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Auditors To Legislature: Tighten Overused Bidding Loophole

Jon Lender

Government Watch

6:04 PM EST, January 26, 2013

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The General Assembly should consider limiting what qualifies under law for a waiver for competitive bidding on state contracts, state auditors John C. Geragosian and Robert M. Ward said in their annual report to lawmakers, released Friday.

The law gives discretion to the governor's budget office, the Office of Policy and Management, in granting waivers for competitive bidding practices on personal service agreements. Any state agency's contract for more than $20,000 must be put out for bids, but OPM can grant a waiver under special conditions that are specified in the law. The problem, the auditors said, is that the conditions cited for granting bidding waivers aren't always so special.

One "often-used" condition for a waiver — "services that require a contractor with special capabilities or experience" — is overly broad and "could conceivably be argued to exist for any personal services agreement that is entered into with a contractor somewhat experienced in a given field," the auditors said.

As a result, they argue, invoking that condition "may limit competition and effectively override attempts by the General Assembly to restrict the use of waivers from competitive bidding."

The report went on to say: "Ultimately, whenever a competitive bid process is not used by a state agency when entering into a personal service agreement, it cannot be determined whether the state agency received the most favorable prices for the contracted service. Competitive bidding also helps to make sure that state contracts are awarded in a fair manner to vendors competing for state business."

Well, here's a coincidence: On the very day that the auditors urged legislators to close that loophole, The Courant obtained a copy of a Dec. 26 memo from the General Assembly's own Office of Legislative Management, which sought to invoke the very same "special capabilities or experience" condition to waive bidding on a contract with a Hartford law firm that is representing the Legislative Commissioner's Office.

(The legislative management office is subject to a separate bidding statute from the one cited by the auditors concerning executive-branch agencies, but the $20,000 threshold and conditions for waivers are essentially the same in both.)

The Hartford firm involved is O'Brien, Tanski & Young. What it's doing is hush-hush, but sources say that it involves a request by federal criminal investigators for information from the Legislative Commissioner's Office — which produces the wording for the bills that the legislature votes on — in an ongoing probe into an alleged conspiracy to kill a new tobacco tax under consideration last year by lawmakers.

Last October, "it was determined that the Legislative Commissioner's office ... would require legal representation in regards to an inquiry by the federal government," and O'Brien, Tanski & Young was recommended by the office of Attorney General George Jepsen for the job, according to the memo by John Harnick, the legislative management office's financial administrator.

And so a contract was signed Oct. 17 between the General Assembly and the law firm — without bidding. No bids were required because "the expenditures made under this contract were capped at $20,000 so as not to conflict with the purchasing authority provided" under the law.

However, now the work by O'Brien, Tanski & Young apparently adds up to more than the $20,000 limit, and a waiver to bidding is needed to continue paying it without soliciting proposals from other firms. Harnick's Dec. 26 memo was accompanied by a request for a "waiver from competitive bidding" to keep paying the lawyers' bills, up to a maximum of $50,000.

The justification for the waiver, according to Harnick's request, was that "the services that will be provided by O'Brien, Tanski, and Young... have been deemed unique and specially skilled services." And how did the firm become specially skilled? By getting the contract without bidding in October, and then working on the case.

Harnick used more words, but said pretty much the same thing: "The legal representation being provided ... is in regards to a confidential matter, the need for legal representation is extremely urgent, and O'Brien, Tanski and Young has developed unique insight into the matter as they have been providing legal representation on this matter from the inception of the issue."

The waiver has not yet been approved; it was still in the process as of Friday, said James P. Tracy, executive director of the Office of Legislative Management. Approval of four of the six top elected legislative leaders, including one of the two Republicans among them, is required for such a waiver to be granted.

Tracy declined to comment on the reasons for the legal representation of the Legislative Commissioner's Office, and also had nothing to say on the auditors' recommendation that lawmakers tighten up the very loophole that they are considering using to pay up to $50,000 in legal bills without going through a bidding process.

Courant columnist Kevin Rennie first disclosed the Hartford law firm's representation of the Legislative Commissioner's Office last week, when he wrote in his Daily Ructions blog about the contract's costs, as well as the effort by legislative officials to keep secret the reasons for the hiring of the lawyers.

Rennie wrote: "Documents obtained by Daily Ructions reveal that those bureaucrats have gone to extraordinary lengths to keep information from taxpayers about the actions they are taking to protect the interests of their agencies and themselves at significant public expense. In emails, they discuss ways of wording their communications in such a general way as to provide no useful information that would inform a member of the taxpaying public who might seek access to their emails or letters through the Freedom of Information Act.

For example, according to Rennie: "OLC's Larry Shapiro asked in an October 10, 2012 email to Stephen V. Manning, of O'Brien, Tanski & Young, if his inquiries of possible conflicts with other State of Connecticut clients 'be done in a way that does not disclose the name of our office (LCO) and the nature of the matter? We would like to keep this confidential.'"

On Wednesday, a Waterbury tobacco shop owner pleaded guilty in federal court to participating in the alleged conspiracy. The federal probe has netted eight indictments and three convictions so far.

Conspirators were accused of raising $27,500 in campaign contributions, disguising where the money came from, and steering it in 2011 and 2012 to the unsuccessful congressional campaign of former state House Speaker Christopher Donovan, a Democrat.

The payments allegedly were part of a failed effort to kill a tax that now has eroded the competitive advantage that so-called "roll-your-own" tobacco stores had over the sellers of packaged cigarettes. Roll-your-own stores sell loose tobacco and let customers pay to use machines that roll the tobacco into cigarettes.

Donovan denies knowledge of or involvement in the conspiracy. Neither he, nor any other elected official, is charged in the case as the federal investigation continues.

Meanwhile, the auditors also made five other recommendations in their report for legislative action, including one to "encourage timely reporting by agencies of matters that may currently be under investigation" and another to "consider including agency human resources directors as mandated reporters of ethics violations."

Jon Lender is a reporter on The Courant's investigative desk, with a focus on government and politics. Contact him at jlender@courant.com, 860-241-6524, or c/o The Hartford Courant, 285 Broad St., Hartford, CT 06115 and find him on Twitter@jonlender.