Nebraska officials fired a pair of technology companies last December after it became clear they couldn't complete two upgrade projects to essential software systems.
But not before $12 million in state funds was spent on the projects.
Likewise, in 2007, state officials awarded a $50 million Medicaid Management Information System project to an Arizona company with 75 employees over the protest of a larger company with 20,000 employees and a track record of completing similar projects.
State officials later fired the smaller company after it became clear it could not perform the work needed, but only after $7 million in state tax dollars had been spent.
Sen. Mark Kolterman of Seward has introduced a bill (LB21) he said would help protect taxpayer funds while also ensuring companies could appeal the decision of state agencies they feel were made in error.
While more than half of all states have some process for judicial review of state procurement decisions, Kolterman said, Nebraska's process limits unsuccessful bidders to submitting a letter and meeting with Department of Administrative Services officials.
"Without an appeal process which includes judicial review, many companies are being dissuaded from investing in Nebraska," Kolterman told the Legislature's Government, Military and Veterans Affairs Committee on Wednesday.
Under Kolterman's plan, the state would be required to create a formal appeals process, under the Administrative Procedures Act, giving unsuccessful bidders on projects in excess of $5 million the opportunity to appeal the decision to the state agency within 60 days.
After the hearing, state officials would issue a final decision, which could be appealed to Lancaster County District Court, where the matter would be reviewed by a judge.
"LB21 would show vendors they would be treated fairly during an appeals process and would give them certainty that errors in an award process can be corrected," Kolterman said.
Thomas Kenny, a procurement and contracting attorney with Kutak Rock in Omaha, said Kolterman's bill "corrects some serious gaps and flaws" in Nebraska's procurement laws surrounding states do not have.
He said enacting a new procedure would lead to more predictable outcomes for the state, attract more quality vendors from across the country, improve competition and drive down costs.
The "business-friendly, pro-competition legislation" introduced by Kolterman is consistent with the aims of Gov. Pete Ricketts, Kenny said.
Former U.S. Sen. David Karnes, testifying on behalf of the IT Alliance for Public Sector, said the change would promote good business practices on Nebraska's behalf, as well as due process for companies, while former Department of Health and Human Services CEO Kerry Winterer said Kolterman's bill created "an efficient, effective and unbiased process" that would engender confidence in state agencies as well as vendors.
The interim CEO of the Department of Health and Human Services, Bo Botehlo, said enacting a judicial review process could lead to long delays before contractors could begin work for state agencies.
Botehlo, a former director at the Department of Administrative Services, said LB21 could lead to delays of 18 months or longer as district court and appeals court judges review the procurement process, while adding that some projects may see appeals from multiple companies.
Kolterman said he will work to create "a process everyone can live with," but pointed to the recent failed projects as proof that a change needs to be made.
There is some estimated cost to the bill — compensation to hearing officers, court reporters, and others involved in the appeal — but Kolterman said rooting out contractors who cannot successfully complete the jobs could ultimately help the state save money.