Questions Raised About Workforce Deal - | Nashville News, Weather & Sports

NewsChannel 5 Investigates: Friends in High Places

Questions Raised About Workforce Deal

(Story created: 8/5/02)

Our NewsChannel 5 investigation exposed how some of the governor's closest friends were getting millions of your tax dollars.

Now, it turns out some folks in state government raised questions about one of those contracts, long before it was ever signed.

But investigative reporter Phil Williams found out that did not stop the Sundquist administration from awarding the contract anyway.

That contract, which eventually totaled almost $2 million, was awarded to a Chattanooga company, Workforce Strategists, LLC. Under that contract, it was to provide intensive psychological counseling and job training to help the unemployed get back to work.

The company's founder: Monteagle insurance agent John Stamps -- a longtime friend and former business partner of the governor.

As NewsChannel 5 first reported, Sundquist labor commissioner Michael Magill requested, in a memo dated June 2, 1999, that he not be required to seek any competitive bids from other companies.

He wrote that Stamps' company was "the only company in Tennessee that has experience" for the job.

That was just 6 days after Workforce Strategists was incorporated.

"Obviously, with six days, their experience is rather limited," said Rep. Frank Buck, a Democrat from Dowelltown.

But newly obtained documents show Magill had tried to get approval for the contract even earlier -- in fact, four months earlier.

That time, the person in charge of reviewing state contracts responded that Magill had not justified circumventing the state's "competitive procurement requirements."

Robert Barlow, the state's director of contracts review, wrote:

"We request information ... which explains why this procurement should be made by a means other than through the required competitive process. Such information would appropriately address why the vendor is the only source for the given services or why the RFP process is not suitable for the procurement."

RFP -- "Request for Proposal" -- is a process where the state invites companies to offer proposals about how they would meet the state's needs for a certain type of service.

So when Magill tried to run the same request through again in June, Barlow wrote the lawyer for the state Department of Finance, saying:

"The current request does not appear to provide any additional information, and thus, I cannot recommend approval. Nevertheless, executives may be privy to information of which I am not aware, and the exception request may be justified."

Two months later, Stamps' company would get the approval it wanted from Sundquist finance commissioner John Ferguson.

State records show that the approval came after Labor Department officials said they had checked with a similar company in Maryland, and that company was going to charge a lot more. One of the officials involved in the price comparison then left state government and became one of the company's owners.

The question is, did pressure to approve the contracts come directly from the governor's office, as some insiders claim.

The governor's office says no.

Yet, these tapes from the state's Workforce Development Board reveal that Magill found several skeptics when he asked the advisory board in June 2000 to endorse the contract that the administration had already signed.

In the end, the board's chairman indicated he believed it was yielding to the governor's wishes.

"Who instituted this program? Where did it come from? This is the first I've heard about it," asked one board member.

"What is the cost of this service?" asked another.

"It sounds high to us," added a third.

Under the contract, Workforce Strategists gets:

  • Almost $3,000 just for doing an evaluation and enrolling the person in the program.
  • Almost $6,000 for working with that person for six months.
  • The smallest amount -- $1,000 -- is awarded for actually finding the person a job.

In the end, the contract with Stamps' company would get the workforce board‘s reluctant endorsement, with the chairman suggesting it was really the governor's decision.

"This is the governor's discretionary money," he added. "I think I told the commissioner earlier this week in regard to this, the governor can spend his money any way he wants to. He's got sole discretion. If he wants to burn it, I guess he could do that."

Sundquist's office continues to insist the governor didn't play any role in Workforce Strategists getting the contract.

They say even though the contract was funded through what the feds sometimes call the "governor's discretionary fund," it still had to go through normal channels.

In addition, the tapes indicate that the various players in Workforce Strategists met through a non-profit Chattanooga agency that serves patients with severe mental illnesses.

As to why the administration did not use the RFP process and allow other mental health professionals to make their own pitches for the federal money, Sundquist's press secretary says they do not believe that was necessary because it was a pilot program.

The state's top auditor, Comptroller John Morgan, is reviewing the contract to determine whether or not it was handled properly.

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