Overview
MCCA entered into contract extensions without approval from its board of directors. Specifically, of the 35 purchases over $50,000 in our sample, 5 (14%) received contract extensions that brought the length of the contracts past the allowable three-year contract period without the approval from MCCA’s board of directors.
The table below summarizes these five purchases.
| Vendor Name | Purpose of Procurement | Spending Under Original Contract | Initial Contract Term | Unapproved Contract Extensions | Spending under Unapproved Extensions during the Audit Period |
|---|---|---|---|---|---|
| Joseph’s Transportation | Shuttles from public transit stops to MCCA venues | Varied per services provided | October 9, 2015–July 8, 2016 | Received three extensions through December 2021 | $2,498,454.42 |
| Levy Premium Food Serv LP | Food/beverage management | Per services provided | May 16, 2013–June 30,2017 | Received one extension through 2020 | $111,935.10 |
| Aerva, Inc. | Software maintenance | Per services provided | May 2, 2016–May 2, 2017 | Received four extensions through May 2021 | $296,650.00 |
| Simplexgrinnell LP | Fire safety system maintenance | $326,679 | February 1, 2018–January 31, 2021 | Received two extensions through 2023 | $95,370.17 |
| Gray Media, Inc. | Media Management | Not to exceed $8,500 per month | June 1, 2018–May 31, 2020 | Received three extensions through May 2023 | $102,000.00 |
Circumventing the procurement process may result in, and itself may constitute, inappropriate or illegal behavior on the part of public officials. By extending contracts past the allowable three-year period, without board approval, MCCA cannot regularly ensure that it receives services from the most appropriate vendors that offer the required goods or services at the lowest available price. Additionally, by not requesting new proposals or inviting new bids for these contracts, MCCA may have missed opportunities to hire and work with diverse vendors. Failing to secure appropriate approvals for contract extensions, particularly those that exceed the $250,000 threshold, may also place contractors at risk of not receiving payment, because these contracts may be unenforceable. Not only does this cause potential harm to contractors, it also places taxpayer funds at risk.
Authoritative Guidance
Section 12(b) of Chapter 30B of the General Laws states, “Unless authorized by majority vote, a procurement officer shall not award a contract for a term exceeding three years, including any renewal, extension, or option.” We consider this to be a best practice.
Additionally, Section 35 of Chapter 190 of the Acts of 1982, as well as MCCA Bylaws, require board approval for any contract over $250,000.
Reasons for Issue
While Chapter 30B of the General Laws recommends that state agencies not enter into contracts that extend past three years, MCCA’s “Procurement, Purchasing and Payment Policy and Guidelines” states that it “has elected to generally follow, Chapter 30B . . . of the Massachusetts General Laws.” Additionally, this policy does not have a limit on the number of renewals or length of a contract term that would indicate a departure from Chapter 30B of the General Laws. Furthermore, it appears that inadequate monitoring controls at MCCA also contributed to this issue.
Recommendations
- MCCA should request and secure approval from its board of directors for vendor contract extensions to ensure compliance with Section 35 of Chapter 190 of the Acts of 1982, as well as MCCA Bylaws.
- MCCA should always follow Chapter 30B of the General Laws relative to the number of extensions and maximum term length for contracts, regardless of the contract’s dollar value instead of only “generally” following Chapter 30B, which leaves room for potential waste, fraud, and abuse. As such, MCCA should modify its “Procurement, Purchasing and Payment Policy and Guidelines” to require compliance in full with Chapter 30B of the General Laws.
Auditee’s Response
The MCCA believes that the contract extensions from 2018 to 2021 aligned with existing MCCA procurement policies. These policies indicate that the MCCA “has elected to generally follow Chapter 30B” but also specifically permit the MCCA procurement officer to extend contracts beyond three years if they: 1) serve the best interests of the Authority, 2) include the specific language required in the solicitation regarding the contract terms and conditions for contract extensions per Chapter 30B, section 12(a), and 3) are approved by the Board, as the contract amounts necessitate Board approval per the Authority’s internal policy.
The MCCA appreciates that its existing procurement policies would benefit from additional clarity regarding when MCCA complies with Chapter 30B, and when MCCA’s specific procurement policies are intended to control. As a result, the MCCA is currently redrafting its procurement policies to further clarify rules and regulations related to various procurement processes, including this example. This specific case will be addressed in the new policies being developed. In addition, the MCCA will be scheduling Chapter 30B training from the State’s Inspector General’s Office. Independent of this audit, the Purchasing Department was reviewed and was reorganized into the MCCA’s Finance Department.
Auditor’s Reply
The development and implementation of stricter procurement policies may address the underlying issues cited in our audit. We will review progress on this issue, including the sufficiency of any new policies developed by MCCA, in our post-audit review in six months.
| Date published: | August 19, 2024 |
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