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Ask anyone in procurement what they most worry about, and most times, you will get an answer that includes the word “afraid.” From fancy corner offices to the cubicles filled with those of the front lines of the agency, there is always that “afraid” factor—worried that an unintentional contracting mistake could bring scrutiny upon both themselves and their entire acquisition operation.

I was reminded of that when I read about what happened with Workforce Solutions Alamo, a federal/state funded agency in Texas that “brings people and jobs together, collaborating with manufacturers, other major employers and schools to provide child care, job placement and workforce development services for Bexar County (San Antonio) and eleven surrounding counties.” The agency has an $83 million dollar annual budget, and with its funding mix, it operates subject to both federal and state acquisition rules and practices.

The story centers on the downfall of Gail Hathaway, who was recently fired as the agency’s CEO in a unanimous vote of Workforce Solutions Alamo’s Board of Directors last week. Why did the board remove Hathaway from her $151,000 post? Well, the answer is simple: Ms. Hathaway appears to be in the .0001% involved in public procurement who did not operate in “afraid-mode,” as shown in an audit report recently issued to WSA’s board by the Texas Workforce Commission (TWC). The TWC audit found that Workforce Solutions Alamo’s acquisition practices were completely lacking under the direction of Ms. Hathaway, In fast, the Texas auditors specifically found that WSA’s acquisitions had been conducted in a manner where there had been:

  • insufficient documentation
  • unfair competitive advantage
  • restricted competition
  • complete disregard of, and failure to follow TWC procurement rules
  • operating under letters of intent without signed contracts; and
  • invoices received before purchase orders are issued.

In general, the TWC found that WSA had been conducting procurements in an inappropriate manner—and one that failed to follow TWC acquisition policies and quite possibly violated Texas state law—and that these actions were both directly and indirectly influenced by Ms. Hathaway’s actions as the agency’s CEO.

Want some examples of her alleged transgressions? Check-out these public procurement “no-no’s” that are but highlights of Ms. Hathaway’s actions, drawn both from the audit report and from some excellent reporting on the matter from Sergio Chapa of the San Antonio Business Journal:

  • Last year, WSA had an opening in the post of deputy executive director, to serve under the agency’s CEO, Ms. Hathaway. The CEO turned to James “Rusty” Perry, who had previously served under her while they were Naval officers assigned to the Navy Medicine Education and Training Command at Fort Sam Houston in San Antonio. The procurement issue was that a Chicago-based search firm, David Gomez & Associates Inc., actually provided services on the search and invoiced the agency over $28,000 for its services in May 2015—a month ahead of the issuance of the calls for proposals from interested search firms! The state auditors found that: “Because substantial work with the vendor had already begun – including submission of the candidate who was ultimately selected – the subsequent solicitation of two additional bids through an informal process does not promote fair and open competition.” As a consequence of the TWC audit, Workforce Solutions Alamo may have to reimburse the state for the full cost of the amount paid to the search firm for the “search”—$28,750.
  • Workforce Solutions Alamo again skirted the formal procurement process in the hiring of strategic planning consultant Cindy Stynchula late in 2015. In November 2015, the agency sent out an RFQ for strategic planning services for the agency. There were three respondents to the call, and the agency went so far as to develop a scoring protocol for judging the applicants’ responses. However, in December 2015, the acquisition was changed from a call for “consulting services” (which under Texas law and WSA’s procurement guidelines had to be competitively sourced) to one for “coaching services” (which did not have to be bid out). The agency contracted with Ms. Stynchula (even though she was not evaluated under the scoring system established for the hiring of the strategic management consultant) as a “small purchase procurement item.” The TWC audit was not pursuing reimbursement of state monies in this case, even though the auditors found that once again, there was an “appearance of preselection” and a lack of adherence to proper procurement practices.
  • The Texas Workforce Commission audit found that WSA had further issues of “preselection” in the real estate area. Earlier this year, the agency was pursuing plans to relocate its headquarters out of the downtown San Antonio to the Vistana Building adjacent to Market Square—a tourist and cultural area a few miles away. The TWC auditors found it problematic that a few weeks before the agency had issued a general RFP for new space, Ms. Hathaway had floor plans for the Vistana Building and began assigning office space for WSA staffers. Further, the audit revealed problems in two instances in 2015 where the WSA cancelled current leases for the locations of its career centers in the towns of Hondo and Pleasanton before conducting any cost-benefit analysis and before having “selected” new office space. The TWC auditors found that this “apparent preselection of the office space is another example of a lack of thorough planning and compliance with procurement requirements.”

The TWC report also faulted Ms. Hathaway for instilling “a culture of fear, suspicion, and retaliation” in the agency. While the culture problems extended beyond the acquisition area in the WSA (as evidenced by the abrupt firing of two senior staffers, one of whom has filed a case with the EEOC), it is noteworthy that the investigation of the agency’s procurements under Ms. Hathaway was initiated based on tips provided by staff members to both the TWC and to the Texas State Auditor’s Office.

And so, what are the “lessons learned” that we should remember from this story? Well, the first is that in any public sector organization, no one should be above the law. In this case, the CEO was way too involved in pushing her own personal agenda through the power of the purse. She apparently used and abused the levers of procurement in a manner that likely violated procedures—and quite possibly the law. Moreover, she created a culture that intimidated employees that perpetuated these poor procurement practices, but pushed animosity and fear amongst the agency’s wider staff.

Finally, there is the issue that we started with—being “afraid.” Yes, there is a healthy level of fear that is indeed necessary for all in procurement with which to operate effectively. But there is no excuse for fear to be used as a weapon by managers—at any level of administration—exercised with the power of the position  to intimidate acquisition professionals to go along with inappropriate—and certainly illegal—procurement activities. It looks like karma will work out in this instance, but this Alamo story is one that all in public procurement need to remember to avoid history repeating itself at your agency—at whatever level of government one might be situated.

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