­‐
briberyconvention/briberyinpublicprocurementmethodsactorsandcounter-­‐measures.htm. 5
Bromberg and Manoharan, 364.
2 USA (Appendix 1). The survey consisted of 17 components related to the state procurement process (see Figure 1).
Figure 1: The 17 Components of Transparency in E-­‐Procurement 1. Centralization Number of procurement websites 2. Laws Online access to relevant laws and regulations 3. Planning Documents Budget, location, and timeframe for large value procurements 4. Public Hearings Notification of hearings on proposed procurements 5. Bid Advertisements Invitations to bid and Requests for proposals 6. Bidding Documents Project description, terms of reference, technical specifications, evaluation criteria 7. Bids Received Vendor details, bid amounts, and beneficial ownership information 8. Bid Evaluations State comments on submitted bids 9. Awards Announcement of the vendor with the winning bid 10. Complaints Vendor or public protests of an awarded contract 11. Complaint Responses State responses to protests of an awarded contract 12. Contracts Awarded contracts published online 13. Contract Amendments All changes to a contract 14. Contract Evaluations State evaluations of the vendor 15. Archives Records of prior contracts and solicitations available online 16. Search Ability to sort procurements by department, year, location, and vendor 17. Freedom of Information Act A single online portal to request documents Data for this study was also collected through telephone interviews and email correspondence with procurement officials. These interviews helped to confirm and build upon the online research. The findings from the questionnaire and interviews were collated into a single Microsoft Excel workbook per state, and were used to analyze the e-­‐procurement websites of 3 the nine states. The team ranked the strongest and weakest states in terms of the overall transparency of their e-­‐procurement processes. In addition, the team identified the best practices of each state’s e-­‐procurement system and made recommendations for developing a transparent e-­‐procurement system that can be adopted by all states.
III. Evaluation Criteria To assess the level of transparency of the different state e-­‐procurement websites, the team has developed a scoring criteria that grades states on a 100-­‐point scale, with 0 points indicating a non-­‐transparent e-­‐procurement website and 100 points indicating the most transparent website. The assessment is based on six categories: Centralization, Access to Information, Planning, Bidding, Evaluations, and Implementation and Monitoring. The first two categories, Centralization and Access to Information, are based on specific elements of the questionnaire, and the remaining four categories were based on the procurement process as outlined in TI-­‐
USA’s Procurement Monitoring Guide.6 Centralization, the first category, is an important attribute of a transparent e-­‐procurement system. If all procurement activity for every state agency is conducted and accessible on one electronic portal, the public can easily monitor the process to ensure the efficient use of government funds. In this report, Centralization is worth 15 points, the most heavily weighted single category. States can only lose points for having a decentralized system in this category. Separate criteria were developed for the subsequent sections. This prevents states from being overly penalized for having decentralized websites.
Access to Information, the second category, is divided into four components: Laws and Regulations, Search, Archiving, and Freedom of Information Act (FOIA). In order to have a transparent procurement process, vendors and the public need to understand what laws govern the e-­‐procurement. Aside from centralization, this is the only other component weighted at more than 5 points, as it lays the foundation for the entire e-­‐procurement process. The public and vendors should be able to search for current and previous invitations to bid and contracts, and be able to easily request documents that might not be posted on the websites. As a state increases the amount of procurement information available online, vendors and the public can better understand how their tax dollars are being spent. Planning, the third category, represents the first stage of the procurement process and includes the Planning Documents and Public Hearing components. Planning documents are the first record of a state’s evaluation of the need, cost, and timeframe for a large value procurement project.7 When planning documents are published online, civil society organizations and the 6
“Procurement Monitoring Guide: A Tool for Civil Society,” Transparency International-­‐USA, accessed April 16, 2016: 27. http://monitoring.transparency-­‐usa.org/flipbook/guide/. 7
The phrase, large value procurements, is commonly used to describe high-­‐cost state purchases. The monetary threshold for large value purchases varies by state.
4 public can better monitor the project for potential abuses and inefficiencies. Additionally, public hearings provide citizens with a voice in large value procurements that use their tax-­‐
payer money and may affect their livelihoods. States should advertise public hearings on their websites and post meeting minutes or transcripts of public hearings.
Bidding, the fourth category, is the next stage in the procurement process. This category includes scores for Bid Advertisements, Bidding Documents, and Bids Received. After a state department or agency has determined the need for a project, the department advertises the solicitation on the e-­‐procurement website. These posts should describe the project and provide all agency contact information. Bidding documents, such as the terms of reference, technical specifications, and evaluation criteria, provide the public and vendors with additional insight into the procurement process. Posting bid advertisements and bidding documents online ensures that all possible vendors can participate in the procurement process, allowing for a competitive environment that is fair for the vendor and cost-­‐effective for the public.
Evaluation, the fifth category, includes the Bid Evaluation, Awards, Complaints, and Complaint Response components. The Evaluation category is the third stage of the procurement process. In this stage, bids are assessed, the contract is awarded, and vendors can potentially challenge the state’s decision on a contract award. This stage is critical because the public should have the opportunity to ensure that the contract has been awarded to the best bidder. Implementation and Monitoring, the final category, and last stage of the procurement process, consists of the Contract, Contract Amendment, and Contract Evaluation components. States should publish the terms of the contract and any amendments so that the public can ensure that the initial goal of the procurement has been met. This section also includes the state’s evaluation of the vendor’s performance on a contract. Each component of the categories described above, except for Centralization and the Laws and Regulations component, is worth 5 points. The scoring methodology for these components is tailored to the criteria they are measuring. Most are scored on a continuous scale of 0 points to 5 points, with partial credit possible for positive progress on the subject. Other questions are scored on an all-­‐or-­‐nothing basis. A state can receive either the full 5 points or no points. In contrast, other questions are scored on an itemized rubric, in which there are specific items that a state must publish online to receive a full score. For additional information on the scoring criteria, see Appendix 2.
IV. Main Findings Michigan has the most transparent e-­‐procurement system, receiving the highest overall score of 64 points. The four most transparent e-­‐procurement systems in our study—Michigan, Georgia, Pennsylvania, and Virginia—have centralized or partially centralized websites, indicating that centralization may be a key factor for determining transparency. Decentralized systems, such as Ohio, are less transparent. Illinois is an outlier in this study because its e-­‐
5 procurement system is relatively transparent despite its decentralized e-­‐procurement system. Illinois’ e-­‐procurement system is more transparent than Tennessee’s program, which does have a centralized procurement system. A tabulation of each state’s score is depicted in Figure 2 below and a one-­‐page summary of each state is provided in Appendix 3.
Figure 2: Overall Scores for Transparency in Nine States Points
Total Score
100
90
80
70
60
50
40
30
20
10
0
63
49
52
64
56
44
59
48
62
States are highly transparent in the bidding stage of the procurement process, which includes advertising bids, posting bidding documents, and publishing bids received. States have variable scores in the Access to Information and Implementation and Monitoring categories. Some states have e-­‐procurement systems with user-­‐friendly search functions, procurement laws and regulations available on their websites, and an online FOIA mechanism. Other states could make improvements in this category. In the Implementation and Monitoring category, Georgia performs well because it published all contracts and amendments, while Tennessee does not post this information online. States in this study consistently receive poor scores in the Planning category because they do not publish planning documents for large value procurements and are inconsistent in providing notices for public hearings. a. Centralization
Scores in the Centralization category are based on the number of websites that the state uses for e-­‐procurement. States earn full points for using one website for e-­‐procurement, partial credit for using two websites (partly centralized) and no points for operating more than three websites (decentralized).
6 Figure 3: Degree of Centralization of Nine States’ e-­‐Procurement Systems Centralization
15
Points
12
9
15
6
3
8
15
15
15
15
8
0
0
0
In this assessment, five states—Michigan, Pennsylvania, Tennessee, Virginia and North Carolina—have fully centralized systems. Georgia’s e-­‐procurement system is partly centralized; the Department of Transportation maintains a separate bidding portal. Massachusetts has one statewide portal currently, but the Division of Capital Asset Management is in the process of building its own electronic system to replace their current off-­‐line process. Illinois and Ohio have decentralized e-­‐procurement systems. In the case of Illinois, the e-­‐procurement system was intentionally decentralized to deter corruption.
b. Access to Information State procurement websites should provide access to documentation on current and past procurement activity and relevant laws and regulations. The websites should have a functioning search mechanism to access archives of prior purchases. In the event that some procurement documents are not available online, transparent e-­‐procurement systems feature a single FOIA portal to request these documents. The Laws and Regulations component has two sub-­‐components: the availability of procurement laws and regulations and the existence of a legal requirement to publish procurement documents online. The scores for a state’s search mechanism reflect the ability to search for procurement documents on the e-­‐procurement website by state agency, location, vendor, and year. 7 States’ performance in the Access to Information category varies from average to high with scores between 10 and 22 points, as shown in Figure 4. North Carolina, Georgia, Illinois, and Michigan receive high scores for posting the full text of the procurement laws online. Massachusetts also includes the full text of procurement laws and regulations, but loses points on the archiving and FOIA criteria.
Figure 4: State Scores on the Access to Information Category Access to Information
25
Points
20
15
10
5
22
15
18
20
11
13
16
17
18
0
Scores for the components of the Access to Information category are depicted in Figure 5. In terms of search capability, the websites for Massachusetts, Pennsylvania, and Tennessee allow users to navigate open and closed solicitations by vendor, year, state department, and location. Although each state has a FOIA process to give the public access to procurement records, only Georgia, Virginia, and Ohio have an online public record request portal available through their e-­‐procurement websites.8 However, Ohio’s procurement system loses points, as the state has separate websites for transportation, paper, and construction bids, and those respective departments only provide contact information for FOIA requests.9 8
The equivalent of FOIA in Massachusetts is a Public Records Act; Pennsylvania has a “Right-­‐to-­‐Know-­‐Law”; Georgia has an Open Records Act. 9
For states with more than one procurement site, each site was scored separately. An average of those scores was taken to establish a single score for that state in each category.
8