00.01

OPINION NO. 00-01

An opinion has been requested by the Department of Human Resources as to whether a private consulting company may participate as a bidder on a monitoring contract procurement for the Department's child welfare information system (MD CHESSIE) in view of the company's previous involvement as a contractor in the planning part of the project. We advise based on the information provided and a careful review of the total circumstances of this project that the Contractor's submissions and other activities during the planning project constituted assistance in preparing the specifications for the monitoring contract and have the effect of disqualifying the Contractor from involvement in the subsequent procurement as required by §15-508 of the Public Ethics Law.

This request involves a pending procurement at the Department of Human Resources relating to database software and support for the case management aspects of the child welfare system. It is a program financed largely with federal funds and implemented primarily by the Department of Human Resources. The initial contract in this particular program (the planning contract) resulted from an RFP issued in April 1997 for the purpose of hiring an outside contractor to perform planning activities in support of a Statewide Automated Child Welfare Information System (SACWIS initially, subsequently renamed MD CHESSIE). Vendor responsibilities were to include conducting a feasibility study and risk analysis to determine the best approach for a Maryland system that would meet the federal requirements and also be responsive to Maryland's program and management needs. The project was to include requirements studies, site visits and meetings both with other states having programs and with Maryland DHR and local DSS staff. Development of cost and risk studies, a recommended approach, and an RFP for the implementation part of the project were required, along with preparation of the basic planning document that would be submitted for federal approval.

The planning RFP contemplated assistance by the planning contractor in several tasks relating to the implementation. In addition to RFP development, for example, the planning contractor was to assist in staffing the pre-proposal conference of the follow-on RFP, assist the State in preparing for the follow-on contractor selection process, participate in interviews and final contract negotiations with the successful vendor, and remain on-site for a period of up to sixty (60) days to provide continuity through the transition from the planning to the development/implementation phase of the project. The initial RFP specifically included a provision that the "contractor is prohibited by State law from bidding on any subsequent contract for purchase and implementation of the [child welfare information system]," which approach was affirmed in pre-bid conferences. ¹

The Contractor is an international professional advisory firm offering services in assurance, tax and consulting. It was awarded the planning contract to be completed by June 30, 1998 for $458,128. This was subsequently amended to add new tasks (including development of a change management study), to change the end date to June 30, 1999, and increase the contract amount to $1,238,118. Several work products were delivered by the Contractor under the planning contract as amended, including Recommendations on Approach, a Change Management Report, and a Report on Risk, Time and Cost, which address process types of issues regarding how the project would be implemented. For example, in the Recommendations on Approach submitted in June 1998, the Contractor endorses the decision of the agency to engage a monitoring contractor to assist it in managing the implementation, and then goes on more specifically to state that the monitoring contractor should assess progress under the contract, test the system, and

also be responsible for assessing and maintaining compliance of the project, its workplan, and the resulting system with the approved [Advanced Planning Document]; the issued RFP; the vendor's proposal; the published and approved system requirements; and program regulations, policies, and procedures (as interpreted by DHR) in effect at the time of system development.

Submitted in April 1998, the Report on Risk, Time and Cost considers both functional and system capability risks and project management and organizational risks. The latter discussion deals with the need for the Department to have sufficient personnel to adequately staff the project and considers issues relating to transferring agency processes to the new system to be developed in the implementation part of the project. The Report entitled the MD CHESSIE Change Management Plan identifies and discusses in detail several tasks that relate not to the substance of the program but the process of getting it implemented throughout the agency's local departments. This Report identifies several "responsible parties" and clearly suggests the existence of a monitoring contractor. It includes several charts as part of each task, defining subtasks and lead parties, including responsibilities for a monitoring contractor. Also, an Advanced Planning Document prepared by the Contractor for submission to the federal agency reflects specific information relating to the anticipated monitoring contractor, including cost estimates.

The RFP currently in process for the implementation monitoring contract is not a full follow-on implementation contract for which the planning contractor was to develop an RFP. The proposal does, however, include considerable substantive discussion of the program that is quite similar to the discussion in the original RFP (April 1997), and, since it deals with the same program, reflects information learned in the process of the original contract. The purpose of the current procurement is to select a qualified contractor to provide services which in essence assist in implementation by monitoring the development phase for the information system that will be developed for DHR by the implementation contractor.

This RFP describes in detail an organizational structure discussed in previous Contractor-submitted planning documents, including a Steering Committee, a Change Control Board, and a MD CHESSIE Project Management Team. It describes the relationship between the implementation contractor and the monitoring contractor, indicating that the monitoring contractor will assist the MD CHESSIE Project Director in all tasks of the project as described in the RFP's Scope of Work. The monitoring contractor is to provide independent advice and evaluation to the Director and report monthly to the Steering Committee, and will also work directly with the implementation contractor. In addition to providing for participation by the Monitoring Contractor in aspects of the selection of the Implementation Contractor, the RFP includes several specific tasks in the Scope of Work, such as monitoring contractor deliverables, preparing a preliminary plan for a Change Management Campaign, providing technical management support and monitoring, performing overall assessment and strategic plan review, providing significant project management assistance to the Project Director and Project Management Team, and assuring quality assurance and quality control for the project. Some of these activities, particularly the change management activities, reflect information and approaches found in the reports submitted by the Contractor under the planning contract.

The Project Director indicates that he wrote the monitoring contract RFP in-house, and did not include the Contractor in discussions relating to the monitoring contractor or provide its staff with drafts or documents relating to the monitoring contractor RFP. The Contractor's staff also indicate that they avoided involvement in aspects of the project that would have entailed their input into the actual procurement/selection of a monitoring contractor. They advise that the sponsoring federal agency encourages states to have a separate quality assurance or monitoring contractor, and in some states this has been the planning contractor. (Apparently, this issue arose, however, because the federal agency had concerns about the Contractor being allowed to bid on the monitoring contract.) The company's position is that its documents are not reflected in a sufficiently direct way in the monitoring contractor RFP that they should be viewed as having assisted in drafting the RFP.

The present question arises under the procurement ethics provision in §15-508 of the Public Ethics Law (State Government Article, §15-508, Annotated Code of Maryland, the Ethics Law). This section prohibits an entity from bidding on or assisting with the bid for a procurement if that entity or an employee of the entity assisted the State in developing specifications, invitations for bid or requests for proposals in connection with the procurement. We have addressed questions presented by this provision in several prior advice situations, advising that where an entity contracts with an agency to prepare planning documents for a project and the results of the planning process become the definition of the project that subsequent bidders bid to implement, then the planning contractor has assisted in drafting specifications for the implementation phase and is barred by §15-508 from bidding or otherwise being involved in the later phase. Legislative amendments to the section limited this approach as to architect/engineering activities related to capital projects, but did not affect the application of this approach in software and data management situations.

More particularly, we advised in Opinion No. 94-9, for example, that the definition of operational and performance requirements for a system, as well as descriptions of required hardware and software that were to be used in a subsequent procurement resulted in a bar from the later procurement (opinions published in COMAR Title 19A). Later in Opinion No. 95-13, the development of a program document to be used for fiscal and program justification and for developing subsequent procurement documents in a capital project was found to constitute assisting in drafting specifications. Opinion No. 98-9 also involved computer system development being handled in several stages. We advised in that opinion that a "Blueprint" contained in a program document and relied upon as the basis for a second stage barred the developer from participation in the second stage procurement, but that the developer could possibly be involved in a later stage, assuming that as a matter of fact the intervening second contract clearly resulted in a third stage that was separate and distinct from the earlier Blueprint development.

In addition to formal and informal advisory documents, the Commission issued a general information memorandum on this section designed to respond to anticipated questions under the provision. Considering the question of what constitutes "assistance," the memorandum reflects the Commission's view that identifying non-agency functions that constitute assisting in drafting is a factual determination to be judged by all of the surrounding circumstances. The approach suggests that in addition to review of actual specification and RFP documents, factors to be considered include the nature of the input, the frequency and timing of the input, and the nature of the process. In the situation presented here, and in view of this approach, we must conclude that the Contractor's assistance to the agency in development of the plan for the MD CHESSIE information system constituted assistance in preparation of the RFP for the monitoring contract as contemplated by §15-508 of the Ethics Law.

In our view, the current monitoring contract procurement has a clear relationship to the prior work done by the Contractor, and there is no suggestion in the procurement assistance provisions of §15-508 that any particular language suggested by a vendor must be adopted in order to bar subsequent bidding. Despite the indication that the RFP document as released was generated in-house, the documents produced as Contractor work products clearly suggest that the monitoring contractor approach did arise from information generated in the planning, particularly relating to experience of other states in ensuring adequate management and quality assurance resources in the implementation phase. In fact, according to DHR's project Director for MD CHESSIE, the Contractor essentially served as the agency's staff in collecting information in all aspects of the planning, development and eventual implementation of the system. The Contractor was thus the initial source of information and assistance regarding the process and experience of other states in managing the implementation of this massive undertaking.

For example, the work products produced by the Contractor include discussion of the need for adequate resources to manage the implementation, including an indication of concerns presented in other states by the need to rely too substantially on the implementation contractor. The Contractor prepared a report detailing the need for a change management plan, and this part of the implementation is included in the RFP as a duty of the monitoring contractor. Also, other documents generated by the Contractor consider the duties of the monitoring contractor in some detail, particularly the Advance Planning Document. We recognize that this is a document prepared for submission by the State to the federal government as a part of the review and funding process. This does not, however, change the fact that it is largely a work product of the Contractor generated by the Contractor as part of its provision of professional planning services to the DHR. This is a substantial and significant document that seems to reflect the summation of the planning work on the MD CHESSIE system. Though it likely reflects the agency decisions that resulted from the planning effort, to suggest that, though prepared by the vendor, it is purely an agency document reflecting no substantive creative input from the Contractor is not credible.

We therefore believe that, in addition to the other duties of the Contractor, the inclusion in this document and in the Change Management Report of detailed discussions of the duties and responsibilities of a monitoring contractor, as well as discussion of the change management leadership functions of the monitoring contractor, are examples of assistance to the agency in preparation of the RFP for the monitoring contractor. Moreover, it appears to us that the potential for issues of this sort was clear from the beginning of the process. Though the agency program Director indicates that there was no intention or expectation to have a monitoring contractor at the beginning of the process, the Contractor's representatives have stated that the use of a separate monitoring contractor has occurred in other jurisdictions. Under the circumstances, the Contractor says its representatives left the room when specific monitoring RFP issues came up, apparently anticipating an interest in bidding on this subsequent procurement. No one, however, inquired of the Ethics Commission regarding potential application of this provision of the Law, despite its existence for several years and the availability to procurement officers and vendors of substantial information regarding this provision. Also, the existence of provisions in the initial RFP regarding participation in the implementation should have suggested the need to confirm application of various law provisions and that greater care be taken to avoid Contractor involvement in any way in aspects of the planning work that related to a subsequent contract which would appear on its face to be an aspect of the implementation.

The Ethics Law directs the Commission to interpret its provisions liberally in order to accomplish the purposes of the Law. In our view the purpose of the procurement ethics provision was to avoid situations where a vendor or private entity with an interest in a procurement is in a position to assist an agency in defining its needs and requirements and then be a participant in what is to be a competitive process in selecting a contractor to meet those requirements. The Law was passed in view of abuses that had reduced public confidence in the State procurement system. We note in these circumstances that the Contractor may not have specifically participated in the document drafting and may even have avoided particular meetings where the RFP itself was discussed. The Contractor, however, played a significant and substantial role filling, in effect, an agency staff function with regard to the planning aspects of the MD CHESSIE program, providing information and policy guidance that assisted in the agency's decision process to use a monitoring contractor and in defining the role of the monitoring contractor being procured in the implementation phase of the project.

Given the role played by the Contractor and the total surrounding circumstances of this situation, we must conclude that the Contractor's assistance to the agency as reflected in its work products constituted assistance in drafting specifications for the subsequent procurement of the monitoring contractor. We therefore advise that the Contractor's participation as a bidder in the ongoing monitoring contractor procurement is barred by §15-508 of the Public Ethics Law.

Charles O. Monk, II, Chair
    Dorothy R. Fait
    Michael L. May
    April E. Sepulveda

Date: February 24, 2000

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¹ A determination of whether this provision would bar the contractor from bidding on the contract involved in this opinion request is for the procuring agency, not the State Ethics Commission.