Auditor Commends State Bid Reforms

The Davis administration has made substantial progress in tightening controls over wasteful spending in the aftermath of last year’s Oracle Corp. software scandal, but must clamp down harder to eliminate the potential for future abuse, a government watchdog said Wednesday.

In a report on a multibillion-dollar government procurement process that virtually everyone agrees went haywire, state Auditor Elaine M. Howle commended the administration for imposing reforms, especially changes that targeted the award of contracts without a competitive bid.

She said that although those actions and other proposed reforms “should help safeguard state resources, additional changes should be made to reduce the potential for misuse.”

The audit was ordered last year by the Legislature after a scandal arose over a $95-million software contract awarded without competitive bidding to Oracle Corp. At the time, state departments said they didn’t need the software.

The auditor warned that the deal would cost taxpayers $41 million more than it otherwise should.

Soon after the scandal erupted, Gov. Gray Davis ordered new controls on state procurement practices, many of which have taken effect, Howle said. Atty. Gen. Bill Lockyer has convened a grand jury to examine possible criminal conduct in the case.

Howle’s investigation also examined other incidents of abuse. In one case, two members of Davis’ staff were fired for their roles and potential conflicts of interest in the costly redesign of the state’s Internet Web site.

In another case, Howle challenged the circumstances in which a contract was awarded for $125,000 worth of teddy bears to be given away as inducements for Californians to participate in the 2000 Census.

Administration officials appointed to fix the procurement process Wednesday embraced the auditor’s report.

“We agree,” said both newly appointed interim Director of General Services J. Clark Kelso and his predecessor, Chloe Hewlett, who was appointed after the scandal broke.

Kelso said the audit found that since Davis had ordered the overhaul, compliance with bidding rules had improved from about 35% to 92%.

Kelso and Hewlett said the reforms included requiring competitive bidding on virtually all contracts in excess of $500,000. Previously, no-bid contracts were virtually open-ended.

Other changes require state agencies to provide full explanations and legal reasons to justify a purchase.

Hewlett said the quality of purchasing practices varies from agency to agency, but investigators learned that among procurement officers “we have a high degree of ignorance out there.”

At a news conference, Kelso and Hewlett warned that in spite of the improvements, officials must be vigilant against abuse.

In an accounting of the redesign of the state’s official Web site, Howle said the project involved the participation of a “council” of vendors and several state agencies, but costs kept escalating, some of them hidden from the Legislature’s budget advisors.

Several parts of the estimated $5.1-million project were handed out without competitive bidding to companies whose employees were relatives of state officials in charge of the project, Howle said. Two of them, Vin Patel, the governor’s director of government, and his boss on the redesign project, Arun Baheti, were fired.

Patel was sacked when it was learned that he had arranged for a $770,000 no-bid contract to go to a company that employed his brother.

Baheti was forced to resign after investigators learned that he had accepted a $25,000 campaign check for Davis from a lobbyist for Oracle.

In the case of the teddy bears, Howle said the contract should have been put out to competitive bid.

An administration spokesman said the stuffed toys were given to schoolchildren as an inducement to take census materials home to their parents and encourage them to participate.