(Pittsburgh) May 8, 2019 Rather than soliciting public bids for most large purchases, Allegheny County relies on alternative purchasing methods not subject to transparency measures and which don’t guarantee the best prices, an audit by County Controller Chelsa Wagner found.
While the County’s Administrative Code requires a public bid process for purchases over $30,000, and price quotations from at least three vendors for purchases between $10,000 and $30,000, it makes exceptions for purchases under contracts entered into by other government entities or consortiums of purchasers–a practice known as “piggybacking.” The audit found that this exception has instead become the rule.
During the period of January 1, 2017 through June 30, 2018, the County made purchases under 234 piggyback contracts. On 145 of those contracts utilized during the period, purchases exceeded $30,000, and therefore would have required a bid process if a piggyback was not used. Meanwhile, 126 bid processes were conducted by the Purchasing Division during this period.
While “piggybacking” can reduce the time and cost associated with purchasing by eliminating the process of soliciting bids or quotations, the audit found that this practice “Lacks transparency and exposes the County to increased risk of procurement fraud.”
“Piggybacking is essentially like buying everything you need at the store closest to your home. It may be convenient, but you don’t know you’re getting the best price unless you shop around. This probably isn’t smart for the average consumer, but for government, it’s an abdication of our obligation to look for the best deal for our taxpayers,” Wagner said.
Purchases made under piggybacked contracts may not reflect the actual market price of goods and services that could be secured through soliciting bids or price quotations. They may also reduce local economic impact by relying on vendors outside the local area. Almost two-thirds of piggybacks contracts under which purchases were made during the period of the audit were with vendors outside the County.
“Piggybacking” also largely prevents measures to ensure the inclusion of Minority, Women and Disadvantaged (MWDBE) businesses in purchasing. A 2018 audit by Wagner found that when factoring in contracts not subject to competitive bidding, County spending directed to MWDBEs represented only 2.5 percent of eligible expenditures for 2017, far short of the County’s 15 percent goal.
“To the extent practical, our taxpayer money should be supporting jobs and businesses here in our community. Our tax dollars lose impact when we spend them elsewhere, and piggybacking lends itself to the use of out-of-town and out-of-state firms,” Wagner said.
While many governments have instituted limits on the types of goods and services that can be purchased using piggybacks, or placed caps on the amount that can be spent under these contracts, Allegheny County has not. Purchases under ten piggyback contracts exceeded $1 million, and under 12 others exceeded $500,000.
The audit specifically cautions against the use of piggybacking onto long-term contracts for services. These contracts generally allow the vendor to change the price charged for their goods or services over time, since most are in effect for a period of years. This makes it even more important for the County to regularly assess the actual prices charged by a piggybacked vendor against prices on the open market.
The audit determined that this heavy reliance on piggybacking may result in part from a lack of resources devoted to the Purchasing Division, where just six Purchasing Agents are employed to handle all procurement from a County Operating Budget of more than $900 million.
“Transparent, public bidding is the preferred practice in government because it protects the taxpayers and discourages corruption. When piggyback contracts are used, we just don’t know if we are acting our citizens’ best interest. Making the investment it would take to give this assurance to our taxpayers is essential,” Wagner said.
While the County’s Purchasing Division instituted a Piggyback Justification Form in 2018, it was not completed for all subsequent instances of a piggyback contract being used. The form doesn’t require that the cost of the purchase from other vendors be estimated, or document if any contract that was competitively bid by the County could be used for the purchase.
The audit also examined the use of “sole source” contracts by the Purchasing Division. These contacts are entered into without a bidding process or solicitation of quotations because the County has determined that only one vendor can provide the product or service. A Sole Source Justification Form is to be completed by the Purchasing agent to enter into these contracts.
Auditors examined the purchases made under 25 sole source contracts, and determined that on at least three, the product or service provided was also available from at least one other supplier.
For example, when an inflatable pool obstacle course was purchased for North Park, the County paid $31,140 under a sole source contract, with the Purchasing agent certifying that no other vendors could be located. However, auditors located a different vendor offering a comparable product for $20,500.
The full Performance Audit Report on the Impact of the Piggybacking Method of Procurement on Allegheny County can be viewed here