IT vendors rarely face debarment

IT vendors rarely face debarment

By Wilson P. Dizard III

GCN Staff

A GCN/State & Local survey of state procurement and information technology agencies has found that few states debar or suspend vendors that perform poorly. The debarment hammer falls only rarely on information technology vendors in those states where it is used.

Officials described the difficulties and disadvantages of suspending and debarring vendors, and said they prefer to use evaluations of past performance in determining what contractors are weeded out for repeated poor performance. They described various reasons for avoiding the use of debarment and suspension, including its administrative complexity and the fact that it can reduce the level of competition for state contracts.

States' increasing use of the Internet to solicit IT contractors has complicated the task of vendor selection, because states now are receiving more bids than in the past, many of them from unfamiliar or overseas vendors.

Twenty-eight states do not maintain debarment lists, GCN found, or don't have any currently debarred vendors. Twenty-one states do maintain lists of debarred or suspended vendors, while Oklahoma and the District of Columbia use the federal government's debarment list.

Rare practice

A GCN review of the debarment and suspension lists from 19 states that posted them on the Web or provided them under open records laws showed that eight states had debarment lists numbering 10 or fewer vendors each. IT contractors comprised fewer than 10 percent of all companies debarred or suspended, GCN found.

State debarment criteria vary widely, with one state, Wisconsin, imposing the sanction only on companies that fail to file affirmative action plans. New York law prevents the state from debarring or suspending vendors unless they violate state wage and hour statutes.

More typical reasons for debarring or suspending vendors include failure to perform according to contract requirements, criminal convictions, or shipping products late or not at all.

Tennessee regulations, for example, specify 15 potential reasons for debarment, including shipping damaged products or defective products, failing to respond to complaints, submitting incorrect bills, using unethical practices, misrepresenting merchandise and being convicted of contract-related crimes.

Similar regulations in Pennsylvania require the debarment of companies for embezzlement, theft, forgery, bribery or fraud, as well as violating antitrust, labor, civil rights, environmental or campaign finance laws.

States' reluctance to debar vendors even when they cause severe problems was highlighted recently when Mississippi settled a lawsuit against American Management Systems Inc. of Fairfax, Va., concerning the contractor's work on the state's tax system (see story, Page 7). The state settled the case for $185 million following a jury award of $474.5 million against the company.

Yet AMS will not only not be debarred from working for Mississippi, the company is now conducting a project for Mississippi's Environmental Quality Department under a contract that the state's chief information officer, David Litchliter, signed'the same day he signed the state's complaint against AMS.

Complex isues

Lynn Ainsworth, deputy division director in Mississippi's Information System Services Department, said, 'The work AMS is doing at DEQ is staffed by a different vertical unit of AMS. In our minds, because AMS is such a large organization, barring them from doing work in Mississippi would be too broad a strategy...Mississippi is hopeful that the situation with the tax commission would be an isolated incident. They have done other successful work in Mississippi.

'With the jury verdict and the settlement, we have tied a ribbon around that,' she added. 'That's a completed incident. We would want them to be able to bid on other work.'

Kansas CIO Don Heiman
emphasizes the importance of performance evaluations to weed out bad contractors.

Rich Varn, Iowa's CIO, echoed Ainsworth's reasoning. 'Say IBM screws something up. Are you going to debar IBM and never work with them again? What if it was only the team you were working with? Performance depends a lot on the various divisions within a company. Also, to confuse matters, there are lots of alliances and takeovers in the industry.'

Varn said the process of debarring a contractor would consume time and resources, and raise the question of how long a vendor would be debarred. Instead of the debarment axe, he said, 'you can just make past performance a factor in selecting contractors.'

Varn said AMS' work in Iowa had been satisfactory, and added, 'In Arkansas, their tax system upgrade is just dandy.' He observed that in the lottery field, if a contractor gets a reputation for having links to organized crime, it is shunned for a long time. 'We don't have anything comparable in our industry, to give them the IT death sentence.'

Cheryl Janey, vice president-state and local for AMS, defended her company's performance on the Mississippi contract and said she hadn't encountered debarment cases. 'I've frankly never heard of it happening,' she said.

Janey said most states judge contractors on the basis of past performance, including their performance on similar types of contracts and tasks of similar complexity. 'We always have to come up with a statement of qualifications.'

AMS, which does business in 43 states, finds that requirements for performance verification vary not only among states but among various departments within states. Janey said that while states evaluate contractors on past performance, contractors decide which contracts to bid on based on a number of factors, including the litigiousness of a state.

Kansas CIO Don Heiman said his state relies on evaluations of a contractor's past performance rather than a debarment process. The state frequently uses negotiated contracts; during the negotiations, past performance is a prominent factor.

'If a contractor's performance is poor, I take it into account,' Heiman said. 'That is a very effective way to hold contractors responsible. If they are a bad performer, I don't do business with them.'

Heiman noted that companies can protest his decisions not to award contracts to them, 'But I have a statute saying I can negotiate in the best interests of the state.' When he negotiates contracts, Heiman includes state attorneys and procurement officials in the meetings to head off contract protests.

Once a project is under way, he added, 'You're in the area of project management standards.' An effective project management program includes training state personnel and tracking vendor performance step-by-step to assure accurate evaluations for use in future procurement decisions, he said.

But, according to George Street, director of purchasing in Tennessee's General Services Department, 'From time to time you just get robbed.'

Street relies on the state's automated procurement system, called Tennessee Online Purchasing System, or TOPS, to help decide which companies to debar. The system automates the collection of complaints from state agencies about specific contractors. It allows the department to decide whether complaints flow primarily from a specific agency, possibly indicating a personality conflict between the vendor's staff and those particular officials, rather than poor performance.

'The big point we liked about TOPS is that it enforced compliance,' by blocking the use of vendors the state has debarred, Street said.

Street said Tennessee doesn't debar vendors for minor problems. 'We have a severity code. What we normally do is sit down with the vendors, go over the problem, and give them a reasonable opportunity to perform. You want to give them a chance and not just kick them out.' Tennessee has the ability to debar or suspend contractors for the purposes of a single commodity as well as for all sales.

Looking to change

Agencies in California and New York, the two most populous states, don't have the power to debar vendors for poor performance. Patricia Jones, manager of policy and legislation in California's General Services Department, said her agency is seeking that authority. 'We've been trying to get some laws changed so we can do that,' she said.

The District of Columbia, which now relies on the federal debarment list, plans to develop its own procedures for debarring and suspending vendors, said Janice Watkins, a contracting officer

Staci Stevens, contracting officer with Alaska's General Services Division, said the state has no vendors on its debarment list because 'it's hard to get on the list.' Like many states, Alaska provides hearings before a contractor can be suspended or debarred. 'A lot of problems are customer service-oriented,' she said.

'Sometimes it's a case of not giving the correct price,' Stevens said. 'I think it also may be a case of a captive audience. The state has a 5 percent preference for in-state vendors, and I think they take advantage of that. It's also because the Attorney General's office is bogged down with other issues. Procurement doesn't have priority.'

Helen Christy, assistant director of purchasing for Rhode Island's Administration Department, said weeding out bad vendors is 'a real challenge in the e-commerce world. It used to be that we had lists of potential bidders. Now bids are posted on the Internet. Over the Web we get hundreds of responses for a simple piece of equipment. We don't know anything about them.'

Rhode Island at times seeks out smaller bidders to meet affirmative action or other goals, but it generally requires that vendors have a six-month track record in business.

'If we have a vendor that has a history of not performing, we can suspend or debar them,' she said.

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