Auditor Of Public Accounts
State Auditor Crit Luallen Releases Review of Finance Cabinet's Crown Victoria Contract with Countryside Motors

Press Release Date:  Tuesday, September 06, 2005  
Contact Information:  Jeff Derouen
Phone: (502) 573-0050
Fax: (502) 573-0067
Pager: (888) 222-5670
Email: jeff.derouen@auditor.ky.gov
Website: http://www.auditor.ky.gov
 


State Auditor Crit Luallen released a review of the Finance and Administration Cabinet's contract with Countryside Motors.  The review of the $4.5 million annual contract uncovered no evidence that Finance violated its procurement policies.  The re - bid contract saved the Commonwealth over $1,000 per vehicle purchased.  The review recognized that Finance's practices and procedures generated questions of fairness and perception.  However, there was no evidence of improper influence on the procurement's outcome. Seven recommendations were sent to Finance to improve the procurement process in the future.

"I fully appreciate and understand why this contract was perceived to be problematic.  However, an exhaustive review that consisted of many volumes of documentation and interviews uncovered no evidence that the Finance Cabinet violated any procurement policies.  Unless further evidence is forthcoming, it appears that a merit employee of Finance acting on his own as the Commonwealth's buyer, who was six levels of supervision below the Finance Secretary's level of supervision, re - bid and awarded this multi - million dollar contract.  The contract saved the state money, but the design of the contract did not guarantee such savings. My office makes seven recommendations that I hope the Finance and Administration Cabinet will implement to assure future savings and prevent the appearance of unfairness in state contracting," State Auditor Crit Luallen said.

The review was conducted by the Auditor's Division of Financial Audit as part of the annual Statewide Single Audit of Kentucky. The professional auditors reviewed hundreds of documents and interviewed seventeen individuals, including representatives of three bidding vendors, the regional Ford Motor Company representative, employees of the Kentucky State Police, Kentucky Transportation Cabinet, the Finance and Administration Cabinet, and others involved in the process.

Among the seven recommendations made in the review are that Finance should evaluate its policy that a single Commonwealth buyer can cancel and re - bid contracts of this dollar magnitude without supervisory approval, and that Finance should review contract specifications and clarify significant questions. If that is not possible, Finance should cancel and reissue the solicitation. Finance should communicate contractual requirements to agencies to facilitate contract enforcement, and Finance should reevaluate the use of blended pricing. 
The detailed review is available but a summary of events follows.

Summary of Events
 
In June 2004, Paul Miller Ford held the Commonwealth's existing Crown Victoria contract, and was in the fourth year of a five-year contract.  The contract specified that both the state and Paul Miller Ford had a renewal option for each year.  On June 30, 2004, the Finance and Administration Cabinet sent Paul Miller Ford a renewal form asking if they were interested in the final option year.  On July 8, 2004, Paul Miller responded in the affirmative.  On that same day, a Commonwealth buyer in the Finance and Administration Cabinet asked if Paul Miller Ford's price could be lowered because he had heard from other local government officials and Countryside that Finance could get a lower price.  In addition, a separate vendor had lowered the Commonwealth's Taurus contract's price.  One week later, Paul Miller Ford responded that they would keep their price as it had been previously. 

The Commonwealth's buyer, in an email exchange with Countryside Motors regarding another vehicle contract Countryside had already executed, was informed that Countryside could sell the Crown Victorias at a price lower than Paul Miller Ford.  After speaking with personnel from the various agencies that were to use the cars, the Commonwealth's buyer decided not to renew the Crown Victoria contract with Paul Miller Ford, and to open the contract for bid.  This was done in late August 2004.  The buyer stated that he did not get approval from his supervisor to cancel the existing contract and re - bid.  This is consistent with statements from the buyer's supervisors.

The new request for proposal (RFP) was copied after previous vehicle RFPs and included a request that the vehicles be delivered with a half tank of gas.  The RFP also requested a bid on two models - a pursuit and investigative vehicle.  The price would then be averaged for a blended price. 

Five vendors bid on the new contract, including Paul Miller Ford and Countryside Motors.  On September 28, 2004, the bids were opened and read.  Paul Miler Ford had the lowest blended price.  However, they, along with two other vendors, were disqualified and their bids not considered because they were unable to meet the fuel requirements.  Countryside Motors had the lowest price of the two vendors that were not disqualified.  Shortly thereafter, the buyer contacted Countryside to ensure they could meet the fuel requirement.

The buyer indicates he was the sole grader for the bid responses.  On October 21, 2004, the Finance and Administration Cabinet awarded the contract to Countryside Motors.  The buyer also made this award without prior approval from any supervisor.

The vehicles were shipped directly to the Kentucky State Police (KSP) and not sent through the dealer.  This is standard procedure. When the vehicles arrived, KSP personal did not check to see if they contained the required half tank of gas because they were not aware of the requirement.  After being informed of the requirement by members of the media, KSP contacted Countryside who then paid Riley Oil, KSP fuel supplier, for 4.5 gallons of fuel per vehicle.  The vehicles sent to the Kentucky Transportation Cabinet came directly from Countryside Motors with the required fuel.

The contract saved the state money because, even though Paul Miller Ford had the lowest blended rate, they had a much higher disparity between the costs of the two models requested.  As in past contracts, the number of pursuit vehicles to be purchased exceeded by a significant margin the number of investigative vehicles.  Since the pursuit vehicle's cost was substantially higher in Paul Miller Ford's bid than in Countryside's bid, even though the blended price was $11 less, the extended price over the life of the contract would have been much higher under Paul Miller Ford.