Informal bidding process: cause for concern?
The School Reform Commission (SRC) has awarded hundreds of millions of dollars worth of contracts for educational services in the Philadelphia School District in the past five years that did not go through formal competitive bidding processes.
This practice is allowed by state law, and District officials say that it is often the best way of obtaining effective educational programs.
However, the District’s reasons for choosing contractors and its evaluations of contractors’ performance are not easily accessible to the public, prompting calls for “better oversight” and questions about whether the District is really getting its money’s worth when it contracts out.
According to a recent study by Research for Action, the number of contractors providing educational services such as afterschool tutoring and professional development to the District has more than doubled in the past four years. The total dollar amount the District spends annually on outsourced educational services is in the hundreds of millions.
Because of an exemption for purchasing certain types of services in Pennsylvania’s state Education Code, the District is not required to seek competitive bids on the vast majority of these contracts.
State law requires school districts to use a competitive bidding process only when awarding contracts for over $10,000 worth of construction, repair, or maintenance of buildings, or for the same amount of “furniture, equipment, textbooks, school supplies and other appliances” for schools.
Because of this lack of legal requirements for awarding contracts for educational services, the School District’s policies on how to choose providers for these services are mostly informal. Those that exist are rarely put into writing.
From outside the District, concerns about a lack of a clear and public process for awarding and monitoring contracts have been raised recently by City Controller Alan Butkovitz, who is investigating no-bid contracting in the School District. He plans to release a report on his findings on this issue by the end of this year.
“One of the reasons we were interested in that,” he explained, “is because of the city’s trend away from no-bid contracting, in particular the elimination of political connections in no-bid contracting,” he said.
“So on one side of the equation, there’s been a judgment in Philadelphia that all that stuff is a prescription for trouble,” Butkovitz observed. He said the School District, which represents “almost 46 percent of the spending of the government in Philadelphia,” remains “a gigantic loophole.”
Similar concerns have been aired since the earliest days of the state takeover in 2001. Mayoral candidate Michael Nutter was vocal during that period in asking who would have oversight over District contracts after the reforms, and he has retained his skepticism – especially in regard to no-bid contracts.
“We should not wait until there is a scandal, but instead should work to prevent a future one from occurring,” he recently told the Notebook. “We need better oversight and systems to protect against abuse now.”
School Reform Commissioner Sandra Dungee Glenn agreed that clearer rules about contracts would be a good idea. “I think that basically, the District should clarify what process it uses and why,” she said. “There needs to be a rationale to explain why it’s doing what it’s doing,” she explained, and added that the rationale should be “publicly stated.”
State law requires the School Reform Commission to sign off on all contracts in the School District, but commission members say that they spend a relatively limited time discussing contracts for educational services during their meetings, both in and out of executive session.
Although he said he and the other commissioners strive to ensure fiscal responsibility in the District, Commissioner Daniel Whelan explained that generally, “I believe it is management’s role to decide which programs are the best to fulfill the SRC’s policies.”
District leaders say they strive to use contracting to allow the system to benefit from privately owned programs that are effective in increasing student achievement and would be too expensive or difficult for the District to develop itself.
“You go out there, and you let the data drive the best product,” Vallas explained, “then you bring them in and negotiate the best deal.”
Chief Academic Officer Gregory Thornton explained that his staff has prepared a rubric that staff in academic departments are supposed to use before seeking contracts to figure out if the District can and should do the job internally. He recommends that departments send out an informal “request for proposals” to select providers for contracts over $100,000.
Once a department chooses a contractor, Thornton and his staff review the proposals, and he approves and signs off on each one before it is sent to the SRC.
Both Vallas and Thornton say a “no-bid” process is used only if their staff believes that a contractor provides a unique service in the market, or that a company is clearly superior to its competitors.
“Everyday Math is the best math curriculum around,” Vallas argued. “You’re not going to competitively bid the math curriculum. What – are we going to competitively bid penicillin?”
Thornton and Vallas also both say, however, that these guidelines are relatively informal. “I think to a certain extent there is a competitive process,” Vallas explained, but “it’s just not a formal process.”
“It’s more of an understanding” than a policy, Thornton confirmed.
Both Thornton’s office and the SRC’s guidelines for contract resolutions require that departments submit a formal explanation of why a service is being contracted out, why the selected provider was chosen, and what performance standards the contractor needs to meet to fulfill their contract.
However, the “Justification” section of resolutions provided to the SRC often lacks a clear explanation of what process was used or why a particular provider was chosen.
That was the case with virtually all resolutions relating to educational services reviewed by the Notebook during its investigation of contracting this summer.
In addition, these documents are delivered to the SRC before their public meetings and kept on file in Thornton’s office, but are not publicly released, and can be difficult for those outside the District to obtain (see "Quest for documents").
Len Rieser of Philadelphia’s Education Law Center addressed this concern about the lack of transparency around how and why contracts are being awarded. “For those of us who don’t work at 440 North Broad,” Rieser noted, “it’s almost impossible to get any information about what’s in the works at the District.”
“No agenda is ever available in advance” at SRC meetings, he noted. “The big issues – the huge new contract, the major policy change, the big new initiative,” are not discussed on the website, “at least not until the decisions have already been made. The District says it wants public involvement; but how can we get involved when we can’t find out what’s going on?” Rieser asked.