Although a spate of federal indictments and convictions of public officials in Hudson County and around New Jersey has caused the state to begin to re-examine policies for hiring contractors, officials in Hudson County began altering their policies several years ago.
Last October, former County Executive Robert Janiszewski pleaded guilty to charges of extortion and mail fraud. Freeholders Nidia Davila-Colon and Bill Braker have both been indicted in connection with bribes from contractors; in Davila-Colon’s case, it was for allegedly passing them along to Janiszewski.
Outgoing County Executive Bernard Hartnett – who was named to replace Janiszewski in late 2001 – said one of his great concerns for Hudson County was the proliferation of “no bid” contracts, which left the county open to abuse. Under revised laws adopted by the state earlier last year, any purchase or contract exceeding $17,500 must go through a public bidding process, and a government body must choose the lowest bidder. For contracts between $2,000 and $17,500, a governing body must seek three proposals. However, due to the state’s “Extraordinary Unspecified Services” clause, certain “professional service contracts” can be exempt. This allows the governing body to hire companies that can not be easily evaluated by price alone, such as experienced engineering firms or attorneys with significant accomplishments. It can also leave a board to hire anyone they wish no matter what their bid, as long as the contract is made public.
A 1992 New Jersey State Commission of Investigation report on municipal corruption recommended that the state legislature do away with the law that permits no-bid contracts for professional services.
“This exception to bidding leaves too much room for abuses involving the awarding of engineering, accounting, legal, architectural, public relations and a host of consulting contracts,” the report states.
This is also an issue that has been under investigation by U.S. Attorney Christopher Christie, who has been carrying an anti-corruption crusade throughout the state.
Pre-qualifying firms to become competitive
Christie’s investigations have shown that in many cases, such contracts have been awarded to friends or to contractors willing to “kick back” a percentage of the fee as campaign contributions or even for politicians’ personal benefit.
Over the last two years, some of these abuses were modified by the establishing of a Contracts Committee by the Hudson County Board of Freeholders – which would pre-qualify professionals and establish a pool from which the county can seek bids or proposals.
“This is something we’ve been trying to do,” said Freeholder Bill O’Dea, a long-time critic of the professional service process. “We started by setting up a policy for hiring engineers and architects. It involves a two-phase process. The first phase would have professionals pre-qualified.”
This means that the county engineer would put out requests for engineering or architectural firms that have a certain level of expertise. Once the credentials of each was checked, these professionals would be kept on file. When the county had a project for work, requests for proposals would be sent to each.
“Then we would award the contract based on the lowest price,” O’Dea said. “We could do this because we would know that each of the firms was qualified.”
This change came about two years ago when the county was to award a contract for repair and maintenance on bridges. Under rules then in place by the New Jersey Transportation Planning Authority – of which Janiszewski was once chairman – the freeholders were not allowed to look at competitive prices.
“Five people were to decide if a firm was qualified to do the job,” O’Dea said. “Three of those people were employed by Hudson County. Once the firm was selected, we could only see the price that firm submitted – none of the others.”
While O’Dea did not claim any wrongdoing in the process, he did believe it was the wrong way to go about awarding a contract.
“Price has to play a part,” he said. “We can’t just accept anything handed to us.”
O’Dea also noted that under the previous system, if a high-level Hudson County official wanted to rig a bid, he or she could order the employees to select a specific vendor and the freeholders would not be aware of it.
Many of the reforms adopted in this area by the freeholders came as a change in policy under Freeholder Chairman Sal Vega, who has said repeatedly that the board would not be “a rubber stamp” for the executive branch.
Some members of the freeholder board are seeking a way to expand the pre-qualification rules to additional areas, such the hiring of attorneys or medical, psychiatric, and food services provided to various county institutions.
In some cases, this becomes more complicated because an equally qualified professional may charge less per hour, but run up a large number of hours for a higher total cost.
“What one lawyer might do in 20 hours for a higher fee, another lawyer might take 35 hours at a lower fee and still cost us more,” O’Dea said. “Hartnett tried to establish a cap on labor contracts.”
The freeholders could set a cap that professionals could not exceed without permission.
The freeholders must also decide whether or not it would cost less to hire consultants or for county staff to do the work.
“We do a lot of work using consultants,” O’Dea said. “We need to look at specific contracts to determine if the work can be done as well and for less money by our own staff.”
This would require analysis of a contract before it is submitted to outside vendors. In one case last year, outside consultants offering medical services for the county jail were actually going to hire people already employed by the county to do the work, charging the county more than if the county had used those employees itself.
HCIA to set caps and cut professional costs
One part of county government that had relied heavily in the past on outside consultants seems to have received the message – especially with Tom DeGise taking over as county executive recently.
In the past, the Hudson County Improvement Authority – ostensibly created to help deal with the burgeoning trash disposal problems – has become a body that handled an assortment of odd activities from providing bus service to providing loans to municipalities for projects.
Many of the transactions generated private wealth for professionals contracted to do the paperwork, lawyers, and financial people. In setting up its contracts for 2003, the HCIA commissioners voted to reduce costs associated with outside consultants by $600,000.
These included reductions in contracts authorizing legal, engineering, accounting and other professional services. The total for the year was $1.4 million, or about 30 percent less than in 2002.
HCIA Chairman John Shinnick said the board would continued to seek further cuts through a new internal cost control system implemented by new Executive Director Norman Guerra and General Counsel William Netchert.
“The HCIA board and staff are working cooperatively with the new [county] administration to achieve County Executive Tom DeGise’s goal to reduce costs and increase efficiency,” Shinnick said. “We will continue to look for further savings wherever possible.”
The new internal control system adds a new level of budget oversight by going one step further than what Hartnett and O’Dea have recommended in the past, creating caps for each task or project authorized by the agency.
“Rather than simply giving each firm an annual spending limit or cap, we will now impose a separate cap for every project,” Guerra said. “We believe this new system will substantially increase accountability and productivity while achieving significant overall cost savings.”