Category Archives: Governance reform

Virginia Procurement Process Needs Reform

Complex projects from transportation to IT need risk management.

Complex projects from transportation to IT need risk management.

by James A. Bacon

The Commonwealth of Virginia needs to reform its procedures for contracting and administering billions of dollars of contracts, the Joint Legislative Audit and Review Commission (JLARC) has found in a new study.

In 2015 Virginia spent more than $6 billion through contracts, including for transportation projects, information technology, and building construction, noted JLARC. The process for managing the contracts is decentralized, with each agency handling its own work. State procurement staff are insufficiently schooled in risk management, and the state pays insufficient attention to monitoring and enforcing the contracts.

Even though contracts account for a significant portion of state spending, the state does not maintain comprehensive information on how contracts are performing. This prevents individual agencies and state-level decision makers from assessing whether their investments in individual contracts have provided value to the state. It also prevents agency staff from avoiding problematic vendors and developing and administering contracts in a way that takes into account previous “lessons learned” at their own agency or other agencies.

JLARC embarked upon the study in 2014 after the maladministration of the U.S. 460 superhighway project resulted in a $250 million loss to the state without any ground being cleared or asphalt laid. The state has been embroiled in other high–profile contractual disputes involving the provision of IT services and the explosion of a rocket at the Wallop’s Island space port.

“Risk management isn’t on the radar,” said Tracey Smith, study project leader, in a presentation to lawmakers Monday. Writes Michael Martz in the Richmond Times-Dispatch:

Legislators on the commission, particularly the lawyers, expressed shock that state agencies routinely enter into big, often risky contracts without legal advice from the Attorney General’s Office.

Del. David B. Albo, R-Fairfax, chairman of the House Courts of Justice Committee, called it “ludicrous” that agencies would draft major contracts without lawyers.

Bacon’s bottom line: State procurement laws reformed corrupt practices of an era in which politicians routinely gave contracts to their friends and supporters. The laws emphasized putting contracts out for competitive bids, procuring the lowest price and making the process transparent. The nature of business has changed over the decades, but with one important exception, the state procurement process has not kept pace.

Unless you’re procuring commodity products like office supplies or janitorial services, the lowest price is almost meaningless. The quality of work is often a critical but hard-to-define variable. Another is the allocation of risk — who pays when something goes wrong? Identifying and allocating risk is why we have lawyers. Sometimes the lawyers get carried away, picking at nits, but they perform a critical business function because things often do go wrong. Accidents occur. Disagreement arise. Unanticipated events throw everyone for a loop.

Government employees are not trained to think about risk. Politicians aren’t inclined to worry about risks that might explode on someone else’s watch.But as contracts grow increasingly complex with the trends to outsourcing and public-private partnerships, the allocation of risk can be as important as the price.

There is one outfit in state government that has been acquiring the competencies to engage in sophisticated risk management — the Office of Public-Private Partnerships (OP3), which oversees contracts for some of the state’s most complex transportation projects. As I recall, OP3 raised red flags relating to the infamous U.S. 460 project but its warnings were overruled for political reasons. The office has developed a network of contacts it can call upon to supplement the skills of its in-house staff. Virginia’s Secretary of Technology and the head of the Department of General Services should have comparable capabilities.

Good management doesn’t excite the electorate like, say, banning guns or restricting bathroom options for transexuals. But billions of taxpayer dollars are at stake. And that makes it a sexy topic for me.

When Bubbas Go Bad

Photo credits: Roanoke Times

From top: David Copeland, Robert J. Kelley Jr., Michael Clark, James Todd Edwards, Wes Rosenbalm, and Paul Hurley. Photo credits: Roanoke Times

Once upon a time, Bristol Virginia Utilities in far Southwest Virginia was lauded as a spunky, small-town electricity and water utility that provided high-speed Internet services to an under-served population. Now, as the Roanoke Times describes it, the company’s “culture of corruption, entitlement and greed,” has been laid bare. So far, nine former utility executives, board members and contractors have pleaded guilty or been convicted of corruption charges. The Roanoke Times summarizes the stink:

The utility was rife with self-dealing, extortion, tax evasion and fraud. There were kickback and bid-rigging schemes, demands BVU’s major vendors underwrite fancy holiday parties (one cost more than $12,000) and provide executives with choice tickets to pro football and college basketball games, NASCAR races, horse races and other sporting events.

Court records depict one case in which some top BVU executives and board members took a weekend trip to Texas, where they relaxed in hotels, dined in restaurants, rode in limousines and watched the NFL’s Dallas Cowboys from luxury skybox seats at AT&T Stadium, all courtesy of a company awarded a $4.5 million contract from the agency.

Rank-and-file employees picked up at least $48,000 total in untaxed bonuses paid as gift cards and cash. Top executives received country club memberships valued at $70,000 , fully loaded GMC Yukons for personal use, and car allowances. Those extras weren’t taxed either.

Meanwhile, the utility’s customers got hit with water, sewer, electric and cable-TV rate increases in a region where the median household income is $33,600 and the poverty rate is 22 percent.

Stace Pomrenke, Bruce James Chilton, and G. Walter Bressler.

Stace Pomrenke, Bruce James Chilton, and G. Walter Bressler.

Caught in the net are Paul Hurley, former BVU board chair and mayor of Bristol; Bruce James Clifton, former board chair; Wes Rosenbaum, former CEO; and G. Walter Bressler, former general counsel.

There’s no point in lamenting greed and corruption — they are encoded in the human genome. The trick is building mechanisms into the system that hold accountable the people in power. I suppose we can say that the system worked at one level — the justice system is holding the BVU executives accountable. Ideally, BVU would have had systems to prevent such abuses from occurring in the first place.

Is it just me, or is corruption and abuse of power in Virginia getting more frequent and more audacious these days?


Rule by Edict Comes to Virginia

mcauliffeby James A. Bacon

A persuasive moral case can be made to restore the civil rights of former felons. Once a man has served his time and repaid his debt to society, he should be allowed to participate fully in that society.

As Governor Terry McAuliffe stated Friday in announcing his restoration of civil rights to 206,000 Virginians:

If we are going to build a stronger and more equal Virginia, we must break down barriers to participation in civic life for people who return to society seeking a second chance. We must welcome them back and offer the opportunity to build a better life by taking an active role in our democracy. I believe it is time to cast off Virginia’s troubling history of injustice and embrace an honest, clean process for restoring the rights of these men and women.

Former Governor Bob McDonnell thought much the same thing. In 2013, he proposed a series of bills meant to fast-track the restoration of voting rights for non-violent felons. The bill died in committee, but McDonnell recognized what governors like Tim Kaine had acknowledged before him: that the United States is a nation of laws and he did not have the authority to rewrite the law as he pleased.

Perhaps anticipating difficulty in convincing the Republican-dominated General Assembly to pass the law he wanted, McAuliffe has borrowed from the Barack Obama playbook — rewrite the law by executive decree.

Not surprisingly, his sweeping action is being negatively received. ” I am stunned at his broad and unprecedented view of executive power, which directly contradicts how past Governors have interpreted their clemency powers,” said House Speaker William J. Howell, “and I am stunned at his willingness to restore the rights of the most heinous criminals without batting an eye.” He continued:

There are significant constitutional and legal questions regarding the Governor’s authority to take such drastic action.  No Governor in the history of Virginia has accepted such a sweeping view of executive power.  A.E. Dick Howard notes in his commentaries that Governors have considered the “restoration of civil disabilities on an individual basis.”  The Supreme Court has acknowledged the Governor’s authority on the restoration of rights, but only in the context of requests made by individuals.  The Court does not appear to have ever contemplated the view taken by the Governor.  Most recently, in 2010, counsel to Governor Tim Kaine said ‘a blanket order restoring the voting rights of everyone would be a rewrite of the law rather than a contemplated use of the executive clemency powers.’

We’re not talking about technicalities here. An important policy question is whether restoration should extend to all felons regardless of their crimes, such as murder, rape, child rape, and kidnapping. Any policy, suggested Howell, “should take into account the nature of the crimes committed, whether they have paid back their victims and the court system, and their willingness to serve as productive members of society.”

Another question is how to implement the law. Writing to the American Civil Liberties Union of Virginia in 2010, Mark Rubin, counselor to Kaine, warned of several practical problems that McAuliffe will be sure to encounter as he tries to implement his edict:

Neither the information about voting registration concerning whether a felon has completed his sentence are completely available in centralized state records as they are in other states you cited as models. For example, information about whether a felon has complied with court orders including the payment of restitution to the crime victim or whether the individual has successfully met the terms of probation or parole supervision is only available in local court records. Without having this information available in centralized data bases, a blanket restoration of rights for those who have completed their sentences would place an unprecedented burden on local registrars to determine whether a felon is actually qualified to register. It could also lead to significant confusion in the election process with disputes about an individual’s voting status. The risk of undermining the integrity of the election process is not one the Governor is willing to take as he leaves office.

Kaine said individual felons should be encouraged to petition to have their rights restored, and the law should be changed to see to it that lifelong voting disenfranchisement is not an automatic consequence of felony conviction. But the governor could not unilaterally change the law himself. “The Governor,” wrote Rubin, “will be glad to continue to work … to ultimately persuade the General Assembly that this distinction is one to erase.”

Remarkably, in his announcement Friday, McAuliffe provided no legal justification whatsoever for his action — not even a fig leaf of a justification — nor did he refer to any bills he failed to get bills through the legislature as justification for conducting an end run around the General Assembly. His action looks like a raw power grab times designed to infuriate Republicans and mobilize the African-American vote in November.

Bacon’s bottom line: I defended McAuliffe when legislators tried to pack the GoVirginia board with their own appointees, an unjustified legislative intrusion into executive authority. (See, “Here, Piggy, Piggy!”) Now it’s time to call McAuliffe on the reverse — an usurpation of legislative power. I’m not sure what happens from here. Presumably, lawsuits will be filed. Perhaps the General Assembly will take some official action. One way or the other, McAuliffe needs to be reigned in.

More Complicated than It Looks…

transparencyTransparency in General Assembly Voting. Two weeks ago I blogged how two-thirds of the 1,221 of the 3,000 bills submitted in the 2016 General Assembly session died in committees without a vote. (See “Killing Bills Quietly.”) To my mind, the numbers implied a scandalous resistance to transparency and accountability.

Former Sen. Chris Saxman, now president of Virginia FREE, lent some perspective in a recent newsletter:

The General Assembly has 60 and 45 day sessions which move very quickly with a process designed to go slowly. Each session will yield about 2,000 votes per legislator. … What is fairly certain is that next year the General Assembly will be criticized, once again, for putting in too many bills, passing too many bills, and then killing too many bills. …

Many bills that do not advance have votes that are not recorded because the legislation itself is not quite ready for one. What happens in that situation is that the bill is explained to the subcommittee, then the chair asks those in the room to speak either for or against the bill – quickly – and then the patron is given a chance to respond. All the while amendments can be offered to improve the bill and its chances of passing. … Can you imagine a system in which every amendment has a recorded vote and corresponding procedures? Not much would get done. (See the U.S. Congress)

The chair then tells the subcommittee, “Okay, ladies and gentlemen, the bill is before you.” If no amendments had been offered, the chances are that no motion will be heard. The chair then says, “Hearing no motions…the bill does not report” which effectively, but not actually, kills the bill. Other motions can be heard and voted on and, as stated above, any of them can be recorded.

The process, however, moves so very fast that the patron knows that the chance of the bill being signed into law is simply not worth the time and work so he or she will ask for and/or be granted by the chair a more palatable motion to “lay the bill on the table.” This is a courtesy to the patron. Sometimes a member can be extra nice to the patron and say the bill be “gently” laid on the table; however, there is no actual motion called gently laying on the table. It’s a professional courtesy.

This does not mean that the bill is dead. It means the bill is held by the committee. Anyone on that committee can later make a motion to take the bill off the table through a motion of reconsideration.

There’s always more to the story than meets the eye.

memory_holeDumping Harry F. Byrd Down the Memory Hole. In an uncharacteristic fit of political correctness, I endorsed the movement of students and parents at Harry F. Byrd Middle School in Henrico County to take a new name. Recognizing the deceased segregationist governor seemed especially inappropriate for a school with a large percentage of African-American students.

But in a recent op-ed, J. Edward Grimsley reminded us that Byrd was a progressive fellow by the standards of Jim Crow-era segregationists. Most notably, Byrd fought for and won the nation’s first anti-lynching law, bringing lynchings in Virginia to a halt. The legislation, Grimsley wrote, “made one of the most significant contributions to black civil rights since President Abraham Lincoln had issued the Emancipation Proclamation.”

If we are to be consistent in removing honors for segregationists, then let’s not single out Byrd. Let’s rename any school honoring Franklin D. Roosevelt, who, after all, famously interned the entire U.S. Japanese population and, as Grimsley noted, did virtually nothing to reverse African-American segregation. He continued:

Having the power to desegregate the nation’s armed forces without the Supreme Court’s permission [Roosevelt] refused to do more than make a few token gestures. … Roosevelt repeatedly rejected pleas to follow the Byrd example and propose a federal anti-lynching law. And Washington, over which the federal government has ultimate jurisdiction, remained one of the most segregated cities in America until the middle of the 20th century.

Concludes Grimsley: “It would be a supreme injustice to allow Harry Byrd’s name to be tossed into Henrico’s trash bin of history without remembering that when black Virginians urgently needed the  help of a powerful political friend, he was there to support their most important civil right of all: the right to live.”

Note to knee-jerks: I am not defending Harry Byrd’s support of segregation. I am recognizing that the man is more nuanced than commonly portrayed.

Mala Suerte, Puerto Rico

potential_derelictsby James A. Bacon

The U.S. territory of Puerto Rico, like several American states, has forged a facsimile of prosperity by borrowing and spending beyond its means. Earlier this year, independent bond-issuing authorities began defaulting on their debt. Investors fear the territory will fail to make payments on General Obligation bonds coming due in May and June.

Not surprisingly, Senate Democrats called for bankruptcy protection for Puerto Rico. Every Democrat in the Senate signed a letter in January, calling for “appropriate restructuring tools” available under bankruptcy law that would allow the territory “to respond to [its] economic and humanitarian crisis.” Virginia Senators John Warner and Tim Kaine signed the letter.

longer_range_risks2Congressional Republicans have been trying to devise some other means of devising default. One proposal has been to create a “control board,” which, though lacking the broad bankruptcy authority that territorial officials had sought, would facilitate some debt restructuring. (Bearing Drift has an excellent article describing the thinking of Rep. Rob Wittman, R-1st, who serves on the House Committee of Natural Resources, which has oversight of this issue.) Democrats maintain that tough measures usurping local control smack of colonialism.

All sides agree that there is no easy remedy. Either bond holders get stiffed, rattling municipal markets and creating fallout for the 50 states, or Puerto Rico must adopt draconian policies that will cripple the economy and hurt the poor. There is no happy ending here.

Why should Puerto Rico’s financial woes concern a Virginia-centric blog? Because whatever solution is devised for the territory will set a precedent for future bail-outs and, indeed, could accelerate the coming reckoning with reality of states in terrible fiscal shape like Illinois. Inevitably, there will be calls for more forgiveness in which fiscally disciplined states like Virginia will bail out improvident states.

safe_for_nowMichael Thompson, president of the Thomas Jefferson Institute for Public Policy, makes the following observation in his latest column:

Allowing Puerto Rico the unprecedented power of abridging [municipal] debt will come at a direct cost to Virginia and all the other states that rely on the bond market for financing. Once the market sees that ‘full faith and credit’ protections are faulty, borrowing costs will go up for states in accordance with the increase risk. … Likewise, the value of funds holding this debt, which are found in 401ks and other retirement nest eggs across Virginia and the rest of the country, will be severely shaken.

The importance of Thompson’s insight cannot be overstated: Once bond investors realize that the assurances they thought they were guaranteed are rendered null and void by political expediency, they will demand a risk premium on all other municipal debt. That will hurt Virginia, although probably to a lesser degree than states lacking our AAA rating. What the Senate Democrats overlook is that investors will demand the highest risk premium for precisely those states whose finances are in greatest disarray — the blue states of Illinois, New Jersey and California. A higher cost of debt would make Illinois’ currently perilous predicament even worse.

Now, it’s one thing for Congress to take a hard line toward Puerto Rico, a territory that no one quite considers a part of the United States, and a very different thing to take a hard line on Illinois, which has senators and representatives with voting rights in Congress. Should the unimaginable occur and Illinois default on its bonds, bailing out Puerto Rico will create a precedent that will make it harder to deny Illinois, and any other states that might follow it, similar consideration.

The country will immediately polarize between citizens of states that have acted prudently, made hard choices, and husbanded their resources and states that ducked fiscal reforms and borrowed more. Congress will face a terrible decision: whether to bail out the improvident, thus creating a moral hazard for the very behavior that got those states into the fix in the first place, or to hold the line, at the risk of having state governments failing to perform essential responsibilities, as we have seen, for instance, in the Flint, Mich., lead-poisoning crisis.

This is a litmus test issue for me. Having railed against fiscal recklessness for years only to be told by many that I am an alarmist if not an outright right-wing whackjob, I have zero sympathy — no, in this brave new world of negative interest rates, I have negative sympathy — for any Virginia politician who caves on this issue. I will wage relentless blogfare against anyone who buckles. The spenders and borrowers need to get a strong, in-your-face message that states must mend their fiscal their ways because there will be no succor for them in the future. Tough luck, Puerto Rico. But better you than Illinois.

Killing Bills Quietly


Image credit: Virginia Public Access Project

From the Richmond Times-Dispatch: The General Assembly killed 1,221 of the nearly 3,000 bills introduced during the 2016 legislative session. Two-thirds died without a recorded vote in committee, according to an analysis by the Virginia Public Access Project.

“The number of bills that do not receive a recorded vote has consistently increased year over year,” said Megan Rhyne, director of the Virginia Coalition for Open Government. “It’s as important to know how your lawmaker voted on bills that were defeated as it is to know how they voted on bills that passed.”

The transparency trend, reports the T-D‘s Jim Nolan, stands in contrast to a positive rule change enacted by House Speaker William J. Howell that ended the practice of conducting committee meetings at desks in the House chamber, and by decisions in both the House and the state Senate to wait 48 hours before taking a final vote on the state budget.

Bacon’s bottom line: As members of the political party whose ideology is most distrustful of politicians and government (a mistrust that is more richly deserved with each passing year, I might add), one would think that Republicans would stand at the forefront of the transparency-in-government movement. As the party that controls both houses of the legislature, Republicans are in a position to set new, higher standards for openness and transparency in government. Unfortunately, we’re getting a country line dance — one step forward and one step backward. The GOP can do better.


A Partial Mea Culpa on Shukla and GMU

by James A. Bacon

I fess up. I raised questions and made insinuations unwarranted by the facts in a recent post, “Did Shukla Fudge His Conflict-of-Interest Waiver Form?” When I’m wrong, I’ll be the first to admit it, so here goes….

The article addressed a conflict-of-interest waiver form submitted by George Mason University climatology professor Jagadish Shukla regarding his affiliation with the Institute for Global Environment and Society (IGES), which paid him $343,000 in 2012 over and above his university salary. I wrote:

Shukla’s waiver request form stated that he received annual salary “in excess of $10,000 from IGES.” The waiver-request form did not state that he earned $343,025 in 2013 compensation, nor that IGES paid his wife $141,000 as business manager, nor that the institute paid GMU colleague James Kinter $207,0000 as director, all as reported in IGES’ 990 form. Ten thousand dollars is in the range of part-time employment that would not conflict with Shukla’s university obligations; three-hundred and forty-three thousand dollars, which exceeded his university salary, is not.

So, the question arises whether Shukla submitted deceptively incomplete information by characterizing his compensation from IGES as “in excess of $10,000,” or whether he remedied that deficiency by conveying it verbally or in some other manner. …

Accordingly, I would conjecture, subject to verification, that the committee based its conflict-of-interest decision solely upon the information that Shukla provided in his waiver request form, in which he described his IGES compensation only as “in excess of $10,000.” …

One possible conclusion to draw from this evidence is that Shukla deliberately obscured his IGES compensation in the conflict-of-interest waiver request form. Another possible conclusion is that committee members knew of the hefty compensation but chose — wink, wink, nod, nod — not to make it an issue. Perhaps readers could offer other possible explanations.

A reader using the name “Travis Bickle” pointed out the existence of a GMU “Outside Employment” policy document of which I had been unaware when I wrote the article. That document states that GMU employees “may engage in certain employment outside the university, provided that the employee has obtained prior written approval of his or her supervisor and the employee complies with all relevant University policies, including policies regarding conflicts of interest…”

Employees must report salary and benefits “that may reasonably be anticipated to exceed $10,000 annually.” They also must submit “regular and routine reports (monthly or quarterly) from such firm or entity identifying the number of hours and total payment made to the University employee.”

Based on these reporting requirements, there is no reason to believe that GMU’s conflict-of-interest committee was uninformed of Shukla’s significant additional compensation.

Had I done a more thorough job of reporting, I would not have asked if Shukla had fully complied with reporting requirements, nor if university officials were aware of his full outside income. Nor would I have raised the possibility that Shukla had fudged his conflict-of-interest compensation, or that university officials had looked the other way. Knowing what I know now, those were unfair questions to pose and insinuations to make based on the information available to me. I apologize for making them.

I apologize to readers as well. I have committed a number of gaffes over the years, and when I am made aware of them, I perform a public mea culpa. Doing serious journalism on a blog is like flying without a net. I have no editor to read behind me, spot inaccuracies or question the thoroughness of my reporting. I count on readers to fill that role, as Mr. “Bickle” has done. When I fall short of my standards, I do my best to set the record straight.

That said, there are still serious issues regarding Shukla’s immense compensation. In light of this new information I would reframe the issue this way: If GMU’s conflict-of-interest committee was fully informed that Shukla’s income from IGES consumed 33 hours weekly and more than doubled his university salary, why did the committee allow it? How is it possible that working 33 hours on IGES business, as closely related with Shukla’s university job as director of the Climate Dynamics Program as it may have been, did not interfere with his teaching, administrative and other university duties?

Alternatively, if Shukla’s IGES duties were so closely aligned with his GMU duties that they posed no conflict, was he essentially collecting two salaries for doing the same job? If so, why would GMU have permitted it?

Then there is the bigger question to consider: Is Shukla an outlier in working the system, or is this a case where “everybody does it”? There are dozens of “institutes” and “centers” in Virginia universities, and hundreds of faculty members and researchers affiliated with them. Most if not all of these groups rely upon outside funding, whether from the federal government or from private sources. Is double dipping widespread? And, if so, are the safeguards in place — Virginia laws and university policies, federal R&D contracts, governance systems for 501(c)3 non-profit entities — adequate to prevent abuse?