Arkansas Legislative Audit Uncovers School District Procurement Debacle
Why are Arkansas school districts using cooperative contracts through TIPS-USA?
Some Arkansas school districts do not put construction projects out for bids.
That's called procurement, and the laws around procurement continues to be a subject of public scrutiny in Arkansas.
South Arkansas Reckoning recently examined a management letter issued by the Joint Legislative Audit on June 15, 2023, to the Forrest City School District. That letter showed several problems with the school district.
Additions and renovations to Central and Stewart Elementary School – $7,308,978
Industrial Art Building – $1,722,433
Parking lot rehabilitation and restoration – $1,500,000
Mustang Arena HVAC – $1,193,895
Flooring within various buildings – $293,958
A response provided to South Arkansas Reckoning from Forrest City School District Superintendent Tiffany Hardrick cited the use of The Interlocal Purchasing System — also known as TIPS — cooperative contracts.
“As you are aware from reading the audit the district used the TIPS/TAPs procurement process,” Hardrick wrote in an email to South Arkansas Reckoning.
Pitfalls of cooperative purchasing exist according to an article published by International Institute of Building Enclosure Consultants (IIBEC).
The IIBEC, based in North Carolina, is an international association of professionals who specialize in roofing, waterproofing, and exterior wall specification and design.
IIBEC states: “Cooperative purchasing programs are promoted as a means to save time and money by capitalizing on participants’ combined purchasing power. When price is the differentiator, purchasers can easily determine when they are getting a good deal. However, when applied to complex design and construction projects the method falters on four critical points:
Circumvention of design professional’s judgement.
Lack of transparency.
Reduced costs do not materialize.
Competition is inhibited hurting minority, disadvantaged, and small businesses.
“Cooperative purchasing does make sense in some areas of procurement policy, but it has proven to be a failure frequently for design and construction projects. Design and construction are not commodities whose pricing is easy to evaluate, like office supplies or laptops.”
IIBEC stated it understood cooperative purchasing varies but “this statement focuses on those related to design and construction services in general and not a specific program.”
The Arkansas Code
Arkansas Code § 6-21-304 states:
“In each instance in which the estimated purchase price shall equal or exceed twenty thousand dollars ($20,000), the commodity shall be procured by soliciting bids, provided that the purchasing official may reject all bids and may purchase the commodity by negotiating a contract.”
(a) The following commodities may be purchased without soliciting bids:
(A) Commodities in instances of an unforeseen and unavoidable emergency.
(B) Provided, no emergency purchase shall be approved by the superintendent unless a statement in writing shall be attached to the purchase order describing the emergency necessitating the purchase of the commodity without competitive bidding;
(2) Commodities available only from the United States government;
(3) Utility services, the rates for which are subject to regulation by a state agency or a federal regulatory agency;
(4) With the exception of used school buses, used equipment and machinery; and
(5) Commodities available only from a single source.
(b) However, the purchasing official must determine in writing that it is not practicable to use other than the required or designated commodity or service, and a copy of this statement shall be attached to the purchase order.
It appears Arkansas lawmakers intended to allow for emergency use of cooperative procurement contracts in cases of unforeseeable emergencies. Understandable. Emergencies like a major roof leak happen that needs immediate attention.
We have questions
Why are school districts using cooperative contracts for construction projects?
Why are these cooperative contracts allowed especially knowing the projects exceed the dollar amount set by lawmakers to trigger competitive bidding? The bidding process supposedly protects the interests of all parties.
What if a school district needs a roof replaced?
Advertising the project to all roofing contractors across the state and requesting competitive bidding ensures that the cost of the project is fair to the taxpayer, and the business that won the bid.
In a bid solicitation, the public entity can provide documented proof of savings when competitive bids are used for major projects. Building renovations or updating flooring is no different.
Government project procurement processes should always protect taxpayers best interests. Competitive bidding guarantees that taxpayers receive the best bang for our buck.
Should your local government have the power to hand pick who gets your tax money? Without competitive bid solicitation, government bodies are picking winners and losers in the economy.
School board members throughout Arkansas receive training – usually from the Arkansas School Board Association. Our tax dollars pay for those trainings. Board members and administrators – like superintendents – also have access to legal advice through taxpayer-funded attorneys.
The Arkansas School Board Association website even advertises “cooperative procurement contracts” for construction.
Who approved the use of cooperative contracts for constructions?
Who knows when this statement was issued? There's no date on it. It's also available online here. There’s also no mention of construction projects.
How would anyone think a construction project is a commodity?
Who in Arkansas government will hold all school districts accountable when they fail to follow the law on competitive bidding?
Under former Gov. Mike Beebe, these laws were apparently enforced. A quick online search yields numerous news reports related to this topic. While Beebe’s administration held local government officials accountable, it appears under former Gov. Asa Hutchinson this was not always the case.
As we investigate Arkansas school districts one question continues to resurface: Who allowed these procurement arrangements?
Other school districts have procured, and continue to procure, capital improvement and renovations through cooperative contracts. They receive clean audits. That's not the case with the Forrest City School District. Why?
Our investigations continue to show that taxpayers’ interests are not well protected, if at all, in local government.
Why hasn’t state government provided oversight at the local level?
In rural areas of the state, most school districts are the largest employer. With little to no oversight, local governments have the power to decide who receives tax dollars and who does not.
The free market system and competitive bidding should determine winners and losers, not elected officials.
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