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Government Reform: Closing a Non-Competitive Monopoly Loophole in Virginia

In recent years, the Commonwealth of Virginia in general and the Commonwealth Competition Council (CCC) in particular has sought to make openness, transparency and competition the hallmark of state procurement. The Virginia Public Procurement Act, VA Code 2.2-4300 et. seq. provides that “all procurement procedures be conducted in a fair and impartial manner with avoidance of any impropriety or appearance of impropriety, that all qualified vendors have access to public business and that no offeror be arbitrarily or capriciously excluded…”

However, the Code only applies to “governmental procurement from nongovernmental sources”.

That results in a loophole that could be costing Virginia taxpayers millions of dollars per year.

Exempt from competition and transparency are inter-agency transactions, permitting one Virginia agency to provide a service to another Virginia agency on a sole-source, non-competitive, monopoly basis. No competent or otherwise qualified private firms even know about these procurements, let alone have an opportunity to offer a bid or proposal. In fact, the private sector does not have access to public business. Offerors are indeed arbitrarily and capriciously excluded from competition, in clear violation of Virginia’s longstanding policy.

Here’s an actual example of how the system works. Recently, the U.S. Department of Homeland Security provided a grant to Virginia’s Department of Emergency Management (VDEM) to develop a statewide plan for communities to identify risks, vulnerabilities and estimate potential losses from floods, wild fires, hurricanes, tornadoes and other natural disasters. The development of such Hazard Identification and Risk Assessment (HIRA) plans are the everyday work of private engineering firms. The activity is commercially available from a variety of companies, however, rather than issuing a competitive procurement under section 2.2-4300 of the Code, VDEM awarded the contract to develop the HIRA to the Virginia Tech Center for Geospatial Information Technology. There was no public notice, no transparency and no competition.

There was no research involved in the tasks. Developing such plans is not an “inherently government function”, but rather, it is a commercially available engineering service.
Another example of this loophole is a Department of Conservation and Recreation and Department of Transportation sole source contract with Virginia Tech to build a geographic information system (GIS) map of trails in the Commonwealth. Geographic information, mapping, and surveying are commercial activities. There are numerous firms in Virginia that do mapping, geographic information systems and surveying. Other states have contracted trails map GIS activities to the private sector.

In the cases mentioned above, private engineering, mapping and GIS firms in Virginia never knew the Department of Emergency Management had a hazards and risks assessment requirement or that the Department of Conservation and Recreation and Department of Transportation had a requirement for a trails GIS. Private firms never had an opportunity to compete for this work. There was no competition, no transparency and qualified firms were “arbitrarily or capriciously excluded” from this opportunity.

The CCC maintains an inventory of commercial activities – functions needed by government that are available from the private sector. Engineering and mapping are on the CCC’s inventory. For activities that are deemed commercial in nature, a loophole that eschews competition and relies on inefficient monopolies is unjustifiable.

The Attorney General’s Office has recommended that this loophole be brought to the CCC. The CCC should undertake a study of inter-agency transactions. At a minimum, the CCC should undertake a study to determine how extensive and pervasive inter-agency contracting for commercial activities is in Virginia. The taxpayers deserve to know the dollar volume of procurements from which the private sector is being “arbitrarily or capriciously excluded”. By regulation or policy, CCC should require all Commonwealth agencies to post its proposed inter-agency transactions on eVA for a period of time before it conducts the transaction. If any responsible offeror comes forward, the buying agency must conduct a public procurement pursuant to 2.2-4300 of the Code. Or, by legislation, the General Assembly should amend Code section 2.2-4300 to include inter-governmental acquisitions of any commercial activity in the requirement for competitive procurement.

At a time of rising unemployment, a Virginia state deficit and Federal action on a $780 billion plus stimulus bill to jump start the economy; it is counter-productive for the government to compete with and duplicate the private sector, or to bypass competition when a competitive, commercial market exists.

The small businesses, workers and taxpayers of Virginia deserve no less.

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