$240 Million Education Contract Illustrates State Lobbying Loopholes

Existing state law generally limits the disclosure of influence to anyone being paid to advocate for changes in state law or regulations, the traditional kind of lobbying that’s largely focused around the work of the California Legislature and the executive branch. But a private company looking to influence the awarding of a state contract by one of dozens of state agencies and departments isn’t held to the same standards.

That means conversations between advocates and key decision-makers about the roughly 100,000 state contracts handed out each year -- worth some $12 billion in taxpayer funds in 2014 and an average of $34 billion a year since 2010 -- remain in the shadows, far from public scrutiny. The totals were culled from a state Department of General Services database that does not include contracts worth less than $5,000.

These numbers were culled from a California Deptartment of General Services database. The totals may be incomplete as DGS depends on departments and agencies to self-report their own totals and doesn't request information on state contracts worth less than $5,000. The numbers represent the total amounts awarded, not paid out, in a calendar year.

These kinds of conversations are common knowledge among Sacramento insiders. And while many prominent lobbying firms in the capital city even advertise their expertise in helping to secure lucrative contracts, they are nonetheless allowed to keep that part of their business a secret.

Gary Winuk, the former chief enforcement officer for California's Fair Political Practices Commission, said more than two dozen states and the federal government require disclosure of lobbying efforts to win government contracts. So do nearly all of California’s big cities and counties -- including San Francisco, San Jose, Los Angeles and San Diego.

“To me it always seemed like a common sense idea,” Winuk said. “The same reason you want it for bills, you want it for (contracts), because you want to see out in the open who’s trying to influence who and if there are any indications that people aren’t working on behalf of the public.”

Winuk helped write a legislative attempt to tackle the issue, Assembly Bill 1200 by Assemblyman Rich Gordon (D-Menlo Park), which is pending in the state Senate as legislators return from summer recess next week.

AB 1200 would expand state lobbying disclosure laws to include contracts. If it’s ultimately signed into law, private companies and organizations that hire lobbyists would have to disclose how much they are spending to influence which contracts -- the same way they have to divulge which legislation and regulations they seek to impact.

But not everyone thinks there needs to be more transparency. Jim Sutton, a San Francisco lawyer who works on campaign finance and lobbying issues, said that AB 1200 has “surface appeal,” but won’t really give Californians any more information than they have under existing law. Sutton argues that it’s already clear who wants to influence a contracting process: the companies that bid on the contracts.

"You know who is influencing the process,” Sutton said. “You know who the companies are and frankly whether it's through a public records request for emails or the bid itself, you are going to know who is working on it, or if they have hired a lobbyist.”

That wasn’t our experience, however, when we started digging into the circumstances surrounding the Common Core testing contract.

‘They Are Going to Have Some Advantages’

In some ways, it wasn’t surprising the California State Board of Education decided to award the Common Core contract to ETS in April. The New Jersey nonprofit has a long and lucrative history with the department, one worth $800 million over the past 15 years. ETS has held the state Department of Education’s main standardized testing contract for more than a decade -- a contract repeatedly extended without a competitive bidding process.

The new contract is a new version of that 13-year-old contract; earlier this year, ETS was also awarded a three-year, $38 million contract to oversee English language testing.

But the Common Core contract is the one that seems to have raised the most eyebrows -- in large part because ETS’ winning proposal will cost taxpayers $34 million more than the lowest alternative bid.

Longtime observers said it’s not unusual for education officials to favor known vendors and for the state Board of Education to rubber stamp those staff recommendations.

“There’s very little question in my mind that Educational Testing Service was the favorite from the beginning,” said Doug McRae, a retired test publisher who closely follows state education policy and raised questions about whether ETS should have won the newest contract.

ETS officials sought to capitalize on that that familiarity when they presented their bid to state board members last March.

“One of the things we’d like you to consider when you are looking at the proposals from these great companies is our track record,” said John Oswald, ETS vice president for K-12 schools. "Here in California, we obviously have had the advantage that we’ve been here, so you know our work.”

But a track record of familiarity isn’t the only thing public officials are supposed to be considering when they award taxpayer money. While in this case, the Department of Education was not required by state law to pick the lowest bidder, it was supposed to make the process “open and competitive” -- and make sure the public got the best possible deal.

Keric Ashley, a deputy state superintendent of public instruction, insisted in an interview that the agency did just that, that it considered the “depth and quality” of the proposals as well as the cost to choose a vendor with “the best chance of delivering a successful test contract.”

Still, Ashley said any familiar contractor is going to have a leg up.

“Anytime you have a contractor currently in place and doing activity and they are doing a job well, they are going to have some advantages. I wouldn't call them unfair advantages,” he said. “It’s the same everywhere.”

Ashley admitted that representatives of all three testing companies that bid on the most recent contract met with him and his supervisor prior to the contract being put out to bid -- meetings he described as routine. He insisted that those conversations were only general in nature and didn’t include detailed discussions about how the department would structure its request for bids, known as the request for submissions (RFS).

“We meet fairly regularly with a lot of different vendors,” Ashley said. “We certainly don’t discuss the RFS itself, because we have to maintain not only objectivity but make sure all the test vendors get the same information.”

But when KQED News sought detailed information about those meetings, we came up empty-handed.

Proof Hard to Come By

A public records request only turned up information on a single meeting -- between the deputy superintendent, Ashley, and an official with the low bidding company that lost the contract, Pearson Education. State officials disclosed no records of meetings between ETS and education officials, despite Ashley’s admission in a KQED News interview that at least one meeting occurred.

Tom Ewing, an ETS spokesman, first said that no such meeting occurred; then, he later admitted that it had.

State education officials were more vague. Elizabeth Stein, an attorney for the Department of Education, wrote in an email, “the fact that the search did not uncover a record of a meeting ... that you were told may have taken place does not shed light on whether such a meeting did or did not actually occur, and it would be wrong to draw conclusions or entertain speculation based on the fact that records were not located in our search.”

All three companies that bid on the Common Core testing contract retain professional lobbyists in Sacramento, and spend tens of thousands of dollars a year on their advocacy services inside the state Capitol. Ewing, however, said that ETS does not use its firm to lobby for government contracts.

Pearson Education, the rival company that lost out on the contract, did make use of its lobbyist to reach out to Board of Education officials, according to emails disclosed through the public records request. Those emails indicate that Pearson officials met with two members of the state Board of Education but that a third, Sue Burr, wrote that she could not sit down with them.

“I am sorry but I have to decline,” she wrote. “All board members have recently been advised by our legal counsel that, due to competitive procurement process for statewide assessments, we should not engage in independent conversations with potential contractors.”

The email was sent in October, a month before the request for bids went out.

Winuk, the former FPPC enforcement chief, said those early meetings are troubling, because that’s when a private company can actually exercise the most influence: while the language of a contract proposal is still being drafted, language that can ultimately favor a specific bidder.

“That’s really where the process can potentially be manipulated to give someone a leg up,” Winuk said. “If you are building an arena, for example, you (could say) you have to have built another arena in California -- but maybe there is only one company that has ever built an arena in California. That company is going to have an advantage if you have that criteria.”

In the the case of the state’s Common Core contract, concerns about the internal process extended throughout the bidding process.

Both Pearson officials and McRae, the retired testing executive, took issue with the scoring process used by education officials to evaluate the bids. McRae raised his concerns in public testimony prior to the board's final vote.

He noted that ETS scored the highest in virtually all of the areas assessed, even though some of its proposals were clearly inferior to those of the other bidder.

McRae said other aspects of the scoring also didn’t make sense. For example, he said, Pearson had the lowest cost proposal but was scored number two out of three vendors in that area.

Pearson, an international education company, initially threatened to file a lawsuit over the decision but has since backed off -- meaning ETS appears here to stay.

Even if ETS was the best choice, supporters of ethics reform said disclosure laws are really about assuring Californians that they can have confidence that the process is fair.

$240 Million Education Contract Illustrates State Lobbying Loopholes

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