Why Does The Fiscal Hawk Crowd Think State Contracts Are The Answer?

This is a long-standing idea that state treasurer John Kennedy has been pushing – namely, that Louisiana can somehow save millions and millions of dollars by just giving a haircut to all the people holding state contracts by 10 percent or so.

And today, a piece of legislation purporting to code the idea into law sailed out of the House Appropriations Committee unanimously.

That bill was HB 73, by Rep. Dee Richard, who has served as Kennedy’s floor leader in the House for some time now. The bill would provide that…

A.(1) The total dollar amount for professional, personal, and consulting service contracts under the jurisdiction of the office of contractual review for Fiscal Year 2013-2014 shall be reduced by no less than ten percent of the total dollar amount for such contracts for Fiscal Year 2012-2013.

The next section of the bill says the state can’t go above that 10 percent cut to award a contract unless…

(1) Either no employee of the contracting department or agency is both competent and available to perform the services called for by the proposed contract or the services called for are not the type readily susceptible to being performed by persons who are employed by the state on a continuing basis.

(2) The services are not available as a product of a prior or existing contract.

(3) The contracting department or agency has submitted to the office of contractual review a written plan to monitor and evaluate the performance called for in theproposed contract.

(4) It is more cost effective to obtain the proposed services through the contract than to have the services provided by thecontracting department or agency if the department or agency can provide the services or by agreement with another state department or agency.

A question: do Kennedy or Richard think you can just cut all these contracts by 10 percent and there won’t be consequences?

Some of those contracts you’ll tell the contractor you’re cutting them by 10 percent, and they’ll void the contract. Then you’ve got to re-bid the contract and you’ve got no idea what it’s going to cost – it could be MORE expensive rather than less.

Considering the precedent you set by welching on a contract, state contractors will likely price that into every bid they’ll make in the future; when you send a signal that the price you agree to by accepting a bid is not the price you’re actually willing to pay for the life of the contract, don’t be surprise if your vendors don’t treat you as well as they used to.

And with some of these contracts, you’ll tell the contractor they’ve got to take a 10 percent cut and they’ll promptly SUE YOU. Attorneys will line up to represent them on contingency as well – don’t be surprised if you don’t end up with a multimillion-dollar class action suit on your hands. Then you’ve got millions in legal fees and no guarantee you’ll win the suit for your trouble (you’ll end up settling it and probably not saving a dime).

This is an uncommonly stupid bill. It doesn’t survive any real scrutiny. But since it’s now part of the Fiscal Hawks’ package, there’s a decent chance it will survive passage on the floor of the House.

This is what you get when the Fiscal Hawks have decided they’re so irritated and frustrated with the Jindal administration that they’ll back whatever he’s against. It’s the mentality which sent them into the arms of the Legislative Black Caucus to negotiate tax increases on business – and few of them seem to have stopped, taken a breath and realized that what they were doing was more or less a total departure from the principles they were elected on.

It’s Jindal’s fault to have let relations with other Republicans get so bad that they’re casting about for dumb bills like this. But it’s the fault of the Hawks that they’re seizing on a dumb bill which says that “we’re spending 10 percent less on state contracts.” That’s like saying you’re going to reduce your electric bill by 10 percent – there are specific things you can do to reduce your electric bill, but you have to focus on doing those things rather than just calling Entergy and telling them to bill you 10 percent less.

What you need to do is to eliminate as many contracts as possible as they come up for renewal – and the Jindal administration needs to do more work on killing those contracts. To accomplish that you might set up an independent review board which would look to kill those contracts as they’re killable, in the same way that turning off lights and spending the spring with the windows open and the AC off means you don’t need to pay as much for electricity. Just mandating a 10 percent cut in the value of state contracts does nothing.

But on the other hand, when state government takes on all the myriad functions it takes on, many or even most of which are far more properly the province of local governments, there will be questionable activities which will need to be contracted out.

Richard’s bill doesn’t address that problem at all. It seeks to address a symptom rather than the disease. And that’s why it’s worthless.

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