Contract dollars flow out of state


Contract dollars flow out of state

Amount of out-of-state contracts released by Ohio Controlling Board

2012 YTD: $89,054,040.57

2011: $328,742,220.68

2010: $62,883,210.24

2009: $310,809,396.52

Total: $791,488,868.01

More than $791 million in Ohio government contracts have gone to out-of-state companies since January 2009, often without even giving Ohio firms a chance to compete for them, the Dayton Daily News has found.

This includes contracts for financial management, medical and restaurant equipment, legal and policy consultation, and web design.

“The state of Ohio purchases a high percentage of the restaurant industry,” said Bo Segi, general manager of Wasserstrom Restaurant Supply with locations in Dayton, Columbus and Cincinnati. “My tax dollars, my employees’ tax dollars, should be spent in Ohio and I think there should be a concerted effort to spend it in Ohio.”

Wasserstrom provides refrigerators, stoves and other food equipment to schools, prisons, group homes and other public agencies across the state. Segi believes they could do more if there were preference given to in-state companies — or at least a level playing field.

Of the 168 out-of-state contracts that went before the state controlling board for approval this year, to date, 128 included waivers of competitive bidding, according to a Daily News analysis. This means $54.5 million of the $89 million that left the state in large contracts this year did so without getting bids from a single local firm.

State Sen. Chris Widener, R-Springfield, objects. But his recent attempts to give Ohio companies a leg up fell through last month with a gubernatorial veto after passing the General Assembly.

Widener is Senate finance chairman and sits on the state controlling board. State agencies must ask the board for permission before waiving the usual competitive bidding process on any contract of generally more than $50,000.

“I know my initial assumption was we do our absolute best to try to find companies in the state of Ohio to provide those services,” Widener said. “What we found, frankly, was practically the opposite.

“As we continue our efforts to create more job opportunities for Ohioans, it is imperative that we utilize the skills and talents of Ohio-based companies whenever possible — especially when the projects involve taxpayer dollars.”

Working with Widener’s office, the Daily News analyzed three-and-a-half years of contracts let by the controlling board.

Widener said there are sometimes contracts that require a product or expertise that simply isn’t offered by any Ohio companies. But too often, he said, the reason the state goes out of state is because it doesn’t check around.

For more than a decade, for example, the Ohio Department of Aging waived competitive bidding for maintenance of its website. The contract, worth $171,063, went to a Cedar Rapids, Iowa, company.

“I asked why are we using an out-of-state company?” Widener said. “Their exact answer was, ‘Because we like these people.’ My response to them was, ‘Get to like somebody in Ohio.’ ”

Can Ohio companies compete?

Randy Cole, the governor’s appointed president of the controlling board, said he shares Widener’s concern that Ohio dollars stay in Ohio whenever possible. But he also said there are many legitimate reasons contracts go out of state. He pointed to several multi-million dollar contracts for vaccines that simply aren’t made in Ohio.

In other cases, he said, a firm may be headquartered out of state but the work may be done by people on the ground in Ohio, such as state prisons operated from Utah.

“They’re Ohio jobs and that’s really where the money goes back to, is the people working in the prisons,” he said.

Many other contracts simply don’t have in-state bidders.

One of the largest out-of-state contracts awarded this year was for a company to perform financial transactions and maintain financial records for participants in home care programs. The contract, worth $4.9 million this year, went to JEVS Human Services of Philadelphia. JEVS has 900 employees, none in Ohio.

Ohio Department of Job and Family Services spokesman Ben Johnson said this year’s payment was just a renewal of a contract awarded in 2008.

“Ohio Medicaid invited (a company with a large Ohio presence) called Paychex to submit a proposal and stated in the RFP (Request For Proposal) that vendors with an Ohio presence would be given scoring consideration,” Johnson wrote in an e-mail. “However, neither Paychex nor any other Ohio company submitted a bid.”

Paychex officials could not determine by press time why they didn’t bid on the 2008 contract.

Kasich vetoed measure

Widener wants to know why this happens. He wrote legislation earlier this year that would have required state agencies that hire from outside Ohio to ask in-state companies why they didn’t reply to requests from the state for bids.

The measure was tacked on to a massive administrative bill that passed the General Assembly, but it was killed by a line-item veto from Gov. John Kasich in June.

“These provisions are unnecessarily burdensome to state agencies and businesses, create inefficiencies, and may increase the cost of purchases by the state by deterring agencies from pursuing qualified vendors,” Kasich wrote in his veto message.

“I just don’t agree with that,” Widener countered. “I don’t think it’s too much trouble or time to pick up a phone or send them an email and ask them why.”

When this was done in the past, Widener said, the findings were eye-opening. Last year, for example, the Ohio Department of Natural Resources hired a West Virginia company for $71,500 to mark trees in state forests for timber cuts.

The project had been bid out, but no Ohio firms submitted bids. When Widener called a timber company and asked why they hadn’t bid, they said the 87-page application was too daunting. This year the application was pared down to six pages and the project was split up, and several Ohio companies won the contract.

“I can’t believe our businesses would not be as competitive as anywhere else,” said Segi of Wasserstrom. He believes Ohio firms should get preference even if their price is a little bit higher.

‘Buy Ohio’ diluted

The state has since the 1980s had a “Buy Ohio” rule that allows state agencies to choose a bidder from Ohio over one from another state as long as the local company’s proposal isn’t more than 5 percent higher.

But this provision has been amended to give all neighboring states except West Virginia the same preference as Ohio companies. In return, neighboring states give Ohio companies the same benefit for their state contracts.

A recent state analysis of cross-border contracts found that Kentucky, Michigan and New York spend more than $770 million a year with 471 Ohio companies, while Ohio spends $249 million on a total of 876 companies in those three states combined.

“It’s important we have those relationships and have other governments very open to having Ohio on their bid lists,” Cole said. “Ohio is a very strong agricultural and manufacturing state, and because of that Ohio jobs and a good portion of our economy is supported by selling to governments in other states.”

Likewise, a July report by the National Association of State Procurement Officials said that many states are considering protectionist legislation to help support their economies. But the association opposes such measures as leading to less competition, higher costs and added bureaucracy.

Protectionism debated

Bending over backward to give Ohio companies an advantage could have unintended consequences, said Kevin Holtsberry, director of The Buckeye Institute, a conservative think tank.

“Politicians and taxpayers would like to see money stay in Ohio and benefit Ohioans, but there’s a danger a burdensome process could develop that doesn’t result in the best services and contracts and prices, which ultimately the taxpayers pay that burden,” he said.

While a company being headquartered in Ohio would be a good tie-breaker, Holtsberry said instead of setting up a system that could grow out of hand he advocates making the contracting process more transparent.

Clarence McGill, president of the Dayton-based content management company Integrated Solutions and Services Unlimited, said he spent months and a large amount of resources getting on the state’s minority vendor list — seemingly for nothing.

“Each agency has their own list of contractors they like to choose from,” he said. “So once a company like mine gets certified by the state, and does all that paperwork, it’s for nothing because they … just go with their favorite contractors.”

McGill has 40 employees and currently holds a federal contract with the U.S. Environmental Protection Agency and subcontracts on a project with the Ohio Lottery Commission.

But he’s sure he could’ve competed on more contracts if given the chance, and he thinks state agencies should have to request proposals from all the Ohio companies on the state list every time something comes up.

“They’re paying out tax dollars to actually put this list together, go out and outreach,” he said. “But they don’t even use the information.”

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