May 25, 2021

Fixing the Problem of the Missing Million-Dollar Signature

Let’s stop sending money down the drain. Modernize procurement to reduce waste.

In government, we have had no shortage of pressing issues to contend with this past year, and perhaps no one’s pulse will be set racing by a brief commentary on government procurement. 

But let me tell you two stories. 

Story #1: In October 1935, the U.S. Army Air Corps was testing long-range bombers, when one of the aircraft being tested was involved in a horrific and fiery crash that killed two members of the crew. The pilot—a brilliant aviator with years of experience—had failed to release a locking mechanism for some critical controls. The cause of the crash was declared as “pilot error.” 

money-down-drain.jpgStory #2: Back in 2008, not long after I joined the Board of Commissioners of the Metropolitan Water Reclamation District (MWRD), the Board received a staff request to authorize a $228.4 million contract for the construction of primary settling tanks and grit removal facilities at the Calumet Water Reclamation Plant. Fairly routine for a billion-dollar agency like MWRD—except that the winning bid was $10 million more expensive than the lowest bid for the contract. As it turned out, the lowest bid was missing a single page with a required signature from the entire bid package. This missing signature invalidated the entire bid, which was disqualified. The result? The company that submitted the faulty bid lost the contract—and Cook County taxpayers paid $10 million more than they otherwise would have had to pay to procure the same services. 

(Maybe procurement isn’t the most exciting thing in the world, but a $10 million difference in price set my heart racing.) 

It’s always tempting to place blame. It seems natural to ask, “Well, whose fault was it?” and to point the finger at the pilot of the aircraft, or at the person whose job it was to assemble the bid package. We assign responsibility to the pilot (“pilot error”) or to the bidder (‘human error”) and we feel like we can move on. But it’s just as important to think about the systems we create. In the case of the Army Air Corps bomber test, the system was the aircraft, with dozens if not hundreds of controls and indicators. At MWRD, the system was the complicated administrative requirements written into statute for submitting a successful bid in order to do business with the District. 

Questions to ponder: Have we created systems that set individuals up to fail? Is there a way to do better? 

In the public sector, we have excellent reasons for the requirements imposed on bidders. The MWRD wants to create a level and honest playing field—so it requires bidders to sign an affidavit that they haven’t engaged in collusive practices. It wants bidders to comply with its Affirmative Action Ordinance—so it requires them to submit a utilization plan for protected-class businesses (certified minority-owned businesses, woman-owned businesses, veteran-owned businesses, and small businesses). The District wants to make sure that protected-class businesses are actually utilized—so it requires bidders to obtain signatures from subcontractors to make sure that they are aware of and agree to participation in the contract (i.e., that their names are not being inserted into bid documents without their knowledge). These are essential objectives in public-sector procurement, and MWRD takes them seriously.

At the same time, the District needs to eliminate the problem of the million-dollar missing signature. (Heck, an error shouldn’t have to cost $1 million to get someone’s attention.) This is not a matter of loosening requirements—it’s about setting up systems that can catch and correct errors before they cost taxpayer dollars (or human lives). 

In the case of the long-range bomber test, the solution turned out to be a simple checklist, so that pilots could rely on a clear reference for critical operations. At MWRD, I have advocated for using electronic procurement to weed out incomplete bid packages before they are submitted. Modern e-procurement would give bidders a chance to fix and complete their bid packages before they are submitted and would eliminate the need to disqualify bidders for unintentional clerical errors.

Consider this: To purchase a $12 T-shirt online, retailers require you to have a valid credit card number, the right zip code, a correctly-spelled name, and a valid delivery address before they will allow you to complete your transaction. Shouldn’t we be able to do something similar for a $12 million contract?   

This story, as you may guess, is not over. At last Thursday’s Board meeting (May 20, 2021), District staff asked the Board for authorization to award a contract whose estimated cost was in the $12-to-$14 million range. The lowest bid was approximately $12 million; the next-lowest bid was approximately $14 million. Guess what? The lowest bid was missing a single signature and was thrown out. Staff recommended that the Board award the contract to the next-lowest bidder for $13.7 million.  

After more than a decade of asking for an improved procurement system, I wasn’t willing to accept the staff recommendation—and neither were my colleagues on the Board of Commissioners. At this point, it’s not clear how this contract will be fulfilled, but the Board has asked the Procurement Department to explore options. 

Meanwhile, I will continue to advocate for a modern procurement system that can notice errors before they cost taxpayer money. It’s not good enough just to find someone and point the finger. Let’s figure out how to streamline the procurement process, improve compliance with our requirements, make it easier to do business with the Metropolitan Water Reclamation District, and save hundreds of thousands of dollars a year. 

Isn’t that a good story?