Arizona upends school procurement laws in effort to cool cozy relationships with builders

Cheyenne Traditional School had construction going-on during the past school year. (photo by Melissa Fittro)

Included in the $10.4 billion budget passed by Arizona lawmakers and signed by Gov. Doug Ducey earlier this month are massive changes to how public schools will be allowed to hire builders for large construction projects, as well as harsh new penalties for malfeasance that occurs during the selection process.

Some in the construction industry, which was not consulted on the changes and fears a return to a system that prioritizes cost above outcomes, say the changes are a legislative overreaction to scandals that have roiled the Scottsdale Unified School District since late 2017.

“My understanding is that what happened in Scottsdale was illegal under existing law and is being investigated and pursued by the attorney general,” said Mark Minter, president of Arizona Builders Alliance. “Perhaps we should have seen how that played out before we tried to change the laws for the entire procurement system.”

The most significant change involves how construction companies will be selected. Beginning July 2019, instead of using a process that allows districts to subjectively score and select a construction manager to manage the entire project, builders will be selected based solely on who promises the lowest cost.

Other provisions aim to prevent undue influence over the procurement process by restricting who gets to be part of the selection process and banning gifts given by contractors to district officials.

The legislation marks a shot across the bow from lawmakers who say they see problems in the school construction industry and want to be sure taxpayers are getting maximum value from expensive construction projects.

“It was all aimed at trying to address corruption in financial management and procurement practices,” said House Speaker J.D. Mesnard, R-Chandler.

The new law directs the State Board of Education to formally draft and adopt rules for the system, but specifies that they must achieve certain specific outcomes:

  • Contracts will be awarded based on lowest price from a qualified bidder
  • Gifts from contractors to district procurement officials will be prohibited
  • No contractor or subcontractor providing services to a district will be allowed to serve on a procurement selection committee
  • Procurement officials will be prohibited from receiving a benefit to create a procurement specification in a particular way, such as to benefit a single company
  • School districts must keep records that prove construction vendors are properly licensed
  • School districts must publicly provide a rationale for awarding contracts
  • School districts will be prohibited from taking reprisal against employees who raise concerns about procurement violations
  • School districts will not be able to use an audit firm for more than three consecutive years
  • School district audit firms will not be able to receive additional fees from the district for other consulting

The law authorizes the attorney general to investigate and interview people under oath if there is a reason to believe any of the yet-to-be-written rules have been violated.

Knowingly avoiding the new rules will be a class 4 felony. Violations of the gift ban will be a class 6 felony for anything with a value above $300 and a class 6 misdemeanor for anything with a value below $300

Charter schools will be exempt from the new rules.

Editor’s note: this story is being republished in support of the Arizona Center for Investigative Reporting.

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