Comptroller Brooke Lierman raised concerns about nine-year contract she said disadvantages state agencies and businesses located in Maryland. (File photo Bryan P. Sears/Maryland Matters.)
The Board of Public works approved a $300 million IT contract Wednesday despite concerns about transparency and whether Maryland businesses and state agencies could be at a disadvantage in the deal.
Under the nine-year contract, a pool of eight preapproved companies will provide digital services to state agencies, with contracts awarded on a rotating basis between the companies.
Comptroller Brooke Lierman questioned the contract’s effects on competition and its costs to state agencies as well as the fact that the deal would have the effect of limiting future review of high-dollar contracts by the board.
“Vendors have expressed frustration to me … because when work is assigned on a rotational basis, vendors have very little agency over what work they’re performing on the contract,” Lierman said. “And if they decline a work order, they risk not being assigned another opportunity until the state works its way through the entire list.
“I have concerns, I guess, about this type of vehicle moving forward, and I hope, I hope I don’t see it again,” she said to the Department of General Services officials presenting the contract.
The contract, approved by a 2-1 vote of the board, is the latest chapter in an effort to revamp how state technology projects are handled. It is an effort that has drawn scrutiny from board members and criticism from some lawmakers.
Maryland Department of Information Technology Secretary Katie Savage. (File photo by Bryan P. Sears/Maryland Matters.)
Katie Savage, secretary of the Department of Information Technology, said Wednesday the contract “will help us improve digital services for Marylanders, help address accessibility issues, the political cybersecurity issues we’re facing, and create economic opportunities for Maryland companies.”
The master contract approved by the board preapproves eight firms — only two of which are headquartered in Maryland — to provide technology services. Projects are awarded using a work order model instead of individually bidding out projects. The orders are handed out round-robin style with each approved company being assigned a project in turn.
Savage noted that three of the winning bidders — while not headquartered within Maryland —”have satellite offices” in the state. And Gov. Wes Moore (D), who sits on the board, noted the contract is tied to 1,400 jobs in the state and “all these firms plan to hire additional Marylanders as needed.”
Moore was joined by Deputy Treasurer Jonathan Martin, who filled in for Treasurer Dereck Davis, in voting to approve the contract.
Lierman said concerns — including the elimination of competition — prevented her from voting for the request.
“I worry there’s now eight firms for the next umpteen years that will be able to have a work order in this way, and that cuts out a lot of other potential Maryland based firms from doing this work unless an agency goes through and full RFP [request for proposals] process, which, of course, is longer than many of us would like,” Lierman said.
Because the work orders are not bid out, the Board of Public Works would have no oversight, Lierman noted. Additionally, a lack of competition could mean projects end up costing more, or that agencies and contractors are mismatched resulting in poor outcomes.
Lierman lamented the lack of Maryland-based businesses involved in the contract. State law allows departments favor bidders headquartered within the state.
“But it’s only good if it’s used,” Lierman said.
Chief Procurement Officer Wallace Sermons defended the removal of the Maryland business preference from the contract, saying the preference could backfire on a Maryland firm doing business in another state.
“If we were to give a 10% preference, let’s say, for instance, for a Maryland-based firm, then if that Maryland-based firm, the majority of their work was, let’s say in New York, New York, through their reciprocity, could then reduce that firm’s score by 10%.” Sermons said.
“Since we don’t know for each firm in Maryland how much work they have out of state at this point, we don’t put that in. We don’t use that,” he said of the in-state preference.
Lierman rejected that argument calling it “completely hypothetical.”
“We’ve never been given evidence of a single factual situation where a state outside of Maryland has imposed some sort of penalty on any other company, or has even threatened to,” Lierman said. “I mean, we don’t track what our businesses are doing out of state. So, it’s a challenge to prove that right now.”
The comptroller — the state’s chief tax collector — added that she is also concerned about the effect of a new sales tax on companies that provide IT services. The contract approved by the board was bid out last year, before the tax was even proposed.
“And because this was spit out and people responded to it prior to that, I think that we now don’t have a necessarily accurate answer of what is going to happen,” Lierman said. “Every day I talk to Maryland businesses about the tech tax and about locating in Maryland. So, it’s even more important to me now that we’re working with our Maryland based firms.”
She said the levy changes “the underlying economics” of such contracts and the actual costs of state contracts.
“I think it’s just going to change the economics of the contracts that companies are doing,” Lierman said. “I’m not saying that’s good or bad. It just changes it.”
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