State Auditor: ‘Several Problems’ with Black Brilliance Contract

This morning the Washington State Auditor released its annual accountability audit of the Seattle city government. It’s a short, pro-forma report saying that mostly everything is fine. But it does call out “certain matters related to procurement of consultant services” that it addressed in detail in a separate letter to the Mayor and the City Council last week.

That letter is entirely about the controversial $3 million Black Brilliance Research Project contract that the City signed last November with King County Equity Now through a fiscal agent, Freedom Project (see SCC Insight’s four-part series on the contract for all the details).

In the letter, the Auditor’s office says that the fiscal sponsor arrangement in the contract technically followed the law, and the City received the “broad deliverables outlined in the agreement.” However, it calls out “several problems in the contract and how it was established.”

• The scope of work listed in the contract “was not sufficiently defined to protect the City’s interests. For example, the City did not specify how the money would be spent, including requirements on administrative costs; a method for compensating community participants; research methodology requirements; and details on how the City would use the results.”
• The fiscal agent contract with Freedom Project specifically directed the contract to King County Equity Now, without a public procurement process or any documented justification as to why these two organizations were uniquely qualified for the contract. “This contract was specifically directed to this particular organization that requested the funding before the contract was awarded.”
• In February, after Freedom Project terminated its fiscal sponsor agreement with King County Equity Now and assumed full responsibility for the project, it signed 13 subcontracts before it had obtained the required written approval from the City to do so. “We found that the City did not provide written consent for Freedom Project to subcontract its obligations before work was done by 13 subcontractors.”

The Auditor makes four recommendations for actions for the City to take:

1. Define a more detailed scope of work in contracts awarded under Seattle Municipal Code 20.50.090.
2. Follow the provisions of its own agreements on obtaining written consent for the contractor to hire subcontractors.
3. Improve its documentation showing how it determined a contractor is best qualified, including explaining why a contractor would be uniquely qualified under SMC 20.50.090, and including that information in the Council resolution to award the contract.
4. Consider conducting a more deliberative public process when awarding contracts under SMC 20.50.090 to improve transparency and accountability for the use of public funds.

In short: write better contracts, follow the terms of those contracts, document why a contract is going to a specific organization and why you think they’re qualified to receive it, and be public and transparent when awarding contracts.

Auditors usually focus their recommendations on specific actions, rather than broad critiques. This has one of the former (written approval for subcontractors) and three of the latter. Allowing for an auditor’s usual circumspect language, this is a strong reprimand for not following well-established “contracting 101” and public-procurement best practices. Here is how State Auditor Pat McCarthy summed up the situation in a press release this morning:

“While the process the City of Seattle used to award this $3 million contract did not technically violate the relevant rules, in my view, the city exercised only the bare minimum of accountability and transparency in this matter. Taking a few more steps to define the terms of the contract and justify the process used to award it could have addressed public concerns. In order to create trust in government, it is incumbent on public servants to establish clear, fair and open processes for the actions we take, especially when they use public dollars.”