1 2 3 4 --o0o-- 5 STATE OF CALIFORNIA 6 DEPARTMENT OF GENERAL SERVICES 7 PROCUREMENT DIVISION 8 --o0o-- 9 10 11 12 13 --o0o-- 14 STATE AGENCY MEETING 15 WEDNESDAY, JULY 10, 2002 16 1:35 P.M. 17 --o0o-- 18 19 20 21 Reported By: Jamie Lynne Oelrichs, CSR No. 8086 22 23 24 25 1 1 APPEARANCES 2 For the Department of General Services: 3 PATRICIA JONES, Office Chief 4 707 Third Street, First Floor, Room 1-400 West Sacramento, California 95691 5 (916) 375-4945 6 --o0o-- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 I N D E X 2 Page 3 Meeting 4 4 Reporter's Certificate 68 5 6 --o0o-- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 BE IT REMEMBERED, that on Wednesday, July 2 10, 2002, commencing at the hour of 1:35 p.m., at 3 the offices of Department of General Services, 707 4 Third Street, West Sacramento, California, before 5 me, JAMIE LYNNE OELRICHS, a Certified Shorthand 6 Reporter in and for the county of Sacramento, state 7 of California, the following proceedings were had: 8 --o0o-- 9 MS. JONES: Hi. How is everybody? Thank 10 you very much for coming this afternoon. I'm Pat 11 Jones. I am a manager in General Services 12 Procurement Division and Ralph Chandler is the 13 deputy director. And Jeff Marschner, General 14 Services legal counsel, chief legal counsel, asked 15 me if I would speak here about the efforts that 16 we're going through now, and I agreed. I'm not sure 17 why I did. You guys are going to be a tough crowd. 18 Anyway, I agreed. 19 And so what we've done is we formed a 20 subcommittee to the governor's task force on 21 contract and procurement review. And we call 22 ourselves the CPR subcommittee. And many of the 23 subcommittee members are here today. Russ Guarna is 24 manager of acquisitions. Just acquisitions is what 25 you call it, in the procurement division. Janice 4 1 King down front here, she's the assistant -- acting 2 assistant deputy director. There you go. Earl 3 Sante is our engineering manager in the procurement 4 division. Mariel D'Eustachio is manager of Cal 5 Buy. Bill Fackenthall is our historian, and he's in 6 the procurement division. We have two team members 7 from the office of legal services. Bill Cade and 8 Debra Kerns. So we've got a pretty good team 9 together. And helping us today, Joyce Gibson helps 10 me in the legislation area, is helping pass around 11 the microphones so folks can talk. 12 Anyway, as you may know, the governor's 13 task force is holding public hearings, and those 14 are -- they have to notice those ten days in advance 15 of the hearing and post those on the web and make 16 sure notice goes out to a pretty big mailing list. 17 Those, we expect more vendors and general public to 18 testify at those. 19 And so we wanted to get an opportunity for 20 state agencies to come and talk with us. We thought 21 state agencies might be attending the hearing, but 22 that they would be attending more as observers in 23 that setting. So basically what we wanted to do is 24 get state agencies and the subcommittee and see if 25 we could get you to be part of the process here. 5 1 Because there will be some changes as a result of 2 the governor's executive order. 3 The tax force themselves have to put 4 together a report and recommendations to the 5 governor, and that's due to the governor on August 6 21st. So there will be some things that will be 7 changing. We think it's real important to get your 8 input into those changes as we help the task force 9 with their own recommendations. 10 As you know, the executive order D-55-02 11 really was addressing what are termed 12 non-competitive procurements, and there are some 13 types of transactions that got lumped into that, and 14 in part, perhaps due to a misperception about how 15 competition is achieved in some of those programs. 16 But regardless of how they ended up there, they're 17 part of that executive order. And so the task force 18 will be looking at those programs and changes to 19 those programs and so forth. Changes to statutes or 20 regulations or procedures that will enhance 21 competition and restore or retain integrity in the 22 process. So those are just kind of a highlighted 23 idea of what the task force is charged with in the 24 executive order. 25 And I apologize for paraphrasing. I'm 6 1 sure many of you have read it and know exactly what 2 it says. But what we're trying to do here is 3 prepare for what we call day 91. And that is the 4 day after that report is due to the governor. What 5 does that mean to our process on contracting and 6 procurement in the State of California? So we need 7 your help. 8 So what we want to do is we sent out, as 9 we sent out the notice, and posted them on our 10 website, we gave you some questions. We're not 11 going to stand up here and do a presentation. I'm 12 going to stop talking in a minute here and I'm going 13 to let you talk. And what we want to do is capture 14 your input. As you speak, if you would identify 15 your name and your department, it will help the 16 court reporter that we've got who's taking this down 17 as a transcript. We want to keep a record of this 18 and make sure that it is available to the task 19 force. And we will most likely publish it also on 20 our website. And I don't want that to discourage 21 anyone. We want you to understand that we're very 22 serious about taking your comments and using those 23 comments to help craft the future, essentially. 24 So with that, why don't we move on to the 25 first question. And that is, how should competition 7 1 be enhanced in our contracting and purchasing 2 transactions? And so we've got folks on both sides 3 of the room here with microphones. And if you would 4 like to speak, if you just throw your hand up in the 5 air, they'll send you a microphone, and you can 6 speak. And I had to do the same thing this 7 morning. We had to coax it out of people. There we 8 go. Once we got started this morning, we were on a 9 pretty good roll. 10 MS. HARDER: Hi. I'm Marie Harder from 11 the Department of Health Services. And I have kind 12 of some concerns that enhancing competition is that 13 if we all of a sudden need to post everything, let's 14 say, on the contract register, we are inviting a 15 whole lot of proposals to be received that maybe we 16 don't have the staff to handle all of that. To look 17 at it, to evaluate it. And then we have the issue 18 of too many funding levels. And usually when we're 19 looking at contracting out, we're looking at a 20 certain category. And if you say up to $500,000 on 21 something you post, then it's almost guaranteed that 22 that's where all of your proposals are going to come 23 in is right around that. 24 So enhancing competition is a really good 25 idea, but it is a double-edged sword that I hope 8 1 everybody is looking at in the regard of staffing 2 and more money being spent. Because the proposals 3 that we receive are going to be higher. 4 MS. JONES: Thank you. Okay. Who else? 5 MR. WILLIAMS: Hello, Pat. Ben Williams, 6 Department of Water Resources. I'm hoping I am 7 repeating some of the comments made by other 8 departments this morning. But to ensure, I think 9 that the method of competition within MSA and CMAS 10 providers I think is a good model. It allows 11 standard contract language so the contractors don't 12 have to renegotiate language. It allows the 13 availability, the negotiation of rates, or at least 14 of maximum rates. And I think it's a good vehicle 15 to reduce administrative costs by state agencies, 16 while at the same time ensuring competition and 17 making the best use of resources. So again, and 18 perhaps removing some of the current caps on the 19 amount, but having a limited competition within the 20 existing vehicles of CMAS and MSAs and related 21 vehicles I think is an idea that warrants 22 consideration. 23 MS. JONES: Thank you. So I will pose a 24 question from your comments is how are, or how is 25 the process of obtaining three quotes under the CMAS 9 1 agreement working for departments? Is that 2 something that is working, not working? That is a 3 means of enhancing competition, certainly, in that 4 specific program. Any comments or thoughts about 5 that? No. Okay. 6 MS. HENRY: I'm Joyce Henry, formerly of 7 DGS, and now with the Department of Child Services. 8 For us, we frankly have gotten pretty dependent on 9 CMAS and just doing whatever they want to do. So 10 now the fact that we even have to go get three 11 quotes or three offers has been very painful for my 12 program people. We're still in that stage of 13 emerging, getting used to doing what I've evoked is 14 using the IFO process that's already built into the 15 MSA contract, and using that process and those items 16 and models in CMAS. 17 MS. JONES: That's the request for 18 offers? 19 MS. HENRY: Yes, as opposed to writing 20 quotes on the back of a cocktail napkin. We're 21 getting there. It's going to be less painful as we 22 go on. But that's what we're doing. 23 MS. JONES: How about others? 24 MS. RABAIN: Joan Rabain with the 25 Franchise Tax Board. And regarding the enhancement 10 1 of competition, I don't know that that's really what 2 we want to do. We just want to add competition. 3 That's what we're talking about, right, to CMAS and 4 to some of the master agreements? Because when 5 you're doing a competitive procurement, that's what 6 you do. You go out and you build your little bidder 7 list. 8 But I think the thing that really comes to 9 mind is that, you know, some of us old dogs have 10 been doing procurements since the 1980s. Some of 11 you weren't born yet, I know. But there is life 12 after 20. But, you know, we were -- the rules were 13 you had to have at least -- you had to go look at 14 seven. And if there weren't seven, then your file 15 needed to document why there weren't seven. And 16 then you had to have three quotes. 17 So if we're only talking about CMAS, 18 because that's where everybody's passion seems to 19 be, then to enhance competition just means that you 20 have to first create it. Look at more than one 21 person. And I think that that's -- you know. I'm 22 speaking just from my personal opinion. 23 But with the staff at the Franchise Tax 24 Board, it has been a policy that in order for them 25 to determine best value, they had to look at more 11 1 than one. And that's where we all need to be 2 headed. And that your files and the documentation 3 that supports your selection have to reflect that 4 you looked at more than one. And so, you know, I'm 5 kind of rambling here. But I think that's why we're 6 in the fix that we're in. Because some people 7 forgot to put the documentation in there. 8 And I can't remember what I did yesterday, 9 so how can I remember three years from now when an 10 auditor's sitting there in front of me asking 11 me, "Why did you make this selection?" Because all 12 of us, it's the moment of decision and the thoughts 13 and information you have at the time that you make 14 the buy that determines whether this was best value 15 or it was fair or it was the right thing to do. So 16 if your file, and Pat, you taught me this, if your 17 file tells the story, then you can support whatever 18 decisions you've made at that point in time. 19 And that's, I think, what we need to do to 20 enhance competition is to make sure that our files 21 can document and support the story for why we 22 executed that particular body for that moment in 23 time. 24 MS. JONES: Thank you, Joan. Okay. Who 25 else? We've got a couple of people over here. 12 1 Good. Just takes a few to get everybody started. 2 MS. WALLACE: I'm Dawn Wallace from the 3 Resources Agency. And I've been involved in the use 4 of the old sole source contracts ever since we had 5 the last executive order. And I think if you begin 6 to enhance competition, one of the things to 7 remember is that bidders will spend a lot of time 8 putting together a response for a proposal, and it's 9 not a legitimate open competition if there really is 10 one source for which you're proposing to purchase. 11 If you have proprietary software and it's 12 coming up for re-bid, in order to have the technical 13 assistance and management to try to put something 14 out to bid, wastes your time and other people's 15 time, I don't think that enhances competition. So I 16 think we need to have that balance in what we're 17 doing to make sure that we don't just go forward on 18 a competitive basis, waste the time, knowing that 19 there really isn't going to be an opportunity for 20 competition. 21 MS. DERODE: Gloria Derode from the 22 Department of Forestry and Fire Protection. I don't 23 think that the majority of us were doing anything 24 that created the problem. I think the majority of 25 us were using CMAS and master service agreements. 13 1 Because it takes so long to use the other processes, 2 and this was a faster way to purchase what we 3 needed, not to give it to the friends that we had or 4 whatever. It was because it's an easier way to 5 accomplish purchasing. 6 And there's some times, particularly at 7 the end of the year, where if we didn't have CMAS, 8 we wouldn't have been able to acquire what we needed 9 or what we had money to purchase. So I know I speak 10 for our department in saying that we're really 11 concerned that CMAS is going to go away, and it's 12 not going to be there for our use. 13 And I don't think we will have any 14 problems with getting phone quotes or bids where 15 necessary. We don't have any problem with that 16 process. And I think everyone can fold it in 17 easily, as long as it doesn't become so cumbersome 18 that we're right in the same position we are with 19 regular -- the regular purchasing process. 20 So as long as it's -- as long as we keep 21 it streamlined like it currently is, then I think it 22 works very well, and I'm hoping it doesn't go away. 23 And the only place that we've had problems with CMAS 24 recently trying to accomplish what the executive 25 order directed is where there's only one person 14 1 providing the service. Because even though it says 2 to document why there isn't more competition, I 3 think we're all a little gun shy to go with one 4 person when we know that we're supposed to be 5 getting more than one quote. 6 MS. JONES: Thank you. So is the message 7 then that the tools are good tools? Other comments 8 about competition in general? Yeah. 9 MS. DEWEY: I had -- this is Cynthia Dewey 10 from Cal Trans. And there is life outside of CMAS 11 and master agreements. And we have a very large 12 procurement and contract division, and we do a lot. 13 We use CMAS. We use master agreements. But we also 14 use the competitive process. And our main concern 15 with this is amendments. And that is that you have 16 a contract that has been and was competitively bid 17 that needs some additional time and money in order 18 to complete, and to have to go through the 19 non-competitive bid process for a relatively minor 20 amendment in view of the entire contract. 21 Maybe this is a contract that is a 22 multi-year contract, and as I mentioned, just needs 23 a little more to complete. Doing away with the 30 24 percent rule has really -- and making us go through 25 the non-competitive bid process for every single 15 1 amendment is really a time-consuming effort, and it 2 involves a lot of additional labor. 3 And just to give you an idea, I think here 4 in Sacramento, procurement and contracting and 5 processing people, we have about 140 people doing 6 that here. And we have maybe an additional 30 7 people in Southern California. So we're about 170, 8 175 people. If you add a few minutes to every 9 single contract and every single purchase, that's a 10 lot of personalities. It's a lot of extra, it's not 11 just a little extra, things that you do one or two 12 times. This is -- this adds up to a lot of extra 13 work, and it also impairs our ability to serve our 14 internal customers and actually trying to get that 15 contract completed, or trying to get that purchase 16 purchased, or whatever. But as I said, our main 17 concern is with amendments. 18 MS. JONES: Okay. I'm glad you brought up 19 amendments. This morning, Jeff Marschner, our chief 20 legal counsel, did share with that group that with 21 respect to amendments, it is being discussed with 22 the governor's office on how to handle those and to 23 provide some sort of lead for state agencies in the 24 handling of those. But he doesn't expect anything 25 to come out for a couple of weeks. But there may be 16 1 hope on the way. That's all I can give you on that 2 right now. 3 MS. SWEET: Ruby Sweet, Department of 4 Corrections. And I just want to add to that that 5 amendments to bid contracts add about 10 percent or 6 amount to about 10 percent of our workload. When 7 we're doing 2,500 contracts a year, just that alone 8 is a major workload issue. And a lot of our 9 services, being that it's Department of Corrections, 10 that time that this process is adding to a simple 11 amendment is not efficient, not cost effective. 12 Those contracts were bid initially. We got the 13 lowest price in most cases. Like a lot of our 14 services at the institutions, there's a need for 15 additional services. 16 So we're not changing the scope. We're 17 just, you know, getting the garbage picked up and 18 extra time, because the order has said so. And to 19 have to go through this process on a bid process is 20 absurd. It is a waste of the state's money. 21 MS. JONES: Thank you. Can we try to -- 22 we want all of this input. We need to focus on the 23 future. We need to focus on what it's going to be 24 like beginning August 21st. And we need all of this 25 input very much. I really appreciate the comments 17 1 that you're giving us. Let's please go ahead. I 2 think you were next. Help us figure out where we go 3 from here. Okay. 4 MR. DEVORE: Okay. My name is Bill 5 Devore, and I'm with the Department of 6 Rehabilitation. And we provide services to the 7 public men and women who have physical and mental 8 impairment. Help them get back to work. Some of 9 the individuals are very scared and disabled and 10 need to have their vehicles adapted with high-tech 11 driving equipment. 12 We received an exemption from the 13 Department of General Services in March of 1991 14 which exempted us from certain parts of the Public 15 Contracting Code. And in order to operationalize 16 that exemption, we received a letter from the 17 Department of General Services, Office of Legal 18 Services providing us with guidance. 19 And one of the ways to operationalize that 20 was to engage in master agreements that are solely 21 used by other departments. Those are not statewide 22 master agreements. These master agreements are for 23 us to qualify vendors, vehicle modification vendors 24 who provide high-tech vehicle modification to 25 provide services to us. 18 1 We have some areas where we only have one 2 vendor. For example, in Chico, California, we have 3 one vendor. And the closest vendor to that vendor 4 is about 100 miles away. So it's very difficult for 5 us to get more than one, sometimes two or three, 6 sometimes two bids in order to do it, which means 7 that that person who's very severely disabled, who 8 already has transportation issues, given this 9 management memo that we've seen and the executive 10 order, might have to go down San Jose, California, 11 approximately 200, and I don't know what, about 225, 12 230 miles away for a vehicle modification. 13 Those modifications require fittings where 14 the person is actually fit in their driving position 15 which requires additional -- sometimes additional 16 authorization to which would be amended in the way 17 we're looking at it here in order to perform that 18 additional work. 19 The executive order and the management 20 memo reoperationalized it. Severely impedes our 21 ability to provide direct services to California men 22 and women who have very severe physical 23 impairments. As a matter of fact, right now, I have 24 five very high-tech modifications that I can't move 25 forward and my hands are tied. 19 1 And so what I need some help with, what we 2 need in our department is an understanding of what 3 the whole reason for our exemption is, because of 4 the very unique nature of what we do. And it worked 5 beautifully in the past. Because we'd go offer the 6 bid, would provide their review and endorsement if 7 they felt it was appropriate for the competitive 8 bidding process that we engaged in the pricing. 9 Because between my unit and the Office of 10 Fleet Administration, we see all bids. So we have 11 an idea whether or not the pricing is appropriate, 12 and whether or not the individuals can perform the 13 work. And we've taken into consideration the best 14 needs of the state and the consumer. When someone's 15 working, we don't want them to go 150 miles away if 16 they're in a program, especially if they're severely 17 disabled. So we try to keep it within a reasonable 18 proximity of the vendor we have. Because we don't 19 do a large volume of work, it's very difficult for 20 us to secure additional vendors. Our contract 21 section periodically advertises for these vendors in 22 order to become master agreement contractors with 23 us. When they find out about the volume of work, 24 which is not a great deal, you know, they don't want 25 to move forward. We have twelve master agreements 20 1 statewide to provide this service. I'm sorry I'm 2 taking up so much time. 3 MS. JONES: That's all right. Thank you. 4 Okay. Anybody else want to tackle this question on 5 how we can enhance competition? 6 MS. HARDER: I was going to address the 7 next one. 8 MS. JONES: Go for the next one. 9 Everybody ready to move on? Fine with me. We'll go 10 to the next one. 11 MS. HARDER: Marie Harder, Department of 12 Health Services. I want to make sure that we still 13 have the delegated authority that we currently 14 have. I would hate to lose that. I think my 15 department, it would certainly bring things to an 16 ugly stop. And if that means maintaining some of 17 the sign-offs that we've had to get from directors 18 in order to maintain that, then so be it. If that's 19 the price that we have to pay to stay in the 20 business, it's worth it to me. 21 MS. JONES: Okay. Thank you. Anybody 22 else on oversight? One of the things perhaps I can 23 share with the group that will maybe help focus some 24 of your thoughts. 25 At the very first task force hearing, we 21 1 shared with task force members how much money was 2 spent by state agencies last year in services and 3 purchases of goods and information technology. And 4 we were able to break those out a little bit so we 5 could show them by masters and CMAS altogether, I 6 believe, and one-time purchases and purchases under 7 delegation. Services were a different piece of the 8 pie. 9 But one of the things that the task 10 force -- actually, it was David Janssen, who was 11 director of General Services about 20 years ago, 12 asked a really important question, I believe. And 13 it was very perceptive of him to pick up on that. 14 But we were talking to him a little bit about the 15 oversight in the delegation program. And I think we 16 have a pretty robust delegation program. And the 17 rules and guidelines are pretty well spelled out. 18 It's monitored real well. And we were sharing that 19 information with the task force. 20 And then, Mr. Janssen's question said, 21 well, basically, the business done under delegation 22 is about $300 million, which is a lot of money every 23 year, and hundreds of thousands of transactions. 24 But the total amount of money spent by state 25 agencies is over $7 billion. And so he basically 22 1 asked the question, "Well, you've got this great 2 oversight and program in place for your delegation 3 program. But that's only $300 million of this $7 4 billion pie." 5 And we basically said yes. So there was 6 more behind his question than what he actually 7 asked. And that was what about the rest of it? 8 They're setting up leveraged contracts such as 9 master agreements, CMAS schedules, statewide 10 commodity contracts, and permitting state agencies 11 to order off of those agreements within whatever 12 rules are established in the programs is a means of 13 delegating purchasing authority. You can go 14 directly to this vendor instead of coming through us 15 to do the buy. So that is a means of delegation. 16 And yet the transactions in those programs, for the 17 most part, there's really not any oversight on those 18 transactions or in those programs. We are beginning 19 to incorporate some of those, a small percentage of 20 those transactions in our delegation reviews. 21 But that is broadening the scope of 22 oversight somewhat where there isn't any now. So I 23 just wondered if you have any thoughts, given that 24 situation and public perception, you know, that 25 might be the same thing that gee whiz, you know. 23 1 We've given away the farm. 2 And I'm not saying that that's the 3 situation. But I am saying that there's probably 4 folks in the general public that feel that way. And 5 so how do we address oversight in such a way that we 6 can alleviate the concerns of those folks and the 7 legislature as well? So any thoughts on that that 8 you can share with us? 9 MS. DEWEY: Cynthia Dewey from Cal Trans. 10 I think that has been expressed by several speakers 11 earlier. And that is that the departments who do 12 procurement and contracting are not running amuck. 13 Almost all of them, and I will say virtually all of 14 them are well-run and have internal oversight over 15 and above the outside oversight that DGS gives 16 them. 17 I know that our contracts are subject to 18 and the things that we do are subject to agent or 19 agency oversight, as well as, I mean, with the 20 department under an agency. We're also subject to 21 internal audit. And we have legal -- our internal 22 legal people who oversee what we do, and we have an 23 outside agency. I mean, Department of General 24 Services overseeing it. 25 We also get a lot of federal funds, so we 24 1 get federal oversight as well. Yes, there is 2 adequate oversight. And I think that the public 3 doesn't really understand that. Some of these 4 things that have been in the headlines were -- 5 actually might have been ill-conceived. But I do 6 not believe that agencies are running amuck as the 7 newspapers would lead you to believe. 8 MS. JONES: Thank you. 9 MS. SWEET: Once again along those same 10 lines -- Ruby Sweet, Department of Corrections. If 11 it's felt that there isn't enough internal 12 oversight, my recommendation would be to make it 13 policy either in, you know, some kind of guidelines 14 from DGS. And then, you know, make it a tighter 15 subject for audit. I mean, I feel our audits are 16 adequate as it is. But if there's a general feeling 17 that it's, you know, there's no oversight, then just 18 do it that way. 19 MS. JONES: Okay. Thank you. I want to 20 make sure the audience doesn't think that I'm 21 representing that there's not enough oversight. 22 I'm trying to represent the perception that may be 23 in the general public. Certainly is in some members 24 of the legislature. And that's -- so it's something 25 that we need to address, and perhaps all we need to 25 1 do to address it. 2 And I'm not -- I don't know the answer 3 yet. But perhaps part of our job is to educate 4 people about the types of oversight that are in 5 place already. But that's -- you know. We still 6 need to hear your ideas about that too. So I think 7 you have a comments back there. 8 MS. DERODE: Gloria Derode with the 9 Department of Forestry and Fire Protection. I think 10 one of the things that occurs to me as we talk, and 11 I certainly thought about in the past, is to empower 12 the department with a greater oversight rule and 13 allow them greater flexibility within their area of 14 expertise. Many programs are unique to certain 15 departments. And departments, they actually glean 16 and form an expertise for a particular type of 17 program. And in that process, they're the ones who 18 are the resident experts, if you will, as to how 19 they should glean the information and put the 20 program in play. 21 It would seem to me, and I know that some 22 legislation in the past has tried, but didn't 23 necessarily succeed to the best extent, and that is 24 to almost create like a delegation. Create a 25 delegation to create a level of oversight that's at 26 1 a very high level within departments. But give 2 them -- that is, for instance, water resources or 3 with forestry, we have certain projects that only we 4 do. All right? Then give us a delegation to 5 actually oversee this whole project. Anything that 6 falls within that genre would be handled by the 7 department, and come and audit us every -- 8 whatever. Every three years or whatever is 9 sufficient to see that our criteria is meeting the 10 state mandate. 11 I think that's -- and that would give us a 12 higher dollar level. And something tells me that 13 the higher dollar level with the responsibility is 14 going to be a better buy for the State of California 15 as a whole. 16 MS. JONES: Thank you. While we're 17 playing with the microphones, I want to let everyone 18 know one of our executive sponsors of the 19 subcommittee just joined us. Jeff Marschner just 20 joined us, chief legal counsel from legal services. 21 MR. MARSCHNER: I apologize. But I've 22 been through this this morning already, so I figured 23 I could be a little bit tardy. 24 MS. JONES: And here's the other one on 25 the other side of the room joining us. The other 27 1 executive sponsor of our subcommittee is Ralph 2 Chandler, the deputy director of the procurement 3 division. Somebody else down in front? 4 MS. RABAIN: Joan Rabain, Franchise Tax 5 Board. Just like the others have said, there's 6 plenty of oversight, I think, that takes place 7 within agencies themselves and from the external. 8 Because it seems like every year we're audited by 9 somebody. But I think what we really need to do is 10 take it down to a lower level. 11 And what I think really needs to take 12 place is that the public perception needs to know 13 that we're well-trained. And it should be the 14 training that the oversight will speak to. I guess 15 the assuredness and the expertise of the people that 16 are conducting the purchases. And so then oversight 17 can speak to, you know, that the San Jose Mercury 18 reporter can go pull a report from the BSA or from 19 anywhere and say, "Oh. This department over here 20 did a very good job. These things were minor, blah, 21 blah, blah. They had these processes in place." 22 But the staff are educated enough so when 23 we do go through oversight, we do speak a good case 24 for being. Because, you know, not to offend 25 anybody, but the public perception is as a state 28 1 worker we just don't know what we're doing. We 2 don't have the brains to do a good buy. We're just 3 stupid. I didn't say that, but that's what they 4 think. 5 But, you know, just like DGS has 6 accounting courses these are wonderful courses. And 7 everybody who's engaged in purchasing should go 8 through those classes. And I think that there 9 should be other types of classes that DGS would 10 present to all of the departments as a support for 11 us so that we -- when we are subjected to oversight, 12 that we have at least people that are knowledgeable 13 and skilled in doing it the right way. 14 That's the one thing that CMAS hurt 15 procurement is that people weren't taught how to do 16 a competitive procurement. So when we were given 17 the ease of purchasing through CMAS, they didn't 18 know the fundamentals of competition. And so those 19 that did have managers or staff on hand that could 20 school them and mentor them in some of the 21 fundamentals of competition and what competition 22 meant, then those processes were in place. 23 But there are an awful lot of people -- 24 because when I went to the forum, I listened to them 25 talk about how aghast they were. "What are we going 29 1 to do? We don't have CMAS anymore." But it wasn't 2 the end of buying. It just meant that it was 3 perhaps more difficult now, because the ease of 4 buying had been removed from their capabilities. 5 MS. JONES: Okay. Thank you. Back here. 6 MS. HENMAN: Roberta Henman with the Cal 7 Arts program, DGS. Along with the education, I 8 think that a lot of times that the outside auditors 9 and even internal auditors don't understand some of 10 the uniqueness of programs or buying needs. 11 The gentleman over here with the special 12 rehab needs and different purchasing that goes on 13 that is unique to an agency, clearly auditors need 14 to, one, understand the tools and how they're used, 15 and how they need to be applied to the individual 16 agency needs. The perception of a citing in writing 17 sounds terrible. But if it's investigated or 18 understood, the application, the citing maybe would 19 not have happened. So along with us needing to know 20 as individual buyers whether it's informal or 21 formal, I think our auditors need to have further 22 training and education ongoing with state purchasing 23 practices and uniqueness of a given agency. 24 MS. JONES: Thank you, Roberta. Anything 25 else? Do you want to move on to the next question? 30 1 Okay. Should we take a stretch break? 2 (Break taken in proceedings.) 3 MS. JONES: We're ready to get started 4 again. Mariel posed a question from the audience, 5 and I told her she's too close to the ground. But I 6 wanted -- actually, Russ twisted her arm. And she 7 can be scribe too. For the privilege of posing her 8 question, she gets to scribe the rest of the 9 afternoon. 10 MS. D'EUSTACHIO: I'm Mariel D'Eustachio, 11 Cal Buy project manager. Some of the agency users 12 are here today, I think. And in regards to the last 13 question on oversight, I'd be interested in hearing 14 whether you see any value in Cal Buy as buying 15 additional accountability and controls for oversight 16 because of the electronic process that's used in 17 work flow. So any comments on that? No? Okay. 18 MS. JONES: You answered that question. 19 And one other thing. I did want to mention, several 20 folks have asked if they could submit comments to us 21 in writing. And yes. You can do that. E-mail 22 those to us or mail them to us. We'd like to get 23 those by Friday if at all possible. But certainly 24 you're welcome to submit anything in writing you'd 25 like to. Okay. 31 1 So now we're moving right along to 2 process. Focused questions and specific questions. 3 The group this morning had some good ideas, but they 4 didn't really have the how-to part of it. They kind 5 of said, "Here's our idea. You guys go figure out 6 how to get there." 7 But this question really is intended to 8 get closer to the process. And specifically, if 9 there are changes that you might recommend to 10 statutes or regulations or procedures. And they 11 could be problematic, or they could be broad based. 12 But changes that would ensure the maximum amount of 13 competition in our transactions. Our contracting 14 and purchasing transactions. So does anybody have 15 any specific suggestions they'd like to share with 16 us or talk about? 17 MS. HARDER: Marie Harder, Department of 18 Health Services. I would pray that somebody will 19 define maximum extent possible. Otherwise, you 20 could post something on the contract register, and 21 someone could complain later that it wasn't in 22 newspapers or anything else. So that needs to be 23 defined. 24 MS. JONES: Okay. And you do know that is 25 language right out of the executive order? 32 1 MS. HARDER: Yes. I know that. 2 MS. JONES: Okay. 3 MS. DEWEY: Cynthia Dewey from Cal Trans. 4 One change to the statutes that I would suggest is 5 there's a statute that indicates the maximum 6 delegation. And I believe for contracting it's 7 75,000. And I think that that language needs to be 8 changed to allow DGS to adjust it according to maybe 9 cost of living or something like that, or skill set 10 or whatever. And there could be additional things 11 requiring the agency to get the delegation to have 12 specific internal oversight to ensure that things 13 are done correctly. And I think that this would 14 make -- it would give an oversight, and also make it 15 easier for the agencies to serve their internal 16 customers. 17 MS. JONES: Thank you. Who else? 18 MS. SWEET: Ruby Sweet, Department of 19 Corrections. And one of the procedures that I would 20 like to see reimplemented, and again this -- I've 21 heard several comments this morning that would tend 22 to go along with that, is we as Department of 23 Corrections had an additional -- additional 24 exemption that was also thrown out the window. And 25 I know for a fact, because I did it. Just a minor 33 1 revision to those limited additional exemptions took 2 a year to get through our agency because they were 3 serious about competing bidding. But those 4 additional categories are unique to the kind of -- 5 the kind of mission that we have. And I think that 6 DGS and DOF should really look at individual agency 7 needs in light of, you know, allowing that process 8 to continue. 9 MS. JONES: These are exemptions from 10 bidding is what you're talking about? 11 MS. SWEET: Yes. 12 MS. JONES: That did come out of the group 13 this morning as well, actually, was a suggestion to 14 include certain exemptions into the statutes. 15 MS. HENRY: While we're on that topic, why 16 does county designated garbage get an exemption 17 whereas county designated ambulance doesn't? 18 MS. JONES: I can't answer that question. 19 Is that a new part of the interim guidelines? 20 MS. HENRY: It was in the addendum they 21 changed. 580 got changed. That piece came out. 22 They revised exemptions in a attachment D to the 23 management memo. I noticed that as well. I believe 24 that's where it was. Correct me if I'm saying it 25 wrong. That they took out county contracted 34 1 ambulances but left in garbage. Not that I care. 2 But I thought that was very curious as well. 3 MS. SWEET: Ruby Sweet. They only have 4 911 as an ambulance. 5 MS. JONES: I don't want to tell you I 6 can't answer your question, but I'm not the right 7 person to pose the question to. And we do have a 8 committee. In fact -- 9 MS. SWEET: It's already been posed to 10 them, but we haven't gotten a response. 11 MS. JONES: Our bidding committee does 12 meet every afternoon, so they are trying to answer 13 the state agency questions. Bill, were you -- 14 MR. FACKENTHALL: Tom was out there. Did 15 you want to say something Tom? 16 MS. JONES: Any other comments about -- 17 MS. HENRY: As far as the recommendation 18 for the changes, after being back out in the field 19 now for about eight months having to live with all 20 of this stuff after being absent for about six 21 years, I think one of the biggest things you can 22 help everybody with is do what we tried to do in 23 CARA. Standardize the rules, the dollar levels, all 24 of that across the board. You know. 25 Why is it different for non-IT services 35 1 than IT services and goods, you know. That just 2 is -- I mean, I've been teaching this stuff for you 3 guys, and I still get confused out there. I have to 4 stop and think about it. To standardize as much as 5 possibly can happen and try to pull a CARA again. 6 That's my one big suggestion. 7 MS. DERODE: I'm Gloria Derode. I think 8 that, and I know you tried this, forestry and park 9 protection, I know you do try to do this. I think 10 in recommending better ways to do things, we should 11 think outside the box and look at different 12 processes than what we're already looking at. 13 Something that provides competition, but not 14 necessarily bidding at the time you want the 15 product. 16 Maybe we could -- maybe your department 17 could do something more innovative on the term bid 18 kind of thing, or have their own vendors that they 19 have competitive bidding before they're going to use 20 the products, because they use them all the time. 21 And look at things like that so that we have ways 22 to -- we're not trying to go to a certain vendor, 23 that we give everybody an opportunity, but we don't 24 have to wait so long. The process doesn't take so 25 long. 36 1 MS. JONES: Thank you. Anybody else? 2 Cynthia. 3 MS. DEWEY: Cynthia Dewey with Cal Trans. 4 Last year I did suggest something, but it didn't get 5 out of agency. I did suggest a change to the law 6 that would allow us to have what I called 7 pre-qualified bidders where we would send it out. 8 And this is for, as the speaker before me mentioned, 9 for something that we do continuously. That we 10 would send the thing out like at the beginning of 11 the year, and have like a two-year pre-qualified. 12 We'd get our bidders selected. And then as the jobs 13 came up, select from the list of pre-qualified 14 bidders. 15 And this is something that was in the law 16 some years ago and got sunset out. And nobody ever 17 renewed the thing. And one of our people suggested 18 it as something that would expedite the process 19 tremendously and still have a competition as far as 20 the bidding is concerned. 21 MS. JONES: Thank you. 22 MR. DEVORE: Bill Devore, Department of 23 Rehabilitation. The spokesperson from Cal Trans, 24 it's funny she mentioned that. Because part of the 25 memo that we received from Office of Legal Services, 37 1 Department of General Services regarding our 2 exemption, in order to operationalize it, indicated 3 that MSAs will not serve as contracts, since they 4 will not have a maximum price. Specified price 5 contained in the specifications for the 6 modifications, and commented to the volume of 7 business. 8 Instead, the MSAs will serve as a method 9 to pre-qualify suppliers to enter into contracts 10 called service authorizations. By signing the MSA, 11 the supplier certifies that if awarded a contract, 12 he/she understands and agrees to the department's 13 rehabilitation administrative requirements and 14 standard technical specifications for vehicle 15 modification service procurements. 16 So this has worked beautifully for us. 17 And so I would certainly endorse it. This is a part 18 of your exemption. This is part of the management 19 memo that operationalized it. And with the advent 20 of the executive order and the management memo that 21 came out on May 28th, this severely impairs our 22 ability to do business regarding providing 23 adaptation to motor vehicles for individuals who are 24 very severly disabled that need high-tech adaptive 25 driving equipment. And that's it. 38 1 MS. JONES: Okay. Thank you. Anybody 2 else? Back here. 3 MS. RADEL: Hi. I'm Cheryl Radel with the 4 California Energy Commission. One change or 5 something that I would like DGS to look into was 6 justification of multi-year contracts. It's very 7 expensive for a bidder to put together a proposal. 8 And if we are limited to one year, projects where we 9 have to go out and either, like we discussed 10 earlier, amending that project and required to bid 11 that amendment, or are limited to you can't have a 12 multi-year project, that's going to be too costly 13 for our bidders to take a risk of the costs that 14 they have to incur to meet the competition each 15 year. So therefore, you're going to get a limited 16 amount of bidders willing to take that risk. 17 So the justification for multi-year 18 projects, you know, are unique to an agency. So I 19 would -- maybe we were talking about delegations to 20 different agencies for their special projects. I'd 21 like that to be considered for a change. 22 MS. JONES: Okay. Thank you. Anybody 23 else on this topic? Move on to the next one then. 24 Tools and training. Oh. I have one other question 25 on the last topic before we move on to this. 39 1 Do you think -- one of the folks this 2 morning mentioned that -- actually, I think it 3 started with a comment our chief legal counsel had 4 about capturing the data from the transactions of 5 each contract and each purchase order that state 6 agencies issue. And then from that arose another 7 question. 8 Do you think it would be helpful to have 9 some kind of a centralized automated way to capture 10 the transaction information, but also to capture 11 information about the competition also to be able to 12 compare bids from one vendor to the next for 13 products? Kind of like catalog shopping. And in 14 fact, much like what we envision Cal Buy to be. But 15 would you find that to be a useful tool? Yes? No? 16 Maybe? Yes? No? Maybe? Okay. That was just -- 17 okay, Cynthia. 18 MS. DEWEY: Cynthia Dewey from Cal Trans 19 again. There is a bill pending to authorize 20 departments to accept bids via the internet. And 21 this -- what you just suggested could piggyback 22 that. Because I do expect we're going to go in that 23 direction eventually. But what you suggested in 24 keeping that information or getting the information 25 on line, if the bid came to you via the internet, 40 1 then you could put it in your system and compare, 2 well, "Joe Jones bid that type of service or product 3 at X amount last time." So it would give you an 4 idea of how much -- if it's something that you use 5 all the time, or a service that you purchase all the 6 time. Yeah. That is a good idea. 7 The one concern that we have is that it 8 would involve changing our computer, a major change 9 to our computerized system, and is going to involve 10 money. And the bill that's out there doesn't give 11 us hours, doesn't give us money. Yeah. We're just 12 supposed to create it. 13 MR. WILLIAMS: Just, I'd like to also 14 affirm the -- Ben Williams, Department of Water 15 Resources. We have an existing automated system, 16 and we want to have a parallel with the extensive 17 entries. So anything that's corrected centrally 18 needs to be fairly simple. 19 The other thing that I want to just add on 20 there is I want to be -- I think it's important that 21 we not have exclusively a cost-based system. We 22 need to recognize best value. And most of the 23 products that we're getting are very complicated. 24 The services we're getting are very complex. And we 25 need to recognize that the cost should not be the 41 1 sole criteria. 2 MS. JONES: Thank you. With that short 3 detour because of my question, why don't we move on 4 to tools and training. And when we talk about 5 contract tools, we're really talking about master 6 agreements, CMAS, statewide contracts, WSCA, Western 7 State Contracting, and licensed contracts, things 8 like Office Depot and Ranger and those sorts of 9 things. 10 So are the contracting tools that DGS 11 establishes for use by state agencies, are those 12 adequate to do the job, or do we need other types of 13 tools, or do we need to tweak the tools that we've 14 got? Are we using the tools properly? We've had 15 some discussion about the tools are working fine, 16 we're just perhaps not always using them right. And 17 maybe we need to use them properly, and everything 18 will be fine. And that kind of came out of this 19 morning's discussion as well. 20 So what do you folks think about the 21 contracting tools and those things I just posed? 22 We've got to hear from some of those folks that 23 aren't talking. 24 MS. SWEET: Ruby Sweet, Department of 25 Corrections. I didn't have a problem with the tools 42 1 that were in place before the executive order. I do 2 have a problem with some of the tools that are in 3 place now. Because it appears that we are spending 4 a lot of time providing redundant information. For 5 example, we have to do the new NCB justification, 6 but at the same time, we still have to do an 821. 7 We have to go through DGS at the very least to get 8 NCB approved, and yet we have to now post a notice 9 of award too. I mean, it's -- this information is 10 getting through in several ways. Why can't we just 11 narrow it down to limit the amount of work we have 12 to do to, you know? You know. Doing a 13 justification once and, you know, why can't DGS pick 14 up the NCB information as it goes through? 15 MS. JONES: Okay. You don't want me to 16 answer that right now, do you? 17 MS. SWEET: If you want to. I mean, it's 18 a question that we have, and it's perplexing to us 19 to see the redundancy, and if there's a reason for 20 it. I know that the 821 is for the CSCR posting. 21 But why can't the justification form do that? 22 MS. JONES: Those are good questions, and 23 I'm glad that you asked them. Because now we'll 24 have to talk about them. 25 MS. SWEET: You're welcome. 43 1 MS. JONES: They're very good questions. 2 Anybody else on contract tools? So we don't need 3 any new ones? The ones we already have work? 4 MS. HENRY: You mean new subjects? 5 MS. JONES: You can't just ask -- 6 MS. HENRY: Joyce Henry, Child Support 7 Services. Just to clarify, when you say contract 8 tools, you're talking about existing master and 9 statewide contracts and that kind of thing, true? 10 MS. JONES: The question is, in case the 11 folks in the back can't hear, when I'm talking about 12 contract tools, I'm talking about master agreements, 13 statewide commodity contracts, and CMAS agreements, 14 state price schedules, WSCA agreements, Granger, 15 Office Depot, Computer Store, those kind of things. 16 MS. HENRY: Adequate meaning do they cover 17 enough different things? 18 MS. JONES: Adequate is however you define 19 it. Are they adequate for you to do your job? 20 MS. HENRY: Almost. 21 MS. JONES: Okay. Should we give her the 22 microphone first, and then we'll hand it back to 23 you, since she barged in front of you. 24 MS. HENRY: That's the problem with 25 sitting in the front row. So adequate in that is 44 1 there enough of them? Do they cover enough topics? 2 Is that part of your thought behind that? 3 MS. JONES: Adequate can be defined a 4 whole bunch of different ways. If that's the way 5 you're defining were it's adequte for your job. 6 MS. HENRY: There are services that we've 7 identified already in our department that would be 8 wonderful if there was a master for it. Things that 9 are not unique to us, like credit reports. To go 10 get credit reports. That's that one. Service of 11 process, serving subpoenas, that kind of thing. So 12 there are other topics that I think are really good 13 candidates for statewide contracts. 14 MS. JONES: So, and this did come out of 15 this morning's meeting, that there are services that 16 are not now on a leveraged contract or one of these 17 contract tools. And that more of those kinds of 18 agreements, having more of those in place would be 19 better for state agencies. That there are services 20 that we have not addressed that would be beneficial 21 if we did. Okay. 22 MR. DEVORE: Okay. My name is Bill Devore 23 with the Department of Rehabilitation. And I'm 24 going to go ahead and revert real quickly to our 25 master agreement for adaptive driving equipment. 45 1 To answer your question are the tools adequate to do 2 the job, prior to May 20th, they were. After that 3 date, our exemption with the master agreement that 4 we have does not allow for the very unique service 5 that we provide. That's not used, to my knowledge 6 anyway, by any other state department. These master 7 agreements are only used by other departments. I'm 8 the contract administrator. I administer them. And 9 what we need to do is take into consideration the 10 unique service that's being provided directly to the 11 citizens of California who have very severe physical 12 impairments that relate to driving. And so that's 13 one of the tools that needs to be integrated into 14 any changes. 15 MS. JONES: Okay. Thank you. Who else 16 wants to talk? 17 MS. FARLEY: Charlotte Farley, Water 18 Board. I believe it would be really beneficial to 19 the department if a survey was done to see what 20 services cross lines. I think a lot of us use 21 things that are the same as other departments. And 22 at least to my knowledge, there's never been a 23 survey done. 24 MS. JONES: Good idea. Thank you. 25 Anybody else on that one? If you want to speak 46 1 about the other bullets on that screen, is the 2 contracting technology adequate to do your job? 3 Contracting and procurement training adequate to do 4 your job? What do you think about those? 5 MS. OVERMAN: Hi. I'm Kay Overman with 6 the Health and Human Services Data Center. The 7 question about procurement training, I find in the 8 area of IT procurement there's not adequate 9 training. There's excellent organization out there 10 that could provide the state procurement staff good 11 training. The Windows organization caucus, they 12 provide extensive procurement training, including 13 high-end software, contracts, et cetera. 14 So I also want to quickly speak to whether 15 the contract tools are adequate. I think prior to, 16 what was it, May 20th or so, they were pretty much 17 adequate. But I think there used to be some 18 identification, as has been spoken to previously 19 during this meeting, that different programs have 20 different needs. And, for example, the data center, 21 there's hardly anything over $100,000. That 22 includes software maintenance. And so to go through 23 all these steps for something that we have to have 24 to keep a major system up and running for the 25 citizens of the State of California, it's just an 47 1 impossible situation. So I think the CMAS and MSA 2 process is very good. But maybe there needs to be 3 recognition that for possibly data centers or other 4 organizations like Franchise Tax Board that are 5 dealing with major IT equipment and software that 6 perhaps our dollar limit needs to be higher because 7 of the nture of what we're doing. 8 Also, I think that CMAS versus MSA, 9 oftentimes CMAS is being used when it's probably 10 appropriate to use MSA. If it's a long-term 11 project, more oversight, there needs to be more 12 training and more development of that concept. That 13 CMAS is probably better for a shorter term-type of 14 project. 15 MS. JONES: Okay. So more training in the 16 use of the different types of tools? 17 MS. OAKMAN: Um-hum. Thank you. 18 MS. JONES: Anyone else? Cynthia. 19 MS. DEWEY: Your agency and Franchise Tax 20 is not the only one that buys things in excess of 21 $100,000. $100,000 is nothing in the types of 22 things we -- if we buy a railroad rolling stop, 23 that's going to cost over $100,000. A traffic 24 signal probably costs in excess of $1 million. So 25 yes. Things that we do are very expensive. Bet you 48 1 didn't realize traffic signals were that expensive. 2 When I worked in accounting in the 1970s, they cost 3 over $1 million. I don't know what they cost 4 today. 5 So the things that we buy are expensive. 6 A lot of the things we buy are expensive. And there 7 are a lot of other agencies that have unique 8 things. And I think that we need to have a more 9 flexible system that takes into consideration the 10 needs of individual agencies, as has been mentioned 11 several times by several different people here. 12 And also, are the tools adequate? Maybe 13 before this bomb dropped on us. We thought 14 everything was going along great. Just because they 15 were adequate at a certain point in time does not 16 mean that we shouldn't look at developing new 17 tools. Doesn't mean that we can't move forward with 18 other ways of doing things. Okay. 19 We were comfortable, and somebody dropped 20 a big bomb there. Now everybody's saying aye. But 21 anyway, the suggestion of pre-qualifying people 22 again is one tool. But there are probably other 23 tools. If we could put together, like, a 24 cross-functional team and get ideas from various 25 agencies, I think we could probably come up with 49 1 other tools that were even better or as well as, 2 that will serve more needs. So that we should look 3 to developing new tools for both procurement and 4 contracting that will have adequate competition, 5 sufficient oversight, and make it easier for people 6 in procurement and contracting to serve their 7 internal customers. 8 MS. JONES: Thank you. 9 MS. HARDER: Marie Harder, Department of 10 Health Services. I support everything that the Data 11 Center was saying about the need for additional 12 training on IT contracts. In setting up and 13 developing deliverables, measurable deliverables and 14 how they will be analyzed is crucial to obtaining 15 services. But also, we can't forget the back end, 16 which is finding you have a contract. But unless 17 you know how to manage a project and learn from the 18 lessons, we're going to keep on making mistakes, and 19 we're going to have to keep on doing amendments. 20 And I would like to congratulate DGS on 21 the efforts they've put in on project management 22 training. You're doing a great job. And I think 23 that that's just one step in the right direction of 24 remembering that it just doesn't -- this whole 25 issue. Don't stop once you do a procurement. That 50 1 it's then actually completing the work that's 2 important. 3 MS. JONES: Thank you. I posed a question 4 to the group this morning, and I want to pose the 5 same question to you folks. 6 If General Services had a series or 7 designed a series of classes in procurement and 8 contracting that if taken by state employees would 9 lead to a professional certification, would that be 10 something that you would be interested in? Okay. 11 Well, I got applause this morning. 12 (Applause.) 13 MS. JONES: There was significant interest 14 in that. 15 MS. RABAIN: Joan Rabain Franchise Tax 16 Board. Wasn't that what KAME was supposed to do? 17 MS. JONES: Joan Rabain, Franchise Tax 18 Board is asking wasn't that what our KAME program 19 was headed towards. I would say yes and no. There 20 has been at different times -- it was originally 21 conceived, I believe, to do that. And we've been 22 working on developing additional classes in the KAME 23 series for state agencies. Okay. 24 Any other -- any comments on technology? 25 Any other comments on training? No? 51 1 UNIDENTIFIED SPEAKER: This is just an 2 idea for smaller purchases. We've been talking 3 about some rather large ones. But for those things 4 like purchase of one copy of microsoft, it would be 5 nice if we could post a request on the electronic 6 marketplace, and then that request is sent out to 7 vendors who perhaps were prequalified. That's 8 something that you just would have to set up. And 9 they have 24 hours to respond with a bid back. And 10 I paid for it with my Cal card. 11 MS. JONES: Sounds like a great idea. 12 Actually, this morning, we did have some folks 13 talking about reverse autioning, which is a similar 14 type of a concept. And we have discussed that 15 amongst ourselves, and with the Cal Buy manager, 16 who's grinning from ear to ear. She loves comments 17 like that. Okay. Anybody else? All right. You 18 guys are way too easy. I'm getting afraid. 19 So what would the impact to your 20 organization be, we have to ask you this question, 21 if the interim guidelines were extended past -- but 22 wait a minute. We already know. Rehab, we know. 23 UNIDENTIFIED SPEAKER: We're going to keep 24 coming at you. 25 MS. JONES: You don't have to say it 52 1 again. Your message has gotten through very loud. 2 That's why we're doing this. Please share with us. 3 And you can talk if you want, but we get your 4 message. 5 MS. DEWEY: Cynthia Dewey from Cal Trans. 6 The impact would be that we would probably need a 7 lot of additional personalities to do what we have 8 been doing with our existing staff. And the reason 9 for that is that because we have to get all this 10 additional -- because of the additional oversight, 11 and we have to send certain things to get a 12 signature from everybody almost. You guys didn't 13 think of getting God's signature. But it's just it 14 takes so much longer. And it takes a lot of the 15 additional person's time. So one of the things is 16 that it's just we're all going to need more 17 person -- we're all going to need more person hours 18 to do the same thing that we used to do with our 19 existing staff. 20 MS. JONES: Okay. Anybody else? 21 MS. OVERMAN: Kay Overman, Health and 22 Human Services Data Center. I say ditto to what she 23 said about the number of hours needed to do what we 24 did in the past. But additionally, with the 25 flexibility we have with CMAS when we're able to 53 1 negotiate with a vendor at the last minute, often 2 times at the end of their quarter or their fiscal 3 year, and we're able to experience greater 4 discounts, because they're very motivated on that 5 last day of the quarter or fiscal year. Or we're 6 able to do this in the case that we don't have the 7 extensive leverage of review. If we continue with 8 what we're doing right now, we won't have that 9 ability, and it will cost the state a lot more 10 money. 11 MS. JONES: Okay. Others? Not going to 12 impact anything else, right? 13 MS. SWEET: Ruby Sweet, Department of 14 Corrections. In addition to the additional time and 15 personnel and money that's going to be needed in the 16 contracting and procurement areas, at least for 17 Department of Corrections, right now this NCB 18 process has -- because agency secretary approval is 19 required, it has got so many levels of review that 20 it -- and it's -- it's very, very cumbersome. It 21 would be very nice if something could be done to 22 streamline it a little bit. And I guess by that I 23 mean return our delegation. 24 Because it's -- I'm particularly concerned 25 for the Department of Corrections, because we're 54 1 under so many court orders, and we have so many 2 lawsuits, and we have a several hundred million 3 dollar deficit. And like right now, we have some 4 problems in the medical area with the vendors that 5 just lost their certification from the state. And I 6 don't know. 7 I imagine most everybody's aware of the 8 regularity and frequency that our inmates like to 9 file lawsuits. And this is going to have an 10 incredible impact on us in that respect as well. 11 Because services -- there's going to be lapse in 12 services. There's going to be breaks in services. 13 There's going to be -- it's going to be rough, and 14 there's going to be a major expense. 15 MS. JONES: How about if I pose a 16 question. Are there parts of the interim guidelines 17 that you think are beneficial to the overall 18 integrity of the procurement and contracting system 19 and the perception of the general public, and maybe 20 those parts should be retained? You know. 21 MS. RABAIN: Yes. 22 MS. JONES: So tell us which ones. 23 MS. RABAIN: Joan Rabain, Franchise Tax 24 Board. Sam Snead, professional golfer. I think 25 that we should -- that the idea of getting 55 1 comparison quotes for CMAS, that's something that 2 should be retained. I think that, I just want to 3 insert this one, the impact to the state is we won't 4 have a deficit if we maintain the interim 5 guidelines, because we won't have any money. We 6 won't be able to spend any money anyway. 7 MS. JONES: That's the benefit. 8 MS. RABAIN: But I -- you know. I just 9 want you to know that we got our first 10 non-competitive bid justification approved. It took 11 three weeks. And it was for a mainframe operating 12 system software. And we were asked the 13 question, "At what point can you change to a 14 different operating system?" The people that 15 approve these things need to be of an intelligence 16 to understand what these things are. 17 MS. HENRY: Joyce Henry, Child Support 18 Services. As usual, I agree with everything that 19 Joan said. I think the impact to us would also be 20 very severe. And it's striking at the very reason 21 our entire department was created. That's one 22 thing. I think education at the cabinet level, 23 people on the non-competitives are okay sometimes. 24 I hope nobody from my agency is here. 25 MS. JONES: It's too late. 56 1 MS. HENRY: But you know, we're getting 2 this. "Don't even talk to us. Don't even bring us 3 a non-competitive request. It won't happen. Go bid 4 it." So we're bidding stuff like what she's talking 5 about. It's ridiculous. If education of cabinet 6 people, you know, secretary level could happen about 7 the nature of what we're doing and why sometimes it 8 is okay, and give them some criteria in which they 9 can look at it to help them understand. 10 Because, you know, we all know those 11 people really truly are not a lot different from 12 us. They want to do their job right and be on the 13 right page. So education at that level I think 14 could help. But impact, huge. Absolutely huge for 15 us. 16 MS. JONES: Thank you. 17 MS. OVERMAN: Kay Overman, Health and 18 Human Services. I was going to say the same thing. 19 We have been putting CMAS out to bid for the most 20 part. And we'll gladly do that for everything. For 21 seven, ten vendors, whatever you want. Just give us 22 our dollar levels back. 23 MS. JONES: Okay. I understand. 24 Sometimes I say okay and people think that's 25 permission. We hear you. Anybody else? 57 1 MS. HUBER: Sherry Huber, Employment 2 Development Department. I think by requiring all 3 the IT-type procurements to go through a competitive 4 process, sometimes the process can take up to a 5 year, depending if there's protests and so forth. 6 By the time we get the procurement done, the 7 technology is obsolete. So I think that is going to 8 impact the state's ability to keep up with 9 technology. 10 MS. JONES: Thank you. Okay. Are these 11 comments on the last screen or this last question? 12 I thought you guys were ready to move on. 13 MS. DEWEY: I think what we need to do, I 14 think most departments have been doing a good job 15 and have been competitively bidding, and have a 16 sufficient oversight. And the problem is one of 17 education. Unfortunately, when you do a good job, 18 that doesn't sell newspapers, and it doesn't make it 19 into the television. It's when something falls 20 through the cracks, then you have a headline, and it 21 makes it look like everybody's doing a lousy job. 22 And what we have here is a PR problem. 23 And we have -- and I think that the 24 governor and the legislators have way, way, way 25 overreacted to something that was probably -- I 58 1 think that the people didn't even disobey the rules, 2 because there was a master contract with that 3 particular agency. But it was made to look like 4 there was something terrible going on. 5 MS. JONES: Okay. Thank you. 6 UNIDENTIFIED SPEAKER: Let's make the 7 legislators do a buy. 8 MS. JONES: Any other comments? Over 9 here. 10 MS. HUBER: Sherry Huber from the 11 Employment Development Department. Our focus should 12 probably be on accountability, not necessarily what 13 we're doing and doing well at the department levels 14 where we follow the rules. We're using the 15 procurement tools as we should be. It's at the 16 accountability level that I think something went 17 wrong. Maybe the focus of the task force should be 18 on that. 19 MS. JONES: Thank you. Any other specific 20 comments or suggestions you would like the task 21 force to consider that we can take forward for you? 22 MS. HENRY: I know we haven't talked a lot 23 about accountability. Joyce Henry, Child Support 24 Services. Sorry. 25 We haven't talked too much about that this 59 1 afternoon. Already in my few months back out in the 2 field, I can't tell you how many vendors are coming 3 to us wanting us to do things that are against the 4 rules. So education of vendors is something I think 5 could help overall, and accountability to the 6 vendors as well. If they're out there promoting 7 breaking the rules, they're not held accountable, we 8 are. And if people aren't educated about what the 9 rules are, they go along their merry way and they 10 break the rules without knowing they're breaking the 11 rules. They don't know what they don't know. 12 MS. JONES: Okay. Anyone else? 13 MS. OVERMAN: Kay Overman, Health and 14 Human Services. I have to respond to that. I think 15 the vendors know the rules. They are out there 16 promoting breaking them and often saying, "Our 17 department lets us do this." And I think we as a 18 group need to stand up to the vendors and let them 19 know, "No. We're not going to do this particular 20 thing." But I think they do know the rules. 21 MS. JONES: Okay. Thank you. 22 MS. DERODE: Gloria Derode, CDF. I think 23 we should let the governor's task force know that we 24 want to look at this as an opportunity, not 25 negatively. And that maybe we can use CMAS and 60 1 improve the process to put more competition into the 2 CMAS process. Like, for example, instead of the 3 federal supply schedule, we have California supply 4 schedule, and use the vendors that will give us the 5 product at a certain price, so we can view it as a 6 positive thing not a negative thing, and we get more 7 out of it instead of less. 8 MS. JONES: Thank you. Anybody else? 9 Ralph, not to put the boss on the spot, but would 10 you like to come up and say a few things? I would 11 personally like to thank everyone who came this 12 afternoon. We will consider this input. We will 13 have a transcript of it. As you can see, we've been 14 taking copious notes. And we appreciate the input 15 and the time that you take to share with us. Okay. 16 Can we take that one comment, and we'll let the boss 17 talk. 18 MS. GAWADO: Marian Gawado, Commission on 19 State Mandates. I would like the task force to 20 consider small agencies if they have reporting 21 requirements that come out of this new change. A 22 lot of times there's a lot of zeros that are filled 23 out and many sheets of paper that are completely 24 unnecessary. I'm sitting here, and I really feel 25 sorry for all the large agencies. It was actually a 61 1 simple process for us. Still a nightmare, but 2 simple in comparison. But a lot of time we end up 3 filling out a lot of paperwork with just zeros. So 4 they can consider that. 5 MS. JONES: Okay. Thank you. 6 MR. CHANDLER: Let me wrap up with a 7 couple of thoughts. Hopefully they will be 8 consistent with Chief Counselor Marschner's comments 9 that he provided to the group when your morning 10 session wrapped up. 11 For me, there's just a couple of things 12 that I might want to touch upon. For those of you 13 that deal in the IT procurement arena, you might 14 want to make yourself familiar, if you haven't, with 15 Professor Kelso's report to the governor. This 16 whole task force was formed by executive order 17 D-55-02, and shortly thereafter was signed by the 18 governor, and asked Professor Kelso to look at the 19 area of IT procurement, in addition to the oversight 20 rule that the Department of Information Technology 21 provides. And he recently produced a report. And 22 it is available on the internet and speaks to IT 23 procurement and oversight and the creation of a 24 board as far as recommendations. 25 So I don't want to complicate things too 62 1 much here. But I think if you're involved in IT 2 procurement, you might want to look at the report 3 that has already been issued to the governor's 4 office. And I say that for a couple of reasons. 5 First of all, it's imperative that 6 whatever recommendations come out of this as offered 7 to the task force, there will be an obvious 8 interconnection, or at least interconnection with 9 the recommendations. So we're looking at that 10 report very carefully. I can say that Professor 11 Kelso's report recognizes that there is a delegation 12 in place currently for departments to carry out 13 their acquisitions. And it's not necessarily 14 advocating going back to a centralized system, and I 15 think that was a positive signal to see. 16 I want to thank all of you for coming 17 today. I know that you're all busy. But this is 18 very important at this time. I think it was to the 19 task force's credit to recognize at their first 20 organizing session that we needed the input from the 21 departments. That's great to suggest that we have a 22 couple of public hearings where the vendor community 23 could come and address the task force on their 24 issues and concerns. You need to find a way to 25 reach out to the department. And your attendance 63 1 today and getting your thoughts into the record are 2 very critical. 3 Kind of in closing, just to give you a 4 feel for some of the direction I've been given to 5 date on this, and Jeff and I are receiving kind of 6 some guiding principles, it's been in three areas 7 from the task force. "Mr. Chandler, whatever you 8 do, please address these areas that we think there 9 needs to be some attention given to. First, make 10 sure that you speak to how you're going to fully 11 integrate the review of the legal services division 12 into the oversight and review that DGS provides to 13 procurement currently." And we've heard from a 14 number of you. Gee. Some things go through 15 procurement, some things go through the office of 16 legal services. We're not sure why. You guys are 17 dealing with IT acquisitions. So your input is in 18 that area and is expected to be addressed by our 19 recommendations. 20 Second area has to do with the delegation 21 problems. There needs to be more enhanced 22 requirements around the delegation program. Work 23 with the department and reward the department with 24 higher delegation and less frequent auditing when it 25 can be delegated. That they're conducting their 64 1 delegated authority that has been granted with the 2 department in ways that are consistent with ethical 3 standards, et cetera, et cetera. 4 And the last area, and we've heard about 5 it this morning and this afternoon is 6 accountability. We want to ensure there's the 7 highest level of accountability. You're right. 8 Someone said earlier we have a PR problem. This is 9 a political year. It's a reaction to everything 10 that's been going on. What the public wants and the 11 administration wants is to have everybody feel that 12 their taxpayer dollars are being spent wisely, 13 fairly, and appropriately. So with that comes 14 holding people accountable to those types of 15 requirements. 16 And I think in some ways, that translates 17 to, well, so what level of reviews do these types of 18 transactions need to go through? And I know I've 19 heard through a lot of you through e-mails and phone 20 calls it's crazy to expect a small amendment to a 21 $105,000 contract to go through an agency 22 secretary. 23 On the other hand, we have to address 24 accountability. So your input again in that area is 25 very important to us. We've got to find that 65 1 balance that gives the governor's office, through 2 the recommendations the task force will forward on, 3 the sense that we've addressed the integrity of the 4 system, and brought decisions at the higher level of 5 appropriate accountability that doesn't create a 6 choke point for everybody to get their work done. 7 So with that, I'll let you return to the 8 heat. And thank you again for your attendance 9 today. I appreciate very much your input. Have a 10 good afternoon. 11 UNIDENTIFIED SPEAKER: What's the web 12 site? 13 MR. CHANDLER: If you go to the governor's 14 home page, there will be an icon right there that 15 lists the latest executive orders that have been 16 issued. Press -- I don't know that. Quite long. 17 But it will say there IT procurement reform. And 18 there's an attachment that has Professor Kelso's 19 report. 20 (The proceedings ended at 3:14 p.m.) 21 --o0o-- 22 23 24 25 66 1 REPORTER'S CERTIFICATE 2 STATE OF CALIFORNIA ) ) ss. 3 COUNTY OF SACRAMENTO ) 4 I, JAMIE LYNNE OELRICHS, a Certified 5 Shorthand Reporter, licensed by the state of 6 California and empowered to administer oaths and 7 affirmations pursuant to Section 2093 (b) of the 8 Code of Civil Procedure, do hereby certify: 9 That the said proceedings were recorded 10 stenographically by me and were thereafter 11 transcribed under my direction via computer-assisted 12 transcription. 13 That the foregoing transcript is a true 14 record of the proceedings which then and there took 15 place. 16 That I am a disinterested person to said 17 action. 18 IN WITNESS WHEREOF, I have subscribed my 19 name on July 15, 2002. 20 ____________________________________ 21 Jamie Lynne Oelrichs Certified Shorthand Reporter No. 8086 22 23 24 25 67