Our review of the California Department of Corrections' (department) processing of two no-bid community correctional facility (CCF) contracts and its projections of inmate populations revealed the following:
The California Department of Corrections (department), which operates California's state prisons, housed more than 164,000 inmates on June 30, 2005. In 2004, to cope with a large increase in inmate population, the department remedied overcrowded conditions by using less secure areas in its facilities to house inmates. As a partial solution to the overcrowding, it also decided to reopen two closed community correctional facilities (CCFs) using one-year, noncompetitively bid contracts (no-bid contracts). CCFs are designed to house inmates who meet certain criteria, such as lower security classifications and no escape history.
Although its policies and procedures for processing two no-bid contracts and identifying potential conflicts of interest are consistent with state requirements, the department did not ensure that these contracts were free of conflicts. For example, two employees involved in one contract had previously worked for the department and were still listed as retired annuitants. The contractor failed to disclose this information, and the department did not require the contractor to submit employee statements of economic interests. Moreover, contacts between these two employees and the department during the formulation of the contract possibly violated conflict-of-interest laws even though the contract was never executed. Further, the department lacks a system to ensure that retired annuitants file such statements. The department also forwarded one contract to the contractor for signing before receiving approval from the Department of General Services on its request to issue a no-bid contract. Perhaps as a result, the department, the potential contractor, and the facility owner all incurred unnecessary expenses. The department later rescinded this request partially because of concerns about conflict of interest.
Also, in justifying the two no-bid contracts for the CCFs, the department presented a misleading claim of cost savings because it used cost comparisons that did not include all comparable costs. Nonetheless, the information it used to determine the need for reopening the two CCFs appears reasonable.
To assist it in managing its resources, in the spring and again in the fall of each year, the department prepares a projection of the number of inmates it expects to house over the next six years. It uses these projections to determine its budget needs and assess its ability to house inmates. Although the projections are reasonably accurate for the first two years, they are significantly less accurate after the second year. As a result, the projections are useful for assessing budget needs—which rely on information relating to the first two years of the projection—but have limited usefulness for longer-range planning, such as determining when additional facilities should be built.
Certain practices increase the subjectivity of the department's projections. It uses staff experience to update information it uses for some of the variables that determine its inmate projection. Also, the unit that develops these projections did not always abide by its own policy that precludes using estimates that lack reasonable support. Because of these factors and others, including a lack of documentation, our statistical expert could not establish the validity of the process the department uses in making its inmate projections and believes it should consult with a group of statisticians to develop a more defensible projection process.
To strengthen controls over its processing of no-bid contracts, the department should do the following:
To ensure that its staff is free from potential conflicts of interest, the department should require the retired annuitants it assigns to designated positions to submit statements of economic interests.
To increase the accuracy and reliability of its inmate projection, at a minimum the department should do the following:
Additionally, if the department intends to continue using the projections for long-term decision making, such as facility planning, it should ensure that it employs statistically valid forecasting methods. It should consider seeking the advice of experts in selecting and establishing the forecasting methods that will suit its needs.
The department generally concurs with 10 of our recommendations and has agreed to study the feasibility of implementing the remaining two.