2007-2008 Santa Clara County Civil Grand Jury Report County Contracting Practices Fall Short on $20m Contract

Conclusions 5

• CL1 Page 8
  SCVMC transmittals to the Board of Supervisors regarding the Deloitte Implementation Contract consistently asserted that there were no fiscal implications. The rationale was that the costs would be covered by the financial benefits obtained from the engagement.
• CL2 Page 8
  The County approval and review processes for the Implementation Contract failed to note the violation of Board Policy Section 5.5.3.
• CL3 Page 9
  Processes are inadequate to ensure that procurement policies and procedures are followed by departments under a Board Delegation of Authority or for board executed contracts.
• CL4 Page 9
  Board Policy does not address the problem of having the same vendor who was hired to make a recommendation being subsequently hired to implement the
• CL5 Page 7
  Most interviewees indicated that the Implementation Contract was the biggest in Santa Clara County history. Yet, the County failed to ensure that this very critical and very costly contract had the high level of scrutiny and due diligence it required. The Grand Jury was told that given the County’s current financial situation, it may need more such contracts with outside experts in the future. It is imperative that those contracting with vendors have the knowledge and experience themselves or utilize available resources to achieve the best price and terms for the county. The process to award the $20 million contract did not allow for adequate oversight. The lack of involvement by county procurement allowed for contracting decisions to be made that did not ensure the most effective contractor was selected or the most favorable terms were achieved in an independent fashion. The County appears to have ignored its own contracting guidelines. The majority of money spent on service contracts in the county demonstrates little or no involvement from the procurement organization. 7 Findings and Recommendations Findings have been reviewed with the subject agency. Finding 1a: SCVMC violated Board Policy Manual Section 5.5.3 when it did not conduct a competitive bidding process for the Deloitte Implementation Contract. Finding 1b: The Santa Clara Valley Health and Hospital Systems Director of Planning and Business Development was the executive lead for both the Assessment and Implementation Contracts. When interviewed by the Grand Jury, he described adhering to a contracting procedure guidebook that was unique to SCVMC. Recommendation 1: SCVMC needs to ensure that all its staff, particularly its management, understands and follows the Board Policy Manual. Finding 2: SCVMC transmittals to the Board of Supervisors regarding the Deloitte Implementation Contract consistently asserted that there were no fiscal implications. The rationale was that the costs would be covered by the financial benefits obtained from the engagement. Recommendation 2: If a contract proposal is the subject of the transmittal, its anticipated cost should be made clear in the transmittal. Finding 3: The County approval and review processes for the Implementation Contract failed to note the violation of Board Policy Section 5.5.3. Recommendation 3: The County needs to ensure that all parties involved with reviewing contracts are aware of and follow County contracting policies and the principles behind them. 8 Finding 4: Processes are inadequate to ensure that procurement policies and procedures are followed by departments under a Board Delegation of Authority or for board executed contracts. Recommendation 4a: A periodic external audit of contracts executed under a Board Delegation of Authority and board-executed contracts should be performed, with contracts selected according to the amount of financial or other risk involved. Recommendation 4b: Responsibility for following County procurement procedures should be specifically designated in the approval processes for all county contracts. Finding 5: Board Policy does not address the problem of having the same vendor who was hired to make a recommendation being subsequently hired to implement the recommendation. Recommendation 5: The County should review Board Policies regarding issues similar to those covered under California Public Contract Code Section 10365.5 to clarify best practices for Santa Clara County regarding assessment contracts leading to implementation contracts. Finding 6a: Contracts over $100K ($500K for IT) do not receive the same level of procurement process scrutiny as those under $100K. Finding 6b: County contracting rules are not consistently followed. Recommendation 6: The Board of Supervisors needs to revise and clarify contract procedures used in the Board Policy Manual and the County Contract Manual and ensure that they are followed consistently by all agencies throughout the county and for all contract dollar levels. 9

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