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Rendell To Veto No-Bid Contract Reform?

Rendell To Veto No-Bid Contract Reform?

By Chris Freind, The Bulletin
Wednesday, February 11, 2009

The Pennsylvania Senate recently introduced 10 bills aimed at reforming state government. Senate Bill 102, sponsored by Majority Whip Jane Orie, R-40th, of Allegheny County, deals with how no-bid state contracts are awarded. The proposed legislation would eliminate no-bid contracts for consulting services, including legal and bond work, instead requiring an open bid process.

Secretive no-bid contracts doled out under the administration of Pennsylvania Gov. Ed  Rendell, D, have come under intense scrutiny by legislators, grassroots organizations and the media. This is largely due to the frequency and high-dollar amount of contracts being awarded to the governor’s close friends and political contributors, including Mr. Rendell’s former law firm, Ballard Spahr.

A similar bill reform bill passed the senate 50-0 during the last legislative session, but languished in the Democratic-controlled House of Representatives.

The Bulletin discussed the proposed no-bid contract legislation with Gov Rendell’s Press Secretary Chuck Ardo.

The Bulletin: If the legislation reforming no-bid contracts were to make it to the governor’s desk, do you think he would sign it?

Chuck Ardo: He is not likely to sign it. 

TB: What would be the rationale?

CA: Well, for instance, take professional contracts. You wouldn’t want to hire a surgeon by determining the lowest bidder. You’d want to find the most qualified surgeon for the procedure. The same is true for lawyers and other professional services providers.

Also, sole-source contracts have saved the commonwealth significant money over the last several years. There is political gain to be had by advocating the end of sole-source contracts, but that’s not necessarily in the best interest of the commonwealth or its people.

TB: Would the governor be in favor of no-bid contracts that had a capped amount, such as $100,000?

CA: The problem is that some legal proceedings could require significant investment by the commonwealth. You want the best representation possible, not necessarily by those who submitted the lowest bid.

TB: In that regard, caps or not, would the governor be in favor of no-bid contracts being either approved or rejected by the state attorney general?

CA: We’ll have to see what the specifics of the legislation might be.  It’s hard to answer a hypothetical question like that until we know exactly what the language requires.

TB: Many eyebrows were raised when Ballard Spahr performed $773,000 of legal work for the turnpike privatization initiative — with no contract.  No-bid contracts are one thing, but how does the governor address this “no-contract” type of situation?  How was the turnpike lease issue “urgent”? 

(With no contract in place, Ballard was required to sign a  “Compromise, Settlement and Release” to get retroactively compensated.)

CA:  The needs that the turnpike lease was meant to address were urgent, and continue to be urgent.  There is very little doubt about the urgency of transportation funding needs.

TB: But was it urgent to the point where Ballard billed 2,300 hours over 84 days, utilizing 55 attorneys? Could the firm not have taken the necessary time to execute a no-bid contract?

CA:  I think that everybody was relatively assured that a contract could be worked out.

TB:  Not to seem like we are beating a dead horse, but…

CA:  You choose Ballard Spahr, but there are lots of law firms that have done work for the commonwealth.  There are law firms across the width and breadth of the state that have various relationships, which provide such services.

TB: Many people have inquired about a comparison of no-bid contracts between the Rendell and past administrations.  But it has been reported that such records were “lost” during a computer transition.  Is there any update on the lost records?  Is there any possibility the records might be found?

CA:  I didn’t know they were lost.  Let me find out.

Chris Freind can be reached at cf@thebulletin.us

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February 11, 2009 at 9:59 am Comments (0)

Legislators, Citizens React to Ballard’s “No-Contract” Work

Legislators, Citizens React to Ballard’s “No-Contract” Work

By: Chris Freind

Pennsylvania state legislators and community activists expressed outrage this week in response to the Bulletin’s Jan. 9 revelation that the politically connected Ballard Spahr law firm performed $773,000 of legal work for the Pennsylvania Turnpike privatization plan without a contract.

Chester county Republican state legislator Curt Schroder stated, “I can’t understand what was so urgent to the public’s interest that the attempted privatization of the Turnpike suddenly merited that a large no-bid contract be awarded. And that prior to that, why 2300 hours of work was done by Ballard with NO contract.” Mr. Schroder added, “At the very least, the Administration owes the public a complete explanation. Leasing the Turnpike has been a politically dead issue, regardless of its merits or lack thereof.”

Wally Zimolong, a center city attorney and Republican activist, was equally skeptical, stating that questions need to be answered about why Ballard performed work without a contract, and how they knew they would receive compensation.

“This whole thing reeks. I see several red flags. First, no reasonable business, particularly top notch attorneys like those at Ballard, performs work without a contract, unless they know they are getting paid, especially when the work performed is worth close to a million dollars,” Mr. Zimolong said. “So the question is how did Ballard know it would get paid? Was it the result of some back room deal with Mr. Rendell?,” he asked.

Companies performing state work normally negotiate a contract before commencing any activity. Without a contract, Ballard could not be compensated for its work, and was therefore required to sign a “Compromise, Settlement and Release” agreement initiated by the state Department of Transportation to receive payment retroactively.

Authorization to pay Ballard in this manner was justified “due to the extreme urgency of the work required,” according to the document.

The Bulletin has repeatedly illustrated the intimate relationship between the Governor and Ballard (see sidebar).

“The Bulletin article describes an incestuous and tangled web of relationships that can only be helpful in attracting no bid contracts from the administration,” Mr. Schroder added.

The legislator explained that this situation exemplifies the need to prevent big donors from obtaining no bid contracts. “I will be re-introducing legislation to place strict limits on campaign contributions for those who receive such government contracts. Anyone exceeding the low limits would not be eligible to receive such contracts,” he said.

Reform legislation sponsored by Republican Majority Whip Jane Orie, Allegheny, will be introduced in the state Senate next week; a similar bill passed 50-0 last session, but it was stifled in the Democratic-controlled House.

The Pennsylvania General Assembly should do all it can to eliminate the appearance of impropriety in regards to “Pay-to-Play” in Commonwealth government. This can be done by creating an open bid process and providing for transparency in regards to who is receiving state contracts and their political contributions,” Senator Orie said. “This issue is receiving an enormous amount of national coverage at the current time and there is no better time than now to adopt legislation to restore integrity as to how public dollars are spent,” she added.

Mr. Zimolong questioned the fiduciary duty the Governor owes to the taxpayers. “Ballard could have run up the bill as much as they wanted to, as this was open-ended. Theoretically, nothing prevented them from doing that, unless there was a gentlemen’s agreement of which we are unaware. Also, the hours worked are absurd,” he said. “Remember this was proposed legislation. Essentially, the Commonwealth paid to set up an outside law firm with 55 attorneys working 27 hours per 24 hour day, for 84 straight days, to perform due diligence for proposed legislation,” he added. “Setting aside that it is doubtful these Ballard attorneys worked 24/7, doesn’t the Commonwealth have a large number of attorneys among all state agencies? What do they do?,” he asked.

“While it’s true the Procurement Code allows services to be obtained in urgent cases without competitive bidding, the Code does require a written basis for the emergency, and why the particular party was selected for the work, to be included in the contract file. Taxpayers should demand to see that written basis in this case,” Zimolong said.

“Whether or not ‘pay to play’ can be proven in any particular situation, the appearance is certainly a big problem and continues to erode trust in government. It is time we take a strong stand against this continued practice,” stated Rep. Schroder.

Chris Freind can be reached at CF@TheBulletin.us

The Bulletin has published an ongoing series detailing the frequency and high-dollar amounts of no-bid state contracts doled out to Gov. Rendell’s political donors and friends. Please see the website for reference. www.thebulletin.us

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January 17, 2009 at 12:02 pm Comments (0)

Ballard Spahr’s $773,000 “No-Contract” Work for PA

Ballard’s $773,000 “No-Contract” Work for PA

Gov. Rendell’s Former Firm Went Beyond “No-Bid” Contracts

By: Chris Freind

Pennsylvania Gov. Ed Rendell (D) has recently come under fire as more information emerges regarding the frequency and high-dollar amounts of no-bid state contracts doled out to his political donors and friends. The Bulletin has published an ongoing series on this issue, much of which centers on the Governor’s intimate relationship with his former law firm, Ballard Spahr. (See recap sidebar).

Many eyebrows have been raised on these lucrative no-bid contracts, especially since the records from past Administrations were “lost” under Rendell’s tenure—- ostensibly the only way to compare the frequency, amounts and recipients of these types of contracts.

The state Senate passed a reform bill 50-0 last session amending how contracts are awarded, but it was stifled in the Democratic-controlled House. The legislation, sponsored by Republican Majority Whip Jane Orie, Allegheny, will be re-introduced early this term.

While conflicts of interest abound, the awarding of no-bid contracts to political donors is not illegal, so long as no quid pro quo arrangement exists.

But in 2007, the ethical line was taken to a whole new level when Ballard performed $773,000 of state legal work with NO contract at all, leaving many questions unanswered.

On March 1 of that year, the firm began work on the proposal to privatize the Pennsylvania Turnpike. Over the next 83 days, Ballard utilized 55 attorneys (more than 10% of its legal staff), and billed the state for 2300 hours, which equates to an average of 27.38 hours per 24 hour day. The hourly rates varied based on seniority, with firm Chairman Arthur Makadon billing $637.50/hour, and partners Ken Jarin and Adrian King, Jr. billing $531.25 and $403.75 per hour respectively.

Mr. Makadon, a close friend to the Governor, has contributed $87,500 to his campaigns. Mr. Jarin is listed as the “relationship partner” on the $773,000 project. He is a longtime confidante and fundraiser to Mr. Rendell, contributing $90,000 to the Governor’s coffers. He also serves as Treasurer to the Democratic Governor’s Association, an entity which has contributed nearly $1.5 million to Rendell. Jarin is married to Robin Wiessmann, who until this week was state Treasurer. Her office approved and issued payment for the Ballard invoices. Adrian King, Jr., served as the Governor’s Deputy Chief of Staff and in a Cabinet position prior to rejoining Ballard as a partner. According to the Ballard press release at the time of Mr. King’s return, Mr. Makadon was quoted as saying, “Adrian was a star here at Ballard and has been a star for the governor. Upon his return, we expect him to play a large role in the future of the firm representing important clients and managing key client relationships.”

The Ballard firm, a Limited Liability Partnership (LLP), contributed $481,000 to Gov. Rendell’s campaigns. The Philadelphia Future Political Action Committee (PAC), registered at the Ballard offices in Philadelphia and whose Treasurer is David Cohen, former Ballard Chairman and former Chief of Staff to then-Mayor Rendell, contributed $470,000. Cohen donated $80,000, and his wife, Rhonda, has contributed $156,000 to the Rendell campaign efforts. Ballard associates contributed nearly a half million more dollars to Rendell. There is no limit to how much an individual or an LLP can contribute to state candidates. The majority of law firms are LLPs.

Additionally, on Pennsylvania Department of State campaign filings, the address of Gov. Rendell’s campaign treasurer is the 51st Floor of 1735 Market Street in Philadelphia. Ballard Spahr occupies the entire floor.

When performing work for the Commonwealth, the normal procedure is to negotiate and execute a contract before commencing any activity. But since the Ballard firm jumped headlong into the project without a contract, it had no way of receiving compensation for its work. Consequently, it had to sign a “Compromise, Settlement and Release” agreement initiated by the state Department of Transportation to receive payment retroactively.

The document specifies that authorization to pay Ballard in this manner was due to certain “circumstances”, among them that on March 1 the firm “was directed by the Office of General Counsel to provide professional services as special counsel to the Commonwealth of Pennsylvania in connection with the Pennsylvania Transportation Funding initiative.”

The document continues, “due to the extreme urgency of the work required, work began immediately at the Office of General Counsel’s direction prior to having a fully executed contract document in place.”

The Settlement also states that, ” the Commonwealth cannot otherwise pay the Law Firm for services performed during the period of March 1, 2007 and May 23, 2007 because no agreement was in place prior to performances of such services.”

A no-bid contract was executed on May 24, 2007 for future services on the privatization initiative. To date, Ballard has billed the state over $2 million in legal fees relating to the project.

While state law allows for work of an urgent nature to be performed without a contract, questions have been raised as to how the Turnpike privatization initiative qualifies an “urgent” matter. The Turnpike, the nation’s first, was in no danger of disappearing or being unable to continue operations. Additionally, the legislative process is typically slow, preventing political issues from moving with any sense of speed and urgency in Harrisburg. Since the Governor’s plan had been met with resistance in the legislature and had little chance of passage, why Ballard rushed into the project with no contract remains a question on many political observers’ minds.

On numerous occasions, Mr. Rendell has been asked if he has played a role in the selection of no-bid contract recipients, especially when political donors are involved. The answer typically given is that the Governor has no involvement in the process, and that firms are chosen based on their particular expertise, with no consideration being given to large dollar political donors.

However, legislators, political experts and the media have been increasingly questioning the close relationship of the Governor to these no-bid contract recipients, especially the Ballard firm and its partners. In particular, questions have been raised regarding the role of John Estey, Mr. Rendell’s former Chief of Staff and currently a partner at Ballard.

While he was not involved in the $773,000 project, Mr. Estey still maintains a position of enormous influence with Rendell. He is Chairman of the Philadelphia Regional Port Authority, an agency of the Commonwealth that in June of 2008 chose Ballard Spahr to be its outside counsel. In addition, Mr. Estey still chairs board meetings of the Delaware River Port Authority (DRPA), of which Gov. Rendell is the self-appointed Chairman. Ballard is the largest recipient of DRPA legal fees, receiving nearly $3 million since Gov. Rendell’s election in 2002. As a point of comparison, Ballard had received only $25,000 in the three years preceding Gov. Rendell’s election. As a board member, Mr. Estey receives and votes to approve DRPA legal bills, including those going to his own firm.

Many questions have also been raised as to why the state is utilizing outside counsel to such an extent, especially on the Turnpike project, given that that the Pennsylvania Department of Transportation (PennDot) has a large in-house Legal Department. Ballard’s 55 attorneys working on the project are larger than the entire roster at many firms, which some believe is akin to the state renting a high-value law firm for several months. Calls to PennDot revealed that there are 49 attorneys on staff. The Pennsylvania Turnpike Commission currently has five attorneys serving as in-house counsel, and had several more at the time of Ballard’s work.

The public’s cynicism and mistrust of government has become exacerbated by the numerous scandals and pay-to-play investigations on the state and national level. The debate surrounding whether there is a need to reform how no-bid and “urgent” non-contracts are awarded will intensify as the Senate reform bill is reintroduced.

The Bulletin will continue to seek responses from the Governor and legislative leaders to questions this investigative report raises.

Chris Freind can be reached at CF@TheBulletin.us

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January 17, 2009 at 11:07 am Comments (0)