Pay to Play?: Non-bid state contracts walk a fine ethical line

Attorney General Tom Corbett’s aggressive investigation of the Bonusgate scandal has put a bright spotlight on the fine line that separates legitimate legislative staff work from campaign-related activities. What has not gotten a lot of attention is a similar cozy relationship between campaign contributors, and the awarding of non-bid government contracts from the officials they have helped to elect.

Just as it is not illegal in Pennsylvania for legislative staffers to engage in political activities on their own time, it is likewise not illegal for elected officials to award non-bid contracts to their campaign contributors. It would be illegal for there to be a quid pro quo, or up front promise of a specific contract for a specific campaign contribution. But contributions are frequently made with the usually reasonable expectation that favorable treatment in the form of contracts will occur if the recipient of campaign cash is in fact elected.

Again, there is a fine line separating legal activity from illegal activity. In recent years the most glaring example of stepping over that line has occurred in the City of Philadelphia where a number of associates of former Mayor John Street were indicted and/or went to prison for too closely tying the awarding of contracts with contributions.

The practice, unofficially known as "pay-to-play," is not limited to the City of Brotherly Love. It also thrives at the state level. According to a recent article in the Philadelphia Bulletin written by Chris Freind, more than $1 billion in non-bid contracts have been let by state government during the six years of the Rendell administration. That is $1 billion in spending for which no competitive bids were sought. The contracts were simply handed out at the discretion of state government officials, most at the highest levels.

In fact, Governor Rendell has immersed himself in the process. After leaving office as Mayor of Philadelphia, Ed Rendell set up shop at the law offices of Ballard, Spahr. "Set up shop," might be too strong of a term, in that the governor himself has admitted he did virtually no work for lots of pay. But, Freind reports it was money well spent by Ballard. In the past six years the law firm has benefitted from some $10 million in legal work doled out by the state or by related entities such as the Delaware River Port Authority (DRPA), and the Pennsylvania Turnpike Commission, among others.

During that time frame, a political action committee headquartered at Ballard – The Philadelphia Future PAC – directed some $471,000 in contributions to Rendell’s campaigns. Freind also points out Rendell’s campaign treasurer operated out of Ballard’s offices during this time frame.

It is a cozy relationship indeed, legal; but cozy.

There are those in state government, however, who think the ethical line here has gotten too blurred. They say current practice gives the "perception that the competitive bidding process is being circumvented." It is often said that in politics perception is reality; so State Representatives Michael Turzai, Doug Reichley, Robert Godshall and Glenn Grell have introduced a package of bills designed to end this legal version of "pay-to-play’."
In announcing their proposed reforms, the legislators cited media reports that "have divulged the Rendell Administration . . . (has) . . . avoided using the required procedures of the Procurement Code. The code’s purpose is to award state government contracts through a public bidding process to the ‘lowest responsible bidder."

The legislators pointed to a report by the Pennsylvania Auditor General that details the Rendell Administration’s use of "settlement agreements" to pay vendors without contracts. The Auditor General also noted a "lack of monitoring invoices before approving payments." Thus, not only are ethical lines being challenged, but the process itself is suffering from sloppy monitoring which could leave the door wide open for abuse and/or fraud.
The now-ending session of the Pennsylvania General Assembly came into office promising to significantly reform the way in which state government conducts business. As with so many of those reforms, legislative efforts to reform the non-bid contracting process have been sent off to committee to die a slow death.

With the New Year comes a new legislature. Contracting reform is one issue which should be placed near the top of what will hopefully be a re-energized reform agenda when legislators return to Harrisburg.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected])

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