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Questions Arise on No-Bid Software Contract

By Bill Britt
Alabama Political Reporter

MONTGOMERY—The revelation that a no-bid software contract approved by Finance Director Bill Newton led to a meltdown in the State’s ability to pay its bills in a timely fashion has raised questions about how the contract was awarded.

Not only are thousands of vendors not being paid, but State employees are not receiving reimbursement for travel and other expenses. The botched implementation has led to a backlog of payments, spanning across every segment of State government.

(Alreporter.com has received numerous emails from some State employees who have not been reimbursed for travel in six months. One email stated that the State employee did not have money for her children’s Christmas because she had maxed out her credit cards for State travel. More sad stories and angry vendors’ e-mails continue to arrive.)

Newton first issued an RFP to upgrade an agency-wide single financial management system.

According to high ranking public employees, Newton and assistant finance director in charge of technology, Rex McDowell, withdrew the RFP and amended the 20-year-old maintenance agreement with CGI Group, turning it into a no-bid contract for a $47 million system upgrade.

The software package provided by CGI Group, with the acronym STAARS (State of Alabama Accounting and Resource System), began in December 2013 with a goal of “implement[ing] a single software solution to modernize the State’s accounting, procurement, personnel, payroll, budget and reporting functions across all state agencies.”

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After alreporter.com’s latest report on the no-bid contract, several lawyers came forward with State code and Attorney General’s Opinions that question the propriety of the contract Newton issued.

A 2002 Attorney General’s Opinion issued by then AG Bill Pryor found that software updates have to be bid unless customized. Those who have worked with the implementation of the STAARS system claim it was not custom software.

(SEE OPINION HERE.)

According to State code, “Contracts for the purchase of personal property or contractual services other than personal services shall be let by competitive bid for periods not greater than five years and current contracts existing on February 28, 2006, may be extended or renewed for an additional two years with a 90-day notice of such extension or renewal given to the Legislative Council, however, any contract that generates funds or will reduce annual costs by awarding the contract for a longer term than a period of three years which is let by or on behalf of a state two-year or four-year college or university may be let for periods not greater than 10 years. Any contract awarded pursuant to this section for terms of less than 10 years may be extended for a period not to exceed 10 years from the initial awarding of the contract provided that the terms of the contract shall not be altered or renegotiated during the period for which the contract is extended.”

The initial contract with CGI was established 1980s or early 90s.  Every renewal has been for maintenance only for about $1 million dollars. An upgrade is different from maintenance and going from $1 million to $47 million is a definite change, according to an attorney with knowledge of State bid law.

According to the State handbook on bid-law, “The general effect of these sections is that most goods and services needed by a government-funded agency must be obtained through the competitive bid process. There are, of course, important exceptions to this general rule, which are detailed in the Exemptions section of this handbook.”

But a search of the handbook doesn’t reveal an exemption that allows a maintenance contract to be converted to a system-wide upgrade for financial software.

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This is similar to another no-bid contract Newton championed in the past.

A report by Bob Lowry in 2011 found that Newton was a “vocal advocate for Paragon Source… a company that won a $13 million no-bid state computer contract during former Gov. Bob Riley’s administration.”

According to Lowry’s report, the Finance Department originally signed a no-bid, sole source contract with Paragon Source for $1.45 million for the period Oct. 1, 2007 through Sept. 30, 2009. The contract was to increased to $5.95 million in 2008 and Riley signed a new contract worth $12.9 million in 2010.

This no-bid contract led to an investigation and no work product was ever recorded according to Lowry’s report.

As the saga of the failed system continues to grow, more questions appear on the horizon.

 

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Bill Britt
Written By

Bill Britt is editor-in-chief at the Alabama Political Reporter and host of The Voice of Alabama Politics. You can email him at [email protected] or follow him on Twitter.

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