NASHVILLE - Despite Republican Gov. Bill Haslam's efforts to put it to rest, a controversy over his outsourcing of state real estate functions is trailing his administration into the new year.
In a sometimes-heated meeting this month, members of the joint House and Senate Government Operations subcommittee delved into a November audit that criticized aspects of the state's contract with Chicago-based Jones Lang LaSalle LLC.
With questions piling up on the Jones Lang LaSalle contract and other aspects of the state's procurement system, the Government Operations panels voted Dec. 18 to bring the contract and other issues back before the individual House and Senate committees early next year.
"There were just a lot of questions from the members and we knew we didn't have time," Senate Government Operations Committee Chairman Mike Bell, R-Riceville, said over the weekend.
Bell noted that the state made a "pretty radical change" to the procurement process.
"And I know there have been some aspects to it that have not been fully understood by the Legislature or the public," he said. "And it's looked bad."
The lawmaker quickly added that "whether the appearances of impropriety are actual, I'm not sure. I haven't seen any evidence of it and, again, it may be that this is a business model that will benefit the state in the long run."
Among other things, the comptroller's audit echoed questions raised in news accounts about potential conflicts of interest. The company is in charge of making recommendations about leased office space needs and also is paid commissions on deals struck with real estate firms.
Haslam says the overall outsourcing will save taxpayers more than $200 million over 10 years. Jones Lang LaSalle also now runs many state office buildings and was put in charge of assessing state office needs and the condition of existing buildings, as well as consolidating state office space.
Based on the firm's assessment, the Haslam administration is closing the Chattanooga State Office Building on McCallie Avenue and the nearby James R. Mapp Building, saying the first is "functionally obsolete" and the other too expensive to fix. The state is leasing new office space.
The governor, a multimillionaire, once had an unspecified investment in the publicly traded JLL but sold it before he became governor and put most of his assets in a blind trust. He says he has no idea whether the trust holds stock in the company.
State Building Commission members, led by Republican House and Senate Speakers Beth Harwell and Ron Ramsey, earlier had balked at Haslam's plan to extend JLL's authority over state buildings into other areas, such as higher education.
That would have earned the firm another $5.3 million. At its Dec. 11 open meeting, the five-member Building Commission approved a General Services Department recommendation that suspends lease commission payments to JLL pending the establishment of an independent reviewing authority.
At the Dec. 18 hearing, members delved into the conflict issue as well as how the contract with Jones Lang LaSalle expanded. The contract grew from an initial $1 million assessment of state real estate functions into what was envisioned as a $19 million per year contract estimated at $100 million over five years.
Thad Watkins, general counsel for General Services, disagreed with the audit's conclusion that the scope of the original contract was too broad or that it grew even more by amendments beneficial to JLL.
"We want to put to rest once and for all that this contract grew from its original conception," Watkins said.
He pointed out that the original contract, as approved by the State Building Commission, "was planned from the very beginning to be grown by amendment as funds became available."
Rep. Joe Carr, R-Lascassas, was skeptical of a General Services official's assertion that lists of services attached to the original contract were either specifically set forth or "logical extensions" of the contract.
"So if the amendments were an obvious and expected extension of the contract ... then why are they amendments?" Carr asked. "Why aren't they part of the contract as originally written and proposed?"
Told that they weren't included because the money wasn't available, Carr said, "your logic poses some challenges."
Senate Minority Leader Jim Kyle, D-Memphis, pounced on the issue.
"That is probably true," Kyle said. "And if it is, it has to be the greatest disrespect I've ever seen to the General Assembly's budgeting process in 30 years - 'We know we're going to be spending the money, but we're not going to tell you we're going to be spending the money.'"
Kyle said he didn't know of anyone in the Haslam administration ever making a presentation to a legislative committee discussing how the administration planned to embark on a major change in state policy.
General Services officials said it was presented to the State Building Commission, which besides the House and Senate speakers includes Comptroller Justin Wilson, Treasurer David Lillard, Secretary of State Tré Hargett and Haslam's commissioner of finance.
Earlier in his presentation, General Services Commissioner Bob Oglesby pointed out that a 2011 comptroller audit pointed out deteriorating conditions in state buildings and recommended something be done.
Since then, the state with Jones Lang LaSalle conducted the first-ever facilities assessment on the majority of state buildings, which included a look at problems related to deferred maintenance. Sixty-four "high priority life and safety" code violations have been fixed, he said. More than 4,000 deferred maintenance issues have been addressed.
That's expected to save the state $50 million, Oglesby said, while consolidating more than 8,000 employees and eliminating 1 million square feet of leased space is projected to save another $100 million over 10 years.
Contact staff writer Andy Sher at email@example.com or 615-255-0550.