A recent State Auditor report found that DHHS “had approximately 2,500 non-competitively bid contracts with a value of approximately $2.4 billion between state fiscal year 2012 through 2014. The value of the no-bid contracts accounts for more than 32% of all contracts during the same period.”

No bid contracts are exactly that – the company awarded the contract received the contract without competition, or a bid process. Think of a no bid contract as a try out for a professional football team, but only one person is trying out. Generally, competition breeds better results because people try harder when they compete, rather than a solo act.

In contract bidding, rivalry also breeds a lower contract price. It’s only logical. If you know that other companies are submitting bids, you are going to submit the lowest number possible.

So how is DHHS allowed to award no bid contracts?

NC Statute dictates that the AG or the AG’s attorney shall review “all proposed contracts for supplies, materials, printing, equipment, and contractual services that exceed one million dollars…” as of June 27, 2011. See NCGS 114-8.3 as amended by Session Law 2011-326 and Session Law 2013-234.

But – Per 09 NCAC 06B .0901, “…competition may be limited or waived where a factual basis demonstrates support of one or more of the conditions set forth in Paragraph (b) of this Rule. If the procurement is within a purchasing agency’s general delegation, then the purchasing agency may waive competition in conformance with this Rule. If the procurement is greater than the agency’s delegation, requests for limited or waived competition shall be submitted to the State CIO for approval.”

Here are the exceptions found in 09 NCAC 06B.0901(b):

(b) Competition may be limited or waived under the following conditions:

1. Competition is not available;
2. A needed product or service is available from only one source of supply;
3. Emergency action is indicated;
4. Competition has been solicited but no responsive offers have been received;
5. Standardization or compatibility is the overriding consideration;
6. A donation stipulates the source of supply;
7. Personal or particular professional services are required;
8. A product or service is needed for a person with disabilities and there are overriding considerations for its use;
9. Additional products or services are needed to complete an ongoing job or task;
10. A particular product or service is desired for educational, training, experimental, developmental or research work;
11. Equipment is already installed, connected and in service, and it is determined advantageous to purchase it;
12. Items are subject to rapid price fluctuation or immediate acceptance;
13. There is evidence of resale price maintenance or other control of prices or collusion on the part of persons or entities that thwarts normal competitive procedures unless otherwise prohibited by law;
14. A purchase is being made and a price is available from a previous contract;
15. The requirement is for an authorized cooperative project with another governmental unit(s) or a charitable non-profit organization(s); or
16. A used item is available on short notice and subject to prior sale.

Did all the no bid contracts that DHHS procured between state fiscal year 2012 through 2014 to equal approximately $2.4 billion fit within 1 or more of the above referenced exceptions?

At least, according to the State Auditor – No.

Here are the key findings of the State Auditor’s Report:

• Many no-bid contracts lacked required review and approval to protect state interests
• Many no-bid contracts lacked documentation of negotiations to improve pricing or terms
• Many no-bid contracts lacked adequate written justification to waive competition, which increases the risk of favoritism, unfavorable terms, and poor performance

It appears that DHHS failed this audit. Should we extrapolate?