Despite coming under fire in a state audit this week for his administration’s contract procurement process, Gov. Bill Haslam praised the Department of General Services for cutting Tennessee’s property leasing costs.
The day after the state comptroller’s office reported flaws in a facilities-management contract with Chicago-based real estate management firm Jones Lang Lasalle, Haslam lauded DGS for helping the state reduce spending on office space and thus allowing taxpayer resources to go to other state needs such as increasing salaries for teachers.
“It’s not just about saving office space, it’s about freeing up money to use in other places,” said Haslam.
Although DGS didn’t violate any state policies in awarding the contract, the audit from the comptroller’s office found flaws in the handling of the facility assessment, planning and management services contract with JLL.
According to the audit, DGS management “intentionally procured” an overly broad contract so that they could later “procure specific services through the contract amendment process.”
Auditors also couldn’t determine if the added amendments were in the scope of the original contract. Two of those amendments “created organizational conflicts of interest” allowing the contractor to “profit from its own recommendations to the state,” according to a press release.
The original contract with JLL was for $1 million to assess state-owned property and make recommendations for planning and management, and was then expanded to nearly $8 million over the next year through a series of amendments, and culminated in JLL receiving in March a five-year contract worth $330 million to take over state facilities management, according to a News Channel 5 report.
DGS Commissioner Bob Oglesby rejected the suggestion that the state had mishandled the contract. He also disagreed with the audit’s statement that JLL could not be trusted to be impartial in a situation where they stand to benefit financially.
Haslam, who has been criticized for having investments in JLL prior to his gubernatorial bid, also defended the impartiality of JLL’s decisions on the grounds that the company doesn’t “have the final say” in a decision. Both the State Building Commission and General Services have to approve the recommendations, said the governor.
The department is considering extending its facilities management contract with JLL for another $5.3 million to assess additional state buildings. “It’s like expanding any new contract; you look at everything on an individual basis. So, whether it be that contract or anything else, you take what you know and what you’ve learned and what you need at that point in time and make a decision on it,” Haslam told reporters following the hearings Thursday.
Oglesby said that through the initial facilities management contract, DGS saved $1.76 million in fiscal year 2014, and the 2015 budget request shows an additional $1.62 million in savings. He added that the department is “anticipating” saving an additional $2 million on janitorial and security services by June 2014, and an equal amount the next year.
While the audit points out several things that “could have happened better,” Haslam said that he is “100 percent convinced Tennessee is in a better place” than it was before “in terms of building safety, deferred maintenance and saving money for the state.”
Senate Minority Leader Jim Kyle told TNReport he believes the audit “validates” the critics of the JLL facilities management contract.
“It’s important that the Comptroller’s Office would issue a report questioning an action taken by the executive branch, because that shows our system is working,” said Kyle, a Memphis Democrat.
During his department budget presentation Thursday, Oglesby requested $115,516,100, which includes $8,968,800 in state appropriations, for fiscal year 2015. The budget request “reflects no growth from the current fiscal year budget,” he said at the hearing.
The department’s spending reduction plan calls for operational expenditure cuts totaling $323,800 from the State of Tennessee Real Estate and Asset Management, administrative and state facilities pre-planning divisions. An additional $1.6 million in spending reductions is the result of force reduction in the real estate management division in fiscal year 2014.
Additionally, the DGS office consolidation plan, Transforming Tennessee for Tomorrow, is projected to save the state almost $13M in FY 2015, Oglesby said.