Ron Villa with wife: "The Vendor was known to the City as an industry leader."
Suspicious circumstances involving a multi-million-dollar, no-bid data processing contract awarded by the administration of lame-duck mayor Kevin Faulconer without city council approval has drawn scrutiny from interim city auditor Kyle Elser.
A September 11 audit memo by Elser, entitled “Hotline Report of Abuse Related to the Unfair Award of a Multi-Million-Dollar Contract,” omits key details of the arrangement, including both the identity of the vendor and specific purpose of the work, but portrays a city procurement process gone rogue on the mayor's watch.
Villa reports to city chief operating officer Kris Michel.
"No other vendor was invited to participate in a competitive bidding process with the City. Rather, the City used a cooperative or 'piggyback' contracting process that relied on the competitive bidding process and procedures of another organization," the document says.
Although absent names, the audit report outlines a series of troubling policy calls and potential legal violations, including exclusive access granted to the vendor by city staffers prior to award of the contract.
Auditor Kyle Eiser. "The vendor was known to City staff because of the vendor’s exclusive marketing."
"We determined that the vendor acted as an unpaid consultant to City staff to develop the scope of work for the contract they were awarded," says the document.
"We obtained detailed meeting summaries indicating that City staff participated in meetings with the vendor, to the exclusion of any other potential vendor."
The contractor was allowed "to discuss goals, exchange data, negotiate pricing, and develop an implementation plan," and took advantage of the unusual privileges by "applying pressure to City staff to enter into a contract."
"When asked about the deviations from City policy and best practices, City staff stated that the vendor was 'at the right place at the right time' and they provided advice to [City staff]." according to the document
The report suggests that errors and omissions during a hurry-up review further biased the award process by robbing officials of vital information regarding the deal.
"A City staff person involved with the formation of the contract stated that they did not perform any independent business case analysis to determine what services were needed, but instead relied exclusively on the information provided by the vendor.
"Nor did they personally research the services that other vendors provided. In fact, they did not return calls or emails from other vendors who contacted them before the contract with the vendor was signed."
"A key City staff person involved with the contract acknowledged that the vendor did not have successful competitive bids with other large cities to use as the basis for a cooperative procurement."
"Several City staff involved with the process noted that the contracting process was rushed. One person noted that they were on a 'tight timeline' and did not have the time to complete a normal competitive Request for Proposal process, which could take 'a year or two' to complete."
The haste to cut a deal resulted in an end-run around legal requirements for city council approval, per the audit. "Consultant contracts that do not involve public works projects, and are worth over $250,000, 'must be approved by the City Council.' The City's cooperative procurement contract with the vendor, worth over $250,000 per year, was not approved by the City Council."
A tip to the auditor’s hotline and subsequent investigation resulted in a decision by the city not to renew the no-bid contract, according to the report, which calls for further inquiries by the city council and city attorney to "evaluate whether City Charter violations occurred and take appropriate legal action."
Officials in the mayor’s administration jumped to the deal’s defense.
Per the audit, "In a nine-page memorandum dated September 3, 2019, Assistant Chief Operating Officer Ronald Villa provided a response to our report that included a disagreement with all of our investigation’s opinions but included agreement with all of our recommendations."
The response says that “Management does not agree that the Contract was a consultant contract and therefore the Contract did not require Council approval.”
Continues Villa, who reports to top Faulconer aide and city chief operating officer Kris Michel, "The Vendor was known to the City as an industry leader and demonstrated that it could provide the necessary services.”
The auditors replied: "The vendor was known to City staff because of the vendor’s exclusive marketing and consultation meetings with various City staff over a two-year period."
To the city administration’s argument that sufficient due diligence had been conducted before awarding the contract, the auditors said: "The City only met with one vendor over a period of more than two years, exchanged information with them exclusively, relied on their guidance, and negotiated the scope of the contract that was ultimately awarded to that vendor.
"No other vendor was included in the City’s review of the potential services. Solicitations from other vendors were intentionally ignored or actively rejected. These actions are not consistent with due diligence, fairness, or best practices."