Miami Beach Procurement Misconduct: Access, Discretion, Bid Alternatives, and Debarment
The arrest of Miami Beach's former procurement director last October
may not be news, but there's a lot to be learned from this case. The issues include personal discretion, alternatives to fully competitive bidding, access to information, and debarment rules.<br>
<br>
According to the affidavit of arrest (attached; see below), the
procurement director was arrested on charges of bid tampering,
bribery, and money laundering. He became a silent partner with
another man (a public school employee) in a consulting company that
effectively sold information on the bidding process to prospective
contractors, so that they could win bids via a limited bidding process.<br>
<br>
Most of the contracts involved were part of the Job
Order Contracts (JOC) program which, with a pool of pre-selected
contractors, allows for quick response to construction projects,
bypassing the formal, fully competitive bidding process. The procurement director appears to have been the only
individual who could see the cost proposals of the pre-selected
contractors. This is just the sort of discretion, outside of formal
processes, that leads to pay to play via kickbacks.<br>
<br>
What he did was tell a preferred company (the one making payments to the consulting company) what the others
had bid, so that they could bid a bit less. This is a classic case of
disclosing truly confidential, and very useful, information for the
benefit of a particular individual or company. In the government
ethics context, there would not even have to be evidence of a
payment. In fact, with a "Cone of Silence" provision, communicating with a contractor or a contractor's
representative (that is, the consulting company) would itself be an ethics
violation.<br>
<br>
Being a silent partner in a consulting company that supposedly provides legitimate services to the
very same contractors makes it easy to hide the kickbacks. “When they
pull my bank records . . . they’re not going to be able to draw the
line from A to B,” the procurement director told his partner, not
realizing that the partner was wired. Together, they made about
$600,000 in kickbacks.<br>
<br>
According to <a href="http://www.miamiherald.com/2012/10/22/3061362/ex-miami-beach-procuremen…; target="”_blank”">an
article in the Miami <i>Herald</i></a>, the procurement director resigned
last March due to allegations involving a convention center district
redevelopment project. He was in charge of overseeing bids for
the project. The concern was that he was "rigging the process by
assembling his own development team" with the help of a local
businessman. Apparently, the procurement director's easy success
with his pay-to-play scheme made him feel he could get a piece of a
bigger action.<br>
<br>
How did they discover that something was going on? They noticed odd
amounts of cash being deposited into his accounts, and huge amounts
of communications with his partner. But they had to have access to his bank accounts and cellphone communications.<br>
<br>
What can be done to prevent this sort of misconduct? No individual
should have this amount of discretion and access to important
confidential information. Bids should not be opened, or openable,
until they have all been made. Discretion should be in the hands of
an independent procurement committee rather than in the hands of one
individual. And there should not be so many projects that are
excluded from the formal bidding process.<br>
<br>
<b>Debarment</b><br>
Another way to ensure that this sort of thing doesn't happen is to
have effective debarment rules. Miami Beach does have such rules
(attached; see below - not underlined), but a contractor can be debarred only when it
has been convicted of a crime or there has been a finding of a civil offense
related to criminal accusations. The problem with this is that
contractors can, as they did in this case, work with the prosecutor
to ensure themselves protection. This allows them to get away with
their misconduct and prevent themselves from being debarred from
getting further contracts, in Miami Beach and elsewhere. In other words, it gives them no incentive to refuse to participate in pay to play.<br>
<br>
The
prosecutor loses nothing by allowing them to do this; in fact, sparing contractors
ensures the prosecutor has a solid case against the official. Yes, it is the official who has the fiduciary obligation not to
misuse his office to help himself and his business associates. But government ethics stresses prevention, not enforcement. To prevent misconduct, there need to be disincentives on both sides of each illegal transaction. The requirement of both parties to disclose their relationship is one check; debarment rules are another.<br>
<br>
According to <a href="http://www.municipalinsider.com/contractors-tied-to-miami-beach-corrupt…; target="”_blank”">another
article in the Miami <i>Herald</i></a>, only one company has been even
considered for debarment since the ordinance was passed in 2000. Considering the apparent amount of ethical miscondcut in Miami Beach, the debarment rules have not been working.<br>
<br>
The city attorney has drafted language that would make the debarment
rules stronger (attached; see below - underlined language). The language would allow the debarment of any contractor that commits
“any offense indicating a lack of business integrity or business
honesty that seriously and directly affects the present
responsibility of a City contractor or subcontractor.” It would also
allow the suspension of any contractor that admits to an offense but is not prosecuted for it, or for "knowingly failing to disclose criminal or fraudulent conduct relating to public procurement, public officials, or the public trust."<br>
<br>
Some of this language sounds unusually vague to me, but according to a short
essay by Rosemary Hayes, "Understanding Government Debarment
Proceedings" (attached; see below), this is common language. The reason it is allowed appears to be that debarment is considered
remedial, not punitive, and therefore due process rules are not so
strict.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
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