Audit: DGS Single Bid Contract for State Fuel Program

The state agency charged with procuring and managing Maryland’s statewide fuel contract structured the procurement process in manner that potentially limited competition for the contract.
According to a legislative audit of the Office of Procurement and Logistics (OPL), a unit of the Maryland Department of General Services, the agency structured and wrote the contract request for the state’s five –year $305 million fuel contract in a way the resulted in only one bidder being eligible for the contract award.
OPL manages the state’s centralized procurement process, procures contracts for design and construction of state facilities, oversees the state’s Automated Fuel Management Program, manages the state’s minority business enterprise program, manages state records and inventories and surplus property.  OPL also manages state printing and graphic services.
According to the audit, it was OPL’s intention to award the contract for the Automated Fuel Management Program to only one vendor but OPL included this this language in its RFP:

While the objective is to award to one prime contractor, who would be responsible for all aspects of the contract, it is recognized that it may be in the State’s best interest to award to multiple contractors based upon the various technical and financial options offered.

OPL offered three bidding scenarios
  1. Propose on all RFP tasks.
  2. Propose on all RFP tasks except the supply and delivery of bulk fuel.
  3. Propose on only the supply and delivery of bulk fuel (some or all types and regions).
Of the 113 vendors contacted, only seven submitted a bid, and OPL deemed three of those bid unacceptable.  Of the four bids OPL did deem acceptable only one vendor bid on meeting scenario 1. 
The auditor claims structuring the RFP in this manner, limited competition to a single bidder.  DGS disagreed with this finding.  “The RFP, was drafted to generate as much competition as possible,” wrote DGS Secretary Alvin Collins in his response to the auditors.  A contract of this size and scope, more than $305 million over five years, does by its size and complexity, narrow the field of those companies who can not only provide the fuel and services, but who possess the financial position to accept the credit risk associated with such an endeavor.” Collins wrote.
The auditor responded to Collins stating:

In its response, the Department stated that it disagreed with the finding and that it structured the RFP to encourage and not limit competition; nevertheless, it acknowledged that the size of the project would narrow the field of companies who could bid on the contract and suggested that companies could have formed joint ventures or teaming arrangements to meet all the requirements of the RFP. This supports our position that the RFP did ultimately limit competition and that the Department should have considered rebidding the contract using a different procurement structure when the bid results indicated that only one bidder was eligible for the award.

The Maryland Board of Contract Appeals noted in a denying a protest by a losing bidder that while OPL “reserved the right to select a combination of proposals if in the State’s best interest, no combination of proposals in this case would satisfy all of the State’s fuel needs.”  Therefore MBCA noted, OPL was left with no other option but award the contract to the vendor who bid on all tasks.
The auditors also state that OPL misrepresented the contract to the Board of Public Works.  The Board of Public Works, comprised of the Governor, Comptroller and State Treasurer approve state contracts.  The audit states that OPL did not clearly advise the board that the contract was a single bid award.  The auditor writes:

Rather, the presentation of the bids on the agenda item gave the impression that a competitive bid process had occurred because the price proposal for the vendor who bid on scenario two was presented as though the vendor had bid on all tasks. Specifically, OPL combined the bid information from the bidder on scenario two with the two vendors who bid on parts of scenario three and used certain assumptions to “create” an overall artificial bid amount. The agenda item showed that the winning vendor had the lower overall pricing. Although the narrative of the agenda item acknowledged that awarding to the vendor who bid on scenario two would require OPL to award to the other bidders for the bulk fuel scenario, and that the related bids did not cover all 24 bulk fuel options, the presentation was, at least, ambiguous.

OPL did not obtain key contract deliverables from the fuel contract vendor such as fuel variance reports, and did not follow procedures to ensure propriety of fuel rates.  Fuel variance reports, which allow the agency to identify billing or usage irregularities, were not provided for the first five months of the contract until after the audit was initiated.
OPL also did not obtain proof of required liability insurance from the vendor until four months after execution of the contract, and OPL did not provide state agency personnel daily motor fuel rates to verify propriety of amounts invoiced to the state by the vendor.
Other findings from the audit include:
  • OPL did not modify a contract price for an eMaryland Marketplace contract after certain deliverables were not implemented;
  • OPL did not document its assertion that certain intergovernmental purchasing contracts were in the best interest of the state, or that a contract vendor was pricing products in accordance with that contract;
  • OPL assessed contract fees without authority to do so, or disclosing those fees to appropriate entities;
  • OPL did not publish fair market prices of goods and services from Maryland Correctional Enterprises and Blind Industries and Services of Maryland as required;
  • OPL did not conduct audits of delegated procurements, and did not keep proper control over statewide purchasing contracts.

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