Wagner Finds PLCB in Compliance
HARRISBURG, Pa., April 29, 2009-- Auditor General Jack Wagner said today that the Pennsylvania Liquor Control Board did not violate state law but that it did exercise poor judgment in awarding a $173,820 employee training contract to the husband of a PLCB regional manager, creating the appearance of a conflict of interest.
“In awarding a contract to the spouse of one of its regional managers, the PLCB should have anticipated the reasonable public questioning that would result over a potential conflict of interest, regardless of whether that conflict was an actual conflict or the appearance of a conflict,” Wagner said.
Because of the appearance of a potential conflict and other red flags, such as the wide disparity in cost proposals submitted by prospective vendors, the PLCB should have seriously reconsidered its decision to award the contract at all and done the training in house, or rejected all proposals and started over, Wagner said.
The Department of the Auditor General conducted the examination at the request of the PLCB, after concerns were raised about a potential conflict of interest in the awarding of the retail staff professional development program contract to Solutions 21, a Pittsburgh consulting firm.
Wagner commended the PLCB for recognizing the value of an independent review of the procurement process and for its cooperation in the examination, including providing immediate and complete access to all of the relevant documents and personnel, which enabled the Department of Auditor General to complete the examination in fewer than five weeks.
Investigators found no evidence that the Western regional director used the authority of her employment or confidential information to assist her husband’s business in obtaining the contract, Wagner said.
In her interview, the Western regional director said that her husband established his business, Solutions 21, prior to their marriage; she does not have any financial interest in the company; and that she was aware her husband’s company was going to submit a proposal in response to the RFP issued by the PLCB but she and her husband had agreed not to discuss it.
Wagner said his department’s review of Solutions 21’s corporate documents and the Western regional director’s statements of financial interest found no evidence to contradict her statements. The report notes that the investigators’ ability to determine the substance of communications between a married couple is obviously limited.
Although the PLCB followed the law in awarding the contract, Wagner said, red flags throughout the process should have caused the PLCB to rebid the contract or consider not awarding it at all.
One of the unsuccessful vendors, Alutiiq Business Services LLC, submitted a proposal listing a current PLCB employee, not the Western regional director, as the on-site staff person required under the contract. The PLCB’s chief counsel became aware that the employee was listed on the proposal and recommended that, due to a potential violation of state law, Alutiiq replace the PLCB employee with another individual, which it did, before the proposals were scored.
Wagner said his investigators could not determine if the PLCB employee provided Alutiiq with confidential information that could have assisted it in preparing its proposal.
Of additional concern, Wagner said, is that one of the members of the evaluating committee stated that she had adjusted her scores to ensure that her top three choices moved forward in the contracting process, even though it did not appear to affect the overall outcome.
“Although this contract was awarded according to the letter of the law, there are several incidents that occurred that raise serious concerns and put the PLCB’s procurement procedures in question,” Wagner said.
Wagner said the examination uncovered several internal control deficiencies within PLCB. His report made five recommendations to improve the PLCB’s management controls, procurement policy and operational procedures, and three recommendations related to the prevention of conflicts of interest. He said the PLCB should:
Develop written policies for areas of the procurement process not adequately addressed in the Procurement Handbook issued by the state Department of General Services.
Conduct a pre-proposal conference for every request for proposals (RFP) issued, or formally document why one is not necessary.
Adhere to the suggested 30-day minimum time period between the issuance of the RFP and the due date for the vendor proposed as suggested by the Procurement Handbook, or formally document why the time period was adjusted.
Provide written instructions for members of future evaluation committees to complete the detailed scoring sheets.
Formally document all evaluation committee meetings and all decisions made by the executive committee and legal counsel within the contract procurement file.
Exercise good judgment when awarding contracts to avoid even perceived conflicts of interest.
Ensure that management and employees understand and comply with laws and policies pertaining to conflicts of interest.
Require the members of future evaluation committees to properly document changes on their individual scoring sheets.
“In awarding a contract to the spouse of one of its regional managers, the PLCB should have anticipated the reasonable public questioning that would result over a potential conflict of interest, regardless of whether that conflict was an actual conflict or the appearance of a conflict,” Wagner said.
Because of the appearance of a potential conflict and other red flags, such as the wide disparity in cost proposals submitted by prospective vendors, the PLCB should have seriously reconsidered its decision to award the contract at all and done the training in house, or rejected all proposals and started over, Wagner said.
The Department of the Auditor General conducted the examination at the request of the PLCB, after concerns were raised about a potential conflict of interest in the awarding of the retail staff professional development program contract to Solutions 21, a Pittsburgh consulting firm.
Wagner commended the PLCB for recognizing the value of an independent review of the procurement process and for its cooperation in the examination, including providing immediate and complete access to all of the relevant documents and personnel, which enabled the Department of Auditor General to complete the examination in fewer than five weeks.
Investigators found no evidence that the Western regional director used the authority of her employment or confidential information to assist her husband’s business in obtaining the contract, Wagner said.
In her interview, the Western regional director said that her husband established his business, Solutions 21, prior to their marriage; she does not have any financial interest in the company; and that she was aware her husband’s company was going to submit a proposal in response to the RFP issued by the PLCB but she and her husband had agreed not to discuss it.
Wagner said his department’s review of Solutions 21’s corporate documents and the Western regional director’s statements of financial interest found no evidence to contradict her statements. The report notes that the investigators’ ability to determine the substance of communications between a married couple is obviously limited.
Although the PLCB followed the law in awarding the contract, Wagner said, red flags throughout the process should have caused the PLCB to rebid the contract or consider not awarding it at all.
One of the unsuccessful vendors, Alutiiq Business Services LLC, submitted a proposal listing a current PLCB employee, not the Western regional director, as the on-site staff person required under the contract. The PLCB’s chief counsel became aware that the employee was listed on the proposal and recommended that, due to a potential violation of state law, Alutiiq replace the PLCB employee with another individual, which it did, before the proposals were scored.
Wagner said his investigators could not determine if the PLCB employee provided Alutiiq with confidential information that could have assisted it in preparing its proposal.
Of additional concern, Wagner said, is that one of the members of the evaluating committee stated that she had adjusted her scores to ensure that her top three choices moved forward in the contracting process, even though it did not appear to affect the overall outcome.
“Although this contract was awarded according to the letter of the law, there are several incidents that occurred that raise serious concerns and put the PLCB’s procurement procedures in question,” Wagner said.
Wagner said the examination uncovered several internal control deficiencies within PLCB. His report made five recommendations to improve the PLCB’s management controls, procurement policy and operational procedures, and three recommendations related to the prevention of conflicts of interest. He said the PLCB should:
Develop written policies for areas of the procurement process not adequately addressed in the Procurement Handbook issued by the state Department of General Services.
Conduct a pre-proposal conference for every request for proposals (RFP) issued, or formally document why one is not necessary.
Adhere to the suggested 30-day minimum time period between the issuance of the RFP and the due date for the vendor proposed as suggested by the Procurement Handbook, or formally document why the time period was adjusted.
Provide written instructions for members of future evaluation committees to complete the detailed scoring sheets.
Formally document all evaluation committee meetings and all decisions made by the executive committee and legal counsel within the contract procurement file.
Exercise good judgment when awarding contracts to avoid even perceived conflicts of interest.
Ensure that management and employees understand and comply with laws and policies pertaining to conflicts of interest.
Require the members of future evaluation committees to properly document changes on their individual scoring sheets.
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