State Losing Millions On Procurement Failures

State Losing Millions On Procurement Failures

Courtesy Baltimore Sun

As members of the Maryland General Assembly wrangle over budget cuts and deficits, it’s tempting to think that there’s a quick fix to the state’s fiscal problems. But what if there was a way for the state of Maryland to save money that didn’t involve raising taxes, fees or surcharges, didn’t require cutting programs and maybe could fund new initiatives?

Such a proposal exists, but it involves digging into the dense subject matter called procurement. Procurement is the method by which government buys and pays for things, from paper towels to highway construction. Procurement laws and rules by their very nature are complicated, convoluted, dense and — frankly — boring. No child when asked what they want to be when they grow up says “a procurement officer.”

Procurement is the most important overlooked and least understood topic in government operations. The state spends over $7 billion in procurement and millions more go to counties and local school systems. So even a small percentage savings translates into large dollar amounts.

Over the past few years, improvements in procurement have been made, with steps taken to increase competition and transparency. But it’s become increasingly clear that this topic needs to be tackled head on.

This year House Bill 698 was introduced. The bill would have created the Office of Chief Procurement Officer, an agency that would take over authority currently exercised by various state agencies. Setting up this new office would cost around $500,000, but our non-partisan Department of Legislative Services estimates that doing this could “generate annual savings of approximately $100 million in procurement costs.” In other words, this modest investment would pay back 200 times more every year. Further, this re-organization would make it easier for Maryland businesses to compete for contracts.

We are one of only seven states that do not operate this way, and the track record of savings in other states with a chief procurement officer is impressive.

Here are two recent examples of procurement failures that are costing taxpayers dearly. State auditors found that the Department of Health did not follow a number of basic procedures when replacing a computer system that would process Medicaid payments; the cost of that project “increased to more than $20 million.” Another audit of the Department of Transportation failures led to an “overpayment of approximately $10 million” and payment of an unnecessary “$498,300” in excise taxes.

No organization operates perfectly, whether in state government or in the private sector. But it’s our collective obligation to improve how government functions. The analysis that led to HB 698 was initiated by Gov. Martin O’Malley, and his successor, Gov. Larry Hogan, has started to take a close look at state contracts. While HB 698 will not pass this year — and comprehensive change bills like this never do — it is serving a purpose. Already, the bill has sparked an intense discussion among all branches of state government and brought together key stakeholders who have committed to work together in anticipation of the 2016 legislative session.

It may be hard to believe that government can be efficient and smart, but it can be. It’s not glamorous, doesn’t get headlines and will take time, but the hope is that citizens and legislators will get behind these common-sense changes. And when that happens in Maryland, we’ll all be better off.