June 20, 2017 2016-124
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the oversight the Department of General Services (General Services) and the California Department of Technology (Technology) have provided over state agencies’ awarding of contracts without the use of a competitive bidding process. State law generally requires agencies to use the competitive bidding process whenever possible to ensure fair competition and eliminate favoritism, fraud, and corruption. Nonetheless, this report concludes that General Services and Technology did not provide adequate oversight of the billions of dollars that agencies awarded through noncompetitive contracts from fiscal years 2011–12 through 2015–16.
The Legislature has charged General Services and Technology with overseeing the State’s procurement of goods and services on a statewide level. Because General Services oversees most of the State’s procurements, its responsibilities include ensuring that key decision makers have complete and accurate contracting data that allows them to make informed decisions. However, General Services did not ensure the integrity of the data in the database it created to track the State’s contracts. As a result of its lack of oversight, the database contained numerous errors, essentially rendering it ineffective for its intended purposes.
In January 2016, General Services transitioned to the new Financial Information System for California (FI$Cal) as its statewide contract database. However, whether FI$Cal’s contracting data will eventually be accurate or complete remains uncertain. According to General Services, only 57 agencies currently use FI$Cal for their procurements, or about 31 percent of the agencies scheduled to use it. The remaining agencies must manually enter information into FI$Cal, creating significant opportunity for error. Moreover, neither General Services nor Technology has established formal plans to regularly analyze the new FI$Cal data to monitor the State’s noncompetitive contracts.
Our review of 27 noncompetitively bid contract justifications (noncompetitive requests) demonstrates the necessity for such analyses. Agencies must use noncompetitive requests in specific circumstances to enter into or amend contracts noncompetitively. However, our review found General Services and Technology approved nine noncompetitive requests—with a total value of nearly $1 billion—that agencies likely could have avoided had they engaged in sufficient planning by, for example, issuing requests for proposals in a timely manner. Although both General Services and Technology have mechanisms they can use to encourage agencies to comply with noncompetitive procurement policies, they rarely employed them during our five-year audit period. Until General Services and Technology create consequences for agencies that habitually overuse noncompetitive requests, these agencies will have little incentive to change.
ELAINE M. HOWLE, CPA