STATE BUDGET

Cashing in on state contracts becomes growth industry

 

Florida’s two-decades-long push to shift state services to contract vendors has meant big business for a burgeoning industry of lobbyists.

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Herald/Times Tallahassee Bureau

Even for Tallahassee standards, the scene was notable: lobbyist Brian Ballard dining with a nursing home executive, Gov. Rick Scott and a top aide at a pricey restaurant just blocks from the Capitol.

That Ballard’s clout could command a private dinner with the governor for a client speaks to the influential lobbyist’s fundraising finesse.

But equally important, and less celebrated, is Ballard’s talent for helping his clients land lucrative state contracts: $938 million this year alone, according to a Herald/Times analysis of contracts in the $70 billion state budget.

“Is that all?’’ joked Ballard, who said he had never added it up. “A big part of my business is protecting contracts, and outsourcing. Outsourcing saves [the state] money.”

Ballard is not alone. The lobbying offices that line the moss-covered streets of Tallahassee have grown exponentially larger in the past two decades as governors and legislators have steered a greater share of the state’s budget to outside vendors.

No one is keeping track of the total, but Chief Financial Officer Jeff Atwater last year estimated the total contract expenditure for Florida’s 2011-12 budget cycle at $50.4 billon — 72 percent of the budget. The bulk of it, nearly $42 billion, was for healthcare contracts and service sector grants that often are never competitively bid.

“We probably privatize, or outsource, more than some of the Northeastern states — and we have a lot more volume,’’ said David Wilkins, a retired business executive who was tapped by the governor to review the state’s byzantine contracting process. He also is secretary of the Department of Children and Families.

Vendors — from giant computer firms and healthcare HMOs, to purveyors of office supplies, parking spaces and even prison services — each compete for a piece of one of the biggest spending pies in the Southeast: the state of Florida. The infusion of state cash into private and non-profit industries has spawned a cottage industry of lobbyists who help vendors manage the labyrinth of rules and build relationships with executive agency officers and staff so they can steer contracts to their clients.

There are now more people registered to lobby the governor, the Cabinet and their agencies — 4,925 — than there are registered to lobby the 160-member Legislature — 3,235.

Dozens of former legislators and their staff populate that industry, as well as former utility regulators, agency secretaries, division heads and other employees.

The most high-profile newcomer to the executive branch lobbying corps is Dean Cannon, the former speaker of the House from Orlando. Even before he retired from office in November, he had set up a lobbying shop just a block from the Capitol and started signing up clients to lobby the executive branch.

Cannon’s swift lawmaker-to-lobbyist turnaround has spawned a backlash from former colleagues. Senators are proposing that lawmakers leaving office wait two years before they can lobby the executive branch — similar to the law that applies to former lawmakers who lobby the Legislature.

“One minute you can be overseeing a budget and the next you’re lobbying a state agency,’’ said Sen. Jack Latvala, R-St. Petersburg, who is shepherding the Senate ethics bill. “That’s a revolving door and that’s wrong.”

With the state using more and more outside vendors, transforming the state government as a broker of contracts, less attention is being given to managing those contracts.

As a result, say critics, all too often contractors and their lobbyists outwit and outman the state at the negotiating table.

“For a government employee, going and buying something new is hard,’’ Wilkins said. They have to create a process and sort through the vendors’ options “so when they award a contract they are usually very happy to keep that vendor in place.’’

The state not only needs better performance standards in its contracting system, he said, it needs more competition — and that means more than just the veneer of competition.

“Competition is the secret to all this stuff and you’ve got to get people interested so the vendor has to believe it’s not wired,’’ he said. “If a vendor is going to spend $1 million on a procurement, if it’s wired, then they’ve really made a bad business decision.”

But writing contracts to benefit vendors is the job of the legions of lobbyists. Using last-minute amendments to the budget, lobbyists write narrowly crafted budget language into the “special categories” section in the back of the annual appropriations bill or tweak language in other bills.

Here are some recent examples:

• Former Senate President Mike Haridopolos used his influence to get lawmakers to insert millions into the budget at the final stage of the budget process to pay for a state law enforcement radio system the agencies didn’t ask for, a juvenile justice contract that agency didn’t seek and the extension of a contract to expand broadband service in rural areas.

• A lobbyist close to former House Speaker Dean Cannon persuaded lawmakers to insert language allowing billboards on state lands, using language disguised as “public information systems,” into a must-pass bill to fund water management districts.

• The former Senate chief of staff, Steve MacNamara, signed a no-bid $5.5 million contract with a company to develop and lease a budget transparency website for lawmakers that was paid for but never used.

Former Senate President Jeff Atwater, now the state’s chief financial officer, as well as Scott, have both launched initiatives aimed at making the state’s contracting corps more professional. Atwater recalled how he watched in dismay when, as Senate president, items appeared in the final budget that were intended to benefit individual companies without a public hearing.

“It was an eye-opener,’’ Atwater recalled in an interview with the Herald/Times. “I’d say, did the agency want this? No? Then who did want this? They’d throw out the name of a lobbyist and so I’d cross it off.”

Longtime Senate budget chairman and former Sen. J.D. Alexander said the blame also lies in the state’s largest agencies, each of which have their own procurement system, bid process and overhead.

Every time a company loses a contract, they hire someone to come back to the Legislature to write them back in, he said. “It works, so who wouldn’t keep trying?” said Alexander.

The Government Efficiency Task Force also is studying the state’s contracting system and has found plenty of fault with lawmakers. In its report, it noted that because of exceptions written into law, the Department of Management Services is barred from seeking competitive bids for legal services, health services, artistic services, lectures, training and education services and substance abuse and mental health contracts — services estimated at $8.4 billion a year.

Legislators also carved out exceptions for 32 vendors whose services don’t have to go through the state’s Web-based vendor database known as MyFloridaMarketPlace, the report found.

Last spring, Scott assigned Wilkins the task of reviewing the state contracting process. He has found a hodgepodge of procedures in which some agencies adhered to strict performance measures while others relied on little more than an invoice. There were no uniform contract standards, often no penalties, and “vendors could low ball to get in the door and then file cost overruns.”

All of this “screams for reform,” says Abigail MacIver, legislative affairs director for Americans For Prosperity of Florida.

The Koch-brothers backed group believes that Florida’s budget system rewards companies by allowing contracts to roll over year after year, with minimal performance measures and competition.

“We don’t even know what we’re getting for with these contracts,’’ she said. “I would have to question whether or not the Legislature is even asking these questions.”

Senate President Don Gaetz has ordered his budget committee to take a deep dive into the state budget system and “scrub the contracts to make sure taxpayers are well served,’’ said Sen. Joe Negron, R-Palm City, the Senate appropriations chairman.

But Gaetz, who as the owner of healthcare companies has had government contracts, is also pragmatic.

“It’s a worthy goal to take influence peddling out of contract making,’’ Gaetz told the Herald/Times. “But it’s as old as the republic. It’s not as if we can pass a law. It is a matter of working against a natural friend when human beings operate a government.”

Mary Ellen Klas can be reached at meklas@MiamiHerald.com and on Twitter@MaryEllenKlas

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