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Idaho contracts under scrutiny amid Syringa Networks ruling, report

The Idaho Supreme Court didn’t mince words in its decision March 29 about a disputed state contract, saying the Department of Administration’s former head apparently tinkered with bidding to help the state’s biggest phone company win a share of a $60 million deal.

The ruling allows phone consortium Syringa Networks to pursue its 2009 case against the Department of Administration, claiming it was improperly denied in the bidding to lay the broadband infrastructure for a public education project.

But the ruling also comes as the Idaho Legislature is separately pushing that agency and its Division of Purchasing to improve how state contracts are developed and monitored, a process criticized in a recent state audit report that found it plagued with inconsistencies and inadequate training.

Former Administration director Mike Gwartney in all likelihood used his influence to help award Qwest Communications Inc. a major stake in installing broadband infrastructure for the Idaho Education Network, an ongoing project to link public schools, universities and businesses, Justice Jim Jones wrote. Syringa had been working with another company, Education Networks of America, but Gwartney’s agency improperly rewrote the contract after it had been awarded to favor Qwest, according to the ruling.

“Gwartney appears to have been the architect of the state’s effort to bend the contracting rules to Qwest’s advantage,” Jones wrote. “In deposition testimony, he essentially admitted knowing, even before the contract award was made on January 20, 2009, that Qwest would be ‘making the connections and providing the broadband’ for the Idaho Education Network.”

The battle between Syringa and the state has been bitter, with the phone company also alleging Gwartney threatened to “make sure Syringa would never get any of the Idaho Education Network business,” according to court papers.

Gwartney, a former vice president at Boise Cascade Corp. as well as Gov. C.L. “Butch” Otter’s best friend and business partner, retired in 2010.

He said April 1 his attorneys have asked to him to limit public responses. But he insists he didn’t try to steer the contract to Qwest, adding staff at the agency — including its lawyers — advised him on every move.

“I want to assure you, every step of the process was vetted by those people, staff, very good staff, legal counsel,” he said. “I had so many people watching me, I couldn’t have bent the rules if I had wanted to.”

The Department of Administration, now led by Teresa Luna, declined to comment on ongoing litigation. The state could still appeal.

Though justices dismissed another of Syringa’s allegations that Qwest — now called Century Link Inc. — illegally damaged Syringa’s business relationships, Justice Jones said the outcome would have been much different had Syringa lodged the same claim against Gwartney.

“Had it been alleged against Gwartney, I would have found sufficient evidence and inferences in the record to allow the matter to go trial,” Jones wrote.

Long before the ruling March 29, however, Idaho’s contracting process has been the subject of scrutiny.

For example, Idaho adopted a new Medicaid claims processing system in 2010, after awarding the $106 million contract to California-based Molina Medicaid Solutions. But the system faltered immediately, interrupting payments to numerous providers and threatening their existence. While the situation has improved, Idaho has penalized Molina millions.

Subsequently, the Office of Performance Evaluations, the Legislature’s performance auditor, studied how Idaho awards and manages contracts with private companies.

While its findings don’t address Syringa’s dispute with the state — or Gwartney’s potential role in steering business to Qwest — its Jan. 21 report concludes reforms are needed, in particular with training and contract monitoring.

“Making sure that these contracts are well written and properly managed helps ensure public funds are spent appropriately,” auditors wrote, adding contracting problems “have a major impact on agency operations and the public trust.”

Rep. John Rusche, D-Lewiston

Their report prompted House Minority Leader John Rusche, D-Lewiston, to draft legislation requesting the Department of Administration craft a plan to improve the development, management, and reporting of contracts; boost training for employees; and develop a new contract database.

Rusche’s measure, which has already cleared the Idaho House and Senate, requires a legislative progress report by Jan. 31.

Without such changes, Rusche said he’s particularly concerned Idaho will be ill-prepared to oversee impending future contracts to develop and operate a Medicaid managed care program — deals that, like the Idaho Education Network, will inevitably be worth tens of millions of dollars, with private vendors.

“I quite frankly am concerned about the way we’re going to handle the very big Medicaid contract if we don’t have good processes in place,” Rusche said April 1.



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