Tennessee legislative committee ready to lay down rules to avert problematic contracts

'Any light that may shine on it is fine,' Chattanooga's Todd Gardenhire says

Expressing concern about Gov. Bill Lee's no-bid contracts are Sen. Heidi Campbell, D-Nashville, and Sen. Todd Gardenhire, R-Chattanooga. / Photo by John Partipilo/Tennessee Lookout

The Legislature's Fiscal Review Committee is ready to revamp state contract guidelines, either through new rules or legislation, after months of poring over millions of dollars worth of dubious deals.

Fiscal Review Committee members demonstrated how fed up they were Tuesday by rejecting a 10-year contract requested by the Tennessee Bureau of Investigation amid concerns the agency hadn't sought bids for its fingerprint system for 20 years. TBI wanted to extend its contract with Idemia Identity and Security USA for $15 million, but the committee voted 5-7 and rejected the proposal.

That proposed contract was one of several state deals to catch the ire of Fiscal Review Committee members over the last two years.

Concerned about no-bid contracts approved during the COVID-19 state of emergency by the Lee administration, Fiscal Review Committee Chairman Todd Gardenhire, R-Chattanooga, this week asked members to start coming up with ideas to bring more accountability to the contract process. Those could lead to new committee rules or legislation designed to rein in state contracting, even though the governor has the ability to stop competitive bidding to expedite contracts during an emergency.

Gardenhire pointed out the state remains in a state of emergency designated by the Tennessee Emergency Management Agency, enabling some state departments to continue to sign contracts without going through the Fiscal Review Committee.

With the blessing of Lt. Gov. Randy McNally, who serves as speaker of the Senate, Gardenhire is set to hold a special meeting of the Fiscal Review Committee in early 2022 to discuss procedures the panel wants to amend to avoid problems with state contracts.

"Let's get a process in place so when we have an emergency situation, whether it's a tornado going through Murfreesboro or Bradley County or Chattanooga or whether it's another level of emergency situation we've been under the past 18 or so months, just what an agency can do with a quick, emergency contract, what we do when the federal government throws all this money in our lap and there's a time limit on how to spend it and how it's rushed through us, and what they have to do to report to us," Gardenhire said.

The state received some $2.6 billion from the federal government through the 2020 CARES Act for pandemic relief, part of which it used to make emergency purchases.

When the governor's administration signs a contract for less than a year, there's no limit to the amount of money the state can spend, Gardenhire said. Those deals also skip the Fiscal Review Committee, but Gardenhire contends they should be reviewed the same way other contracts are vetted.

Gov. Bill Lee has defended his administration's contracting procedures, saying it had to move fast at the outset of the COVID-19 pandemic but ended emergency contracts as the pandemic waned.

A second opinion

The State Comptroller's Office is set to come out with a series of reports on the state's pandemic contracts. But state Sen. Heidi Campbell announced Tuesday she is asking Nashville District Attorney General Glenn Funk - possibly working in conjunction with TBI - to audit contracts that Lee's administration signed under emergency conditions in the COVID-19 pandemic.

Campbell, a Nashville Democrat who serves on the Fiscal Review Committee, cited several questionable deals that embarrassed the state in requesting Funk's office to review contracts that didn't go through the normal procurement process.

In the spotlight

No-bid contracts signed by Gov. Bill Lee that are now being question by lawmakers include:› Xtend Healthcare: $75 million for contact tracing.› Pale Horse Global Risk Solutions: $13.5 million for personal protective equipment. Nashville Councilman Robert Swope, 2016 director of the Tennessee Trump presidential campaign, is managing partner.› Renfro Corp.: $8.3 million for masks made of sock-like material.› Nomi Healthcare: $26.5 million for COVID-19 testing kits and personal protective equipment. The company sent plastic gloves used in cattle breeding instead of latex medical gloves, and Tennessee terminated the deal with a $6 million buyout.› Sexton Furniture Manufacturing: $165,000 for hospital gowns at twice the rate of other vendors. Rep. Jerry Sexton, R-Bean Station, owns the company.

"The governor's administration is executing sole-source contracts in instances for which suspension of a regular bidding process does not seem warranted," Campbell said in the letter.

In some cases, vendors were able to take advantage of the state, Campbell said.

Campbell noted she's unsure whether such an audit would lead to criminal charges but said it's worth an outside review to find out.

Gardenhire said he isn't certain the DA's office is the "proper venue" to seek the information, but he noted new procedures the Fiscal Review Committee adopts will help avoid the appearance of impropriety that would prompt a lawmaker to seek an investigation.

Nevertheless, he added, "Any light that may shine on it is fine."

Campbell cited several questionable contracts inked by the governor's administration, including a deal with Xtend Healthcare LLC of Hendersonville, which is being paid a total of $75 million by the Department of Health for COVID-19 contact tracing, with an extension through January 2022.

The senator contends Xtend is a medical billing company with no experience in epidemiology but initially was hired to do contact tracing for $20 million in June 2020 and then received five extensions, even though its weekly reports focus mainly on call volume, not effectiveness in tracing the disease.

From March 2020 through May 2021, the governor's Unified Command Group spent more than $742 million on sole-source contracts related to the pandemic. The Department of Education spent another $1 billion on 760 contracts from March 2020 through May 2021.

In addition to the Xtend contract extensions, which were previously reported by the Tennessee Lookout, Campbell made note of other contracts such as one the state signed with North Carolina-based Renfro Corp., a sock manufacturer, for $8.3 million. The sock masks were made with a porous material, instead of several layers of tightly-woven fabric recommended by the CDC, and were treated with a pesticide called Silvadur 930. The Department of Health halted use of the masks temporarily, until experts said the amount of pesticide used on them was too small to hurt people.

(READ MORE: Hamilton County halts distribtion of 'sock masks' over chemical coating)

The state also signed a $13.5 million contract with Pale Horse Global Risk Solutions and paid it $6.8 million as of September 2020 for personal protective equipment. Metro Nashville Councilman Robert Swope, who served as Tennessee director for the Trump presidential campaign in 2016, is managing partner of the company.

In addition, the state contracted with Sexton Furniture Manufacturing, owned by state Rep. Jerry Sexton, R-Bean Station, for $165,000 to provide hospital gowns. The price was $5.50 per gown, twice the rate other vendors charged. The purchase order was canceled after reporters started asking questions.

The state contracted with Nomi Healthcare of Utah in May 2020 for COVID-19 testing kits and other equipment at a cost of $26.5 million. The state moved forward with the contract in spite of warnings from the Department of Health and ultimately terminated the deal with a $6 million buyout because of problems with the test kits.

Some of the personal protective equipment from Nomi included veterinary wipes, plastic gloves used by cattle breeders and faulty masks.

"At this unique moment in time, with unprecedented levels of federal funding available to help Tennesseans, we must make sure that we are employing strong fiduciary and legal oversight," Campbell's letter states.

The Davidson County DA's Office did not respond Wednesday to questions about Campbell's request.

Questions about TBI system

Several Fiscal Review Committee members were flummoxed Tuesday by the TBI's request for a 10-year contract extension for Idemia at a cost of $15 million, including $6 million in federal funds, to upgrade Tennessee's fingerprint system.

The TBI obtained a federal grant to bolster the system, which officials said is on the verge of shutdown.

Fiscal Review Director Krista Lee Carsner told the committee the Comptroller's Office could still review the contract to allow the state to move forward with it.

Lawmakers appeared more willing to let the Comptroller's Office handle it than sign off on TBI's request, even though officials said the department had spent $10 million on the system over the past decade, only to watch it continue "limping along."

TBI officials explained that the contract had always been a sole-source deal with the vendor. Yet they acknowledged the agency hadn't sought competitive bids for a new system because they were told that switching to a new vendor could cost about $25 million.

Still, they had not put out a request for proposals to determine that amount.

"I've got some very strong reservations with this," said state Rep. Ron Gant, a Fiscal Review Committee member who was incredulous that TBI had let the system reach the point of collapse over the past few years without putting out a request for proposals to see what the true cost of replacing or upgrading would be.

TBI officials said they had tried unsuccessfully for years to get the necessary state funds to bolster the system but had to resort to a federal grant.

Committee members voting against the contract were Rep. Rush Bricken, R-Tullahoma, Sen. Campbell, D-Nashville, Rep. Gant, R-Rossville, Sen. Brenda Gilmore, D-Nashville, Rep. Darren Jernigan, D-Old Hickory, Rep. Dwayne Thompson, D-Cordova and Rep. Kelly Keisling, R-Byrdstown, co-chairman of the committee. Voting in favor were Sen. Gardenhire, R-Chattanooga, Sen. Paul Bailey, R-Cookeville, Sen. Paul Rose, R-Covington, Sen. Steve Southerland, R-Morristown, and Rep. Clark Boyd, R-Lebanon.

Read more at TennesseeLookout.com.