Under Raimondo, Out-of-State Vendors Receive 48% of RI Spending - $524M

Tuesday, April 05, 2016

GoLocalProv News Team

Under Governor Gina Raimondo’s leadership, Rhode Island selected out-of-state vendors to design the state’s tourism logo and conduct the marketing, but that $2 million expenditure for those activities marks just a tiny tip of the iceberg of spending with out-of-state companies.

According to an analysis of state spending under Raimondo during the first nine months of the 2015-2016 budget, out-of-state vendors received contracts for more than $524 million — nearly half of all contracts or payments.

GoLocal reviewed hundreds of vendor accounts of greater than $1 million, and thousands of state payments published on the State of Rhode Island’s Transparency Portal. According to the analysis of those state records, total payments of nearly $1.1 billion in expenditures have been made in just first three quarters of Raimondo’s first full budget.

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Questionable Vendors — Wells Fargo Receives Millions

Besides selecting an out-of-state firm to design the Rhode Island tourism’s logo when Providence has been branding its self the Creative Capital (it hired an out-of-state firm to design its logo too) and the fact that Rhode Island is home to Rhode Island Schools of Design, some of the other payments to outside vendors raise more questions.

Those receiving payments include a number of out-of-state mega banks, including Wells Fargo — a financial institution that the State has sued three-plus years ago for tens of millions in damages for the bank's role in the 38 Studios financial meltdown.

On March 7, the United States Securities and Exchange Commission charged the Rhode Island Economic Development Corporation (now the Rhode Island Commerce Corporation) and its bond underwriter Wells Fargo Securities with defrauding investors in the 38 Studios bond offering.

Even with multiple suits pending against Wells Fargo both by Rhode Island and the SEC, the Raimondo Administration has paid the bank $10,026,906.84 in just the first nine-months of this fiscal year.

Big Vendors Advantage

Some of Rhode Island’s largest companies receive significant payments from the State of Rhode Island — companies like CVS have received substantial payments. The Woonsocket-based healthcare company has been paid $40,759,507.40 to date this year, but that is dwarfed by out-of-state companies like United Healthcare that has received over $134 million, Xerox/Healthcare Finance $75 million, and Deloitte Consulting over $57 million.

Employees from XEROX have given $6,000 to Raimondo and Deloitte staffers have donated $3,250 to her campaigns.

“Most of the contracts awarded for goods and services purchased from outside state vendors are a result of two factors: (1) there was no individual or business in the state that met the qualifications/specifications required and/or (2) the lowest bidders were individuals and businesses located in other states. Selling products and services to the state requires a vendor to be familiar with state purchasing procedures, rules and regulations,” said Edward Mazze, former Dean of the University of Rhode Island’s Business School.

In the case of healthcare insurance, United Healthcare is the largest recipient of state funds, but there are local companies in Rhode Island that could, and in fact, did have the state contract with, like Blue Cross Blue Shield of Rhode Island. Keeping those dollars in Rhode Island would create more jobs than shifting those dollars going to Minnesota.

"I have two concerns. The first is how out of state vendors are selected. If there was an public bidding process there is nothing wrong selecting the lowest and best bid. When out of state vendors are awarded sole source contract which are not subject to public bidding than Rhode Island businesses should be concerned,” said Gary Sasse who heads the Hassenfeld Institute of Public Leadership at Bryant University.

“The second issue is the amount of the state budget allocated to contracted services…Regardless if contracted services are performed by instate or out of state vendors the General Assembly should look for options to reduce the contracted service budget,” said Sasse, who served as Director of Administration for Rhode Island under Governor Don Carcieri.

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Raimondo has hired many of her top staffers from out-of-state

Raimondo’s Out-of-State Staff, Fundraising and Vendors

Throughout Raimondo’s career as a politician she has been prolific at fundraising from out-of-state donors. She has received millions from interests tied to Wall Street and other related finance concerns. When Raimondo assumed the Governorship in 2015, she was driven to stack top positions with out of staters. She named Stephen S. Neuman, who had previously been Director of Public Affairs for Maryland Governor Martin O’Malley, as her chief of staff. Her Deputy Chief of Staff Eric Beane is another former O’Malley Staffer.

The state's Commerce Corporation -- who was responsible for the state's new tourism campaign -- is lead almost entirely by out-of-staters.

The most recent upheaval tied to the launch of the tourism campaign may have been avoided if the Governor’s staff or the Commerce Corporation’s leadership had a better understanding of Rhode Island.

In contrast, Bruce Sundlun attracted top level staff in the early 1990's. Leaders in business left their positions to serve with Sundlun. All of his top staffers were from Rhode Island.

Do Rhode Island Companies Have a Fair Opportunity?

“Many micro-,small- and medium-sized businesses believe it is 'too tough' to deal with the state because of the purchasing process and the time it takes to get paid. Large contracts have to be self-financed by the vendor. This can create cash-flow problems that make it almost unprofitable to do business with the state,” said Mazze.

Mazze makes the following recommendations to improve opportunities for Rhode Island businesses:

First, the state needs to simplify the purchasing process so that it is easier for small businesses located in the state to participate in the process. There may situations in which contracts should be ear-marked for local/small businesses. This creates jobs which are needed for small businesses to grow.

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Gary Sasse, Hassenfeld Institute

Second, the state needs to publicize what it wants to purchase more widely so that local vendors can participate in the process. Smaller local vendors do not have the same access to all on-line state government data bases.

Third, the review process in selecting vendors needs to be made transparent so that the process is not viewed as political. Many small businesses do not trust state government.

Fourth, the reason for awarding a contract to a particular vendor should be provided to the other vendors submitting bids. This gives vendors not receiving the contract a chance to bench-mark their price/services against their competitors. This should be done for state contracts over $50,000.

And fifth, the state Department of Purchasing should be continuously informing, educating and training micro-, small- and medium-sized businesses on how to become a state vendor. There may be opportunities, in large contracts, for out-of-state firms to use local businesses and individuals to provide some of the goods and services required. It is not unusual for out-of-state vendors to include Rhode Island businesses and individuals in their bid package as sub-contractors. This may give the bidder an advantage over other bidders in the awarding of contracts.. The support of Rhode Island businesses, of all sizes, needs to be a priority for the Department of Purchasing if all other factors are alike in awarding a contract. This practice exists in most states since local businesses pay taxes and hire local personnel.

Under Raimondo, Out-of-State Vendors Receive 48% of RI Spending - $524M

Related Slideshow: Out-of-State Vendors Receiving the Most RI Payments - 2016

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