September 19, 2014

House Committee raises legal question about fee office awards process

An informal House Committee hearing has raised a question of whether the Department of Revenue’s fee office bidding process has an illegal flaw.

The Department of Revenue was represented at the informal hearing by (from left to right) Administrator Cathy Herigon, Division Director Jackie Bemboom, registered lobbyist Jay Atkins and Deputy Director John Mollenkamp.

The Department uses a competitive bidding process that replaced the earlier “patronage” system, under which state license offices were generally awarded by governors to political allies. The new process has been phased in beginning with the administration of Governor Matt Blunt (R) and continuing with current Governor Jay Nixon (D).

The Director of the Motor Vehicle and Driver Licensing Division, Jackie Bemboom, explains how under the new process, requests for proposal change from fee office to fee office.

“We start with a standard (request for proposal) and we have what we call ‘variables,’ that will be inserted into the RFP, basically based upon transaction volume. An office that processes 10,000 transactions in a year will have different variables than an office that processes 100,000 transactions in a year.”

The Department then implements the rules of the Office of Administration’s Division of Purchasing for the bidding process.

Representative Jay Barnes (R-Jefferson City) says having that standard request for proposal could constitute having a rule that, under state law, must be formalized. Until it is, the Committee questions whether the state could be open to lawsuits from those who have lost bids on fee offices.

Chairwoman, Representative Sue Allen (R-Town and Country) says, “We’ve had circumstances regarding other types of bids that there have been lawsuits, so why wouldn’t you have an expectation that something like that could happen with the fee offices?”

Barnes says that is a concern, but says the use of the Office of Administration Rules could be enough to satisfy state law.

“The Department of Revenue might not have to promulgate (the rules) on its own.”

Recent reviews by the State Auditor’s Office of several fee offices and of the award process have not delved into the question of whether the procedure should be formalized as a matter of state law.

The Committee is urging the Department to formalize that standard request for proposal not just due to possible legal concerns, but also to keep old patronage practices from resurfacing.

Barnes says, “I think what the Department has done is to create a de facto rule that they have not put in writing which leaves open the possibility of changing criteria throughout the process for each individual bidding opportunity, which also leaves open the opportunity to ensure that one bidder or another wins with respect to those bidding opportunities.” He adds, “(The Committee is) not alleging that in fact has happened, but that the statutes, without a rule in writing, are open to that happening.”

The Committee met informally due to the lack of a quorum. Speaking for the Department were its Deputy Director, John Mollenkamp, a registered lobbyist for the Department, Jay Atkins, Bemboom, and Administrator Cathy Herigon. Several committee members expressed frustration that the four could not answer policy questions, and that Director, Alana M. Barragán-Scott, was not present.

Allen says this meeting was the third the Director refused to attend.

“We just want to know that we are given full disclosure of anything we ask, and presence or lack of presence could be an indicator that somebody doesn’t want to answer questions.”

Representative Chris Kelly (D-Columbia) notes, the Committee has praised the work of the Department for improving over the old patronage system.

“Everybody acknowledges that this administration has made progress with the fee offices.” He says what the Committee wants to know is, “How can that become formalized, and is there more progress that could be made? Nobody’s throwing rocks here.”

Barnes says Barragán-Scott needs to be at the Committee’s next hearing in December.

“If she doesn’t show up, I’m going to ask the chair to ask the Speaker (of the House) to subpoena her to show up at another meeting, so let’s be abundantly clear. She has to show up, or she will be subpoenaed to show up.”

A call to the Department of Revenue for further comment was not returned.