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Transparency and Market Competition in Virginia

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With little fanfare and scant media attention, Virginia government became more transparent, efficient and business friendly on July 1 thanks to a new law authored by Delegate Jim LeMunyon (R-Fairfax).

During the administration of George Allen, Virginia led a national trend to bring competition and private sector effectiveness to government services.  One of Governor Allen’s first actions was to establish a Commission on Government Reform, known as the Blue Ribbon Strike Force, to review and reinvigorate state government. The commission examined every aspect of the executive branch of state government and recommend ways to improve state services.

One such recommendation was to implement an institutional infrastructure for a statewide competitive government program through legislative formation of a Governor’s Council on Competition.  In 1995, the Virginia General Assembly passed and the Governor signed into law the Government Competition Act, creating the Commonwealth Competition Council.  For more than 15 years, Virginia’s “CCC” helped government to work better, cost less, and not compete with private enterprise by promoting outsourcing, privatization and the use of public-private partnerships.  The council became moribund under Governor Mark Warner, focusing on briefings at the expense of positive action, and was terminated by the General Assembly upon the recommendation Governor McDonnell’s Commission on Government Reform and Restructuring in 2011.  (That Commission also recommended privatization of the Virginia Department of Alcoholic Beverage Control (ABC) distribution and retail system, a proposal that stirred controversy but ultimately failed in the General Assembly.)

Virginia law (§ 2.2-5513) requires the Governor’s “examination of the commercial activities that are being performed by state employees at state agencies and institutions to ensure such activities are being accomplished in the most cost-efficient and effective manner.”  The Commonwealth’s procurement code, (§ 2.2-4300 et seq) procedures for the procurement of goods and services from nongovernmental sources, is to include an open and transparent process.

However, a glaring loophole existed in the law applicable to inter-agency transactions. When a Virginia agency purchased a good or service from another state agency that is otherwise commercially available, the procurement code did not apply. If the Virginia Department of Transportation (VDOT) needed widgets, and the Virginia Department of Conservation and Recreation (DCR) made widgets, using state employees, VDOT could buy widgets from DCR with no public notice or competition. A behind closed doors monopoly existed for inter-agency transitions.  And if there was a private small business, let’s call it Old Dominion Widget Manufacturing, Inc., the company not only was denied the opportunity to supply VDOT with widgets, but it never even knew DCR had a widget requirement.

With the termination of the CCC, Virginia businesses had no recourse and nowhere to go to lodge a complaint.

Delegate LeMunyon’s reform legislation changed all that by injecting transparency and open competition into the process.

HB 823 requires that any state governmental agency that purchases goods or services from another governmental agency – including universities and colleges — to first make such a requirement public by posting it on the Department of General Services’ central electronic procurement system.  It also requires the Department of General Services to publish on its central electronic procurement system website a government-to-government transaction transparency report.

While the widget example is hypothetical, actual situations of agency-to-agency purchasing existed. Back room deals and non-competitive arrangements were not only permitted under the law, but actually transpired.  Tax dollars were wasted, government operated in the dark, and business as well as employment opportunities for private enterprise were denied.

While being known for small, limited and frugal government, Virginia still has hidden activities in need of reform.

“Agriculture, manufacturers, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise,” according to Mr. Jefferson.  There is a little more of that in Virginia today thanks to Delegate LeMunyon’s new law.

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