Tennessee comptroller looks closely at outsourcing contract

Tennessee comptroller looks closely at outsourcing contract

May 16th, 2017 by Andy Sher in Local Regional News

Tennessee Comptroller Justin Wilson, left, is pictured in this file photo.

Photo by Erik Schelzig

NASHVILLE — Tennessee Comptroller Justin Wilson's office has run a proverbial fine-toothed comb through the governor's potential building management contract with Chicago- based Jones Lang LaSalle, valued at an estimated $1.9 billion over a five-year period.

That figure covers what state and higher education facilities are estimated to pay to operate their buildings.

As a result of the review, Wilson said in an interview, administration officials have "already indicated to me they will make changes. Now what they are exactly I don't know."

Wilson, Tennessee government's top watchdog, issued Gov. Bill Haslam's administration a 53-item list of questions on May 4 about the administration's proposed contract with Jones Lang, the real estate giant that already manages about 10 percent of state government's real estate portfolio in areas ranging from security to maintenance, janitorial and groundskeeping.

The contract, which Jones Lang already has signed but the state hasn't pending review, appears to have the potential to become the largest in Tennessee government history.

Jones Lang already provides facilities management to about 10 percent of the state's real estate portfolio. The new five-year contract would add up to 90 percent of state buildings and much of higher education.

Individual higher education campuses could decide whether to participate or not and at what level. But they'll have to justify their decisions.

Into this process enters Wilson, an attorney who oversees a vast operation that includes other lawyers and accountants well steeped in the operations of government through auditing of all state agencies and other office responsibilities.

And Wilson has posed questions beginning with the most basic broad-stroke inquiries. These include whether the initial bidding process among three potential vendors was fair given the subsequent contract attachments later negotiated with Jones Lang after it emerged as the winner.

Other questions relate to the estimated liability given the latest projected savings now that final negotiations with Jones Lang are complete. And that's followed up by questions about the liability calculation itself.

It asks what percentage of the 90 percent of state office buildings not already under Jones Lang management will be involved. And it notes the contract "assumes" 50 percent participation by the UT and Tennessee Board of Regents systems.

"How was the estimate developed?" asks one question.

There is a request for documents explaining how the state "will fulfill its obligations for oversight/governance." And questions for more details about the "exit plan" if things don't work out as promised.

Another big question relates to the state's proposed incentive payments to Jones Lang under the contract's savings-sharing agreement on the massive experiment. How is that being calculated, Wilson wanted to know in a question that raises yet another issue.

"Does the state have adequate data available to measure the baselines for all participating entities?" his question poses.

In a sit-down interview last week with the Times Free Press, Wilson said "we've treated this under the same ways we treat anyone else" with one major exception.

That is, the comptroller has been personally involved in reviewing details of the contract and contract attachments.

"In this case, because of the amount involved and the complexity, I picked probably a greater role than simply what my folks send over and their recommendation," explained Wilson, who while in private practice was listed in "The Best Lawyers in America" and in the Mid-South edition of "Super Lawyers."

"I've read the proposed contract — twice," Wilson said. "We've sent a number of questions and it's ongoing discussions about those — we'll see where they [administration officials] come out with all these answers."

The first thing examined, Wilson said, was whether the contracting process was fair, noting "that's sort of the No. 1 issue. Was there real competition?"

Secondly, Wilson said, "and the one we focus on more than anything else, is it technically correct? Does it meet all the legal requirements, do the right sections match up, all the sort of technical things that come up."

And finally, the comptroller said, "we don't make a decision whether or not it is a good contract for the state in the sense that it's the best contract. That's not really our role. That's done by the evaluators and then by the agencies and by the administration.

"But," Wilson added, "we want to make sure there is in fact a rational basis for it. And that's what we look at."

The state's bond counsel, has its own list of questions. That's because a number of the buildings Jones Lang would provide facilities management for were built through issuance of public debt.

Because the bond counsel questions fall under attorney/client privilege, a Wilson spokesman said Monday, those questions are not publicly available.

But Wilson's own lengthy list of questions was provided in response to a Times Free Press request.

Asked about the administration's responses, General Services spokesman David Roberson said Monday in an email that "I hope you can understand our view that it would be awkward and inappropriate for us to discuss the answers now, before we submit them to the comptroller.

"Once the discussions between the [central procurement officer] and the comptroller are completed we'll be happy to do that," Roberson added.

Haslam, a Republican, has shown a penchant for privatization of facilities in areas ranging from children's services to prisons that has provoked opposition. In a state that's cut taxes and expenses, it's necessary, the governor argues.

But the administration's outsourcing of hospitality functions at state parks has now stalled, at least temporarily.

And now the facilities management of potentially the remainder of state government buildings — including the University of Tennessee and Tennessee Board of Regents' systems, as well as six universities recently spun off from TBR into their own self-governing orbits — has generated a political backlash.

State employees and campus workers have attacked the latest round of outsourcing. And a majority of the Republican-controlled General Assembly recently signed a letter calling on the administration to halt the outsourcing to give lawmakers time to study the issue comprehensively.

But lawmakers adjourned last week. The process is moving on.

The administration estimates that up to 3,000 positions could come under Jones Lang LaSalle's control. But Haslam officials say they've included better job security and benefit protections for workers who would now work for Jones Lang.

The United Campus Workers has questioned that, as have a number of legislators.

Haslam and others like Finance Commissioner Larry Martin argue that Jones Lang can operate the buildings more cheaply through the company's sheer buying power on everything from light bulbs to paper towels and subcontractors. The company nor its three major subcontractors don't have to stint workers on pay and benefits, the officials say.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow him on Twitter @AndySher1.