Orange County Transportation Authority (OCTA) staff broke a number of procedures when they awarded a software contract to Clearwater Analytics in 2012, according to an internal audit of the agency’s investment management contracts.
The audit found “several irregularities” in the bidding process. Among the irregularities, staff issued the contract at just under the $250,000 threshold that would require OCTA board approval. They later amended the contract twice, and ultimately, with board approval, paid the company $409,500.
The audit results were presented to the agency’s Board of Directors at its May 1 meeting,
OCTA Finance Director Andrew Oftelie told the board he believes the issues raised in the audit were a one-time mistake.
“We wish we could have done things a little differently,” Oftelie said. “I do believe this is a one-off. I don’t believe there is a systemic problem here.”
The original bid in August 2011 advertised a six-month, $70,000 contract for treasury management software. But the final contract the staff awarded ended up being a five-year, $250,000 agreement, a major change in the scope that could “have had an impact on the level of the competition” had the bid been completely reissued, according to the audit report.
Of the three bids the agency received, the one that was selected was not in the right format. A cost estimate conducted by staff for the winning proposal also was not documented as the bidding rules require.
Although OCTA policy requires negotiations to be conducted by contract administration staff, in this case, a project manager negotiated directly with the company.
The project manager negotiated a lower fee rate in exchange for allowing the company to use the OCTA logo for marketing and participation in a case study during the first year of the contract. The internal auditor recommended that OCTA, which doesn’t have any policy about allowing vendors to use its logo, create a policy.
A key threshold in government agencies is how much money staff can spend without going to its governing body for permission – which takes extra time, and exposes that decision to greater scrutiny at a public meeting.
At OCTA, staff can authorize spending up to $250,000. Anything larger than that has to be approved by the board.
In this case, OCTA staff issued the contract just under the threshold for board approval.
In March 2016, the fourth year of the contract with Clearwater Analytics, staff amended the contract, bringing its total cost to $287,500. Two months later, they requested a second amendment – which went to the board for approval – that increased the contract’s amount to $409,500.
OCTA spokesman Joel Zlotnik said the person who administered the Clearwater contract is, unrelated to the audit, no longer with OCTA and would not give his or her name.
If any disciplinary action related to the issues in the Clearwater contract approval occurred, it would not be disclosed because it is a personnel matter, Zlotnik said.
Board members were not critical of staff.
Board chair Michael Hennessey complimented Oftelie and the finance department.
“Here we can wind up in this situation with such incredibly good people. Imagine an organization that doesn’t have these folks,” Hennessey said.
Director and Tustin City Councilman Al Murray, commenting on a separate procurement report on the meeting agenda, said the agency approves hundreds of other contracts without any issues.
“With the amount of procurements this agency handles and the manner [in which] we oversee them, I think it’s worthy of compliment,” Murray said.