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February 18, 2015
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The Texas Senate
Senate Finance Chair Jane Nelson said her committee would investigate the state contracting process this session.

(AUSTIN) — There are serious deficiencies in state oversight of agency contracts according to testimony offered before the Senate Finance Committee on Wednesday. Officials from the State Auditor's Office presented the findings of audits of 14 agencies that showed only two agencies met all compliance standards for contracting with outside vendors. While the majority of the violations were minor technical problems, two agencies had substantial problems with contracts totaling half a billion dollars. Committee members also expressed concern at a lack of documentation and adequate records regarding contracts entered into by state agencies.

In 2010, the Texas Education Agency signed a contract totaling $462 million with an outside agency in order to provide assessment services for public school students. The contract was signed with a standard clause intended to prevent conflicts of interest by barring former agency employees for one year from working with the outside vendor and working on the same issues they worked on while at TEA. In 2011, this clause was deleted from the contract by the agency. It was added back into the contract after State Auditor's Office pointed out the oversight to TEA officials.

Auditors also found major problems with a telecom contract signed by the Health and Human Services Commission in 2008. The contract was initially signed for $47 million, but the HHSC amended it twice, increasing the contractor cost to $80 million in 2011 and then renewing it for two more years in 2013 at a cost of $105 million. The State Auditor found that the HHSC did not adequately monitor the contract, overpaid for services in some instances and did not take advantage of discounts that were a part of the contract. More than that, they found that an HHSC employee who was part of the contracting process had worked for the vendor in the past. The agency official who served as contract manager in 2014 and oversaw payments to the vendor was also a former employee of that vendor, according to the State Auditor's report.

Other concerns were raised about inconsistent documentation and a lack of a central database to hold all state agency contracts. It is up to individual agencies to keep those records, auditors testified, and often times these records are incomplete and difficult to obtain. With state agencies awarding tens of thousands of vendor contracts amounting to billions of dollars, committee members worried about what potential problems lawmakers don't know about. "How much are we not seeing? It is shocking to me what we're learning and I think we're just scratching the surface," Finance Chair Jane Nelson told committee members. "It's outrageous, we're going to get to the bottom of it and we're going to fix it." She added that fixing the state's contracting procedure will be her committee's top priority second only to the budget itself, and that once appropriations hearings end this month, the Finance Committee will dig deeply into this issue. "We need to make sure that our contracts are awarded fairly and that they are monitored across all state agencies," she said.

The Senate will reconvene Monday, February 23 at 2 p.m.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.