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State revamps purchasing rules

CHARLESTON, W.Va. -- State agencies across West Virginia must now get written approval before they use statewide contracts to buy goods and services that cost more than $250,000.

The policy change follows federal and state reviews of West Virginia's decision to buy more than 1,000 Internet routers that cost $24 million.

The state Office of Technology bought the routers two years ago under a statewide contract typically used for routine and repetitive purchases. The state Purchasing Division wasn't notified about the router transaction.

Earlier this week, the West Virginia Purchasing Division sent emails to more than 170 state agencies about the revamped purchasing rules. The new regulations take effect on Friday.

"For future purchases from our master contracts, this procedural change will provide the Purchasing Division advance notice," said Diane Holley-Brown, a Department of Administration spokeswoman. "The department continually assesses purchasing procedures to ensure the best policies and practices."

Under the tighter rules, state agencies must send a memo to the Purchasing Division when they plan to use a statewide contract to buy items that cost $250,000 or more. Statewide contracts are competitively bid.

The memo must include "a synopsis of the purchase, the item [name], the participating vendor, the bidding information, any award justification and the amount," according to a draft of the new rules in the state purchasing "handbook."

The Purchasing Division must sign off on the request before agencies can pay vendors.

State officials acknowledged Thursday that the $24 million router transaction contributed to the policy change. But they said that wasn't the only high-dollar purchase the state has made under a statewide contract.

"When making changes to procedures, we take a responsible approach and look at everything, not an isolated situation," Holley-Brown said.

In 2010, West Virginia received a $126.3 million federal stimulus grant to bring high-speed Internet to 1,064 "community anchor institutions" - schools, libraries, state agencies, 911 centers, county courthouses, health clinics and other public facilities.

That year, the state used $24 million from the grant to buy the routers under an existing 2007 statewide contract for "Internet Voice Protocol Communications." The contract mentioned nothing about routers.

A team of former and current state officials authorized the router purchase, and the Office of Technology signed off on the transaction.

West Virginia law specifies that state agencies use such statewide contracts for "commodities that are needed on a repetitive basis..."

The 2007 communications equipment contract didn't specify a maximum-dollar purchase limit, but the contract apparently wasn't designed for multimillion-dollar transactions.

The $24 million router purchase was 345 times higher than the average purchase on the statewide contract and 22 times higher than the next largest transaction, the Gazette has reported.

Under the 2007 contract, state agencies spent $53,600 per purchase on average during the past five years - excluding the $24 million router transaction, according to state Auditor's records.

By using the statewide contract, state officials bypassed the state's formal and comprehensive bidding process.

Instead, the Office of Technology used a "secondary bid process," soliciting router bids on the agency's online "bulletin board" for five days. The request was never publicly advertised, and the Purchasing Division and Department of Administration never reviewed the bids.

That will change under the new rules. 

"In the case of utilizing the secondary bid process, the Purchasing Division will have two opportunities to review the agency's purchase," Holley-Brown said. "First with the agency's intent, and secondly, once they have attained bids from the qualified bidders and plan to issue the [purchase] release order."

State Homeland Security Director Jimmy Gianato has defended the router purchase, saying the state followed "normal procedures for procuring such equipment," according to a letter he sent to the Legislative Auditor in late August.

Gale Given, West Virginia's chief technology officer, also has said the state's decision to use the 2007 contract to buy the routers was appropriate. Given did not work in state government when the state bought the routers in July 2010.

The machines, which funnel data from one computer network to another, cost $22,600 each.

In a report released last week, the U.S. Commerce Department's Inspector General found that West Virginia could have purchased smaller, less expensive routers for many schools, libraries, county courthouses, health centers and planning agencies.

The Cisco 3945 series routers - which the state purchased from Verizon's retail division - were designed to serve a minimum of 500 users. But the state has installed the devices in some public facilities with only a few Internet connections. Seventy percent of the routers wound up in schools and libraries.

The state Legislative Auditor is expected to release a report about the $24 million router purchase in February.

Reach Eric Eyre at ericeyre@wvgazette.com or 304-348-4869.


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