Nebraska Procurement Reform Legislation LB 814 Committee Hearing RecapNews | March 12, 2018
The Government, Military and Veterans Affairs Committee of the Nebraska Unicameral held a public hearing on LB 814 on February 21, 2018. As sponsor and introducing senator, Sen. Paul Schumacher was first to testify. Sen. Schumacher also proposed an amendment to LB 814 which resolved a concern raised by two members of the Nebraska Bar Association.
To begin the hearing, Sen. Schumacher offered his full‑throated support for the legislation, extolling the importance of transparency and accountability in the Nebraska procurement process. Sen. Schumacher focused on the potential effects the current system may have on the business climate in Nebraska and the potential that national vendors might choose not to pursue Nebraska business due to the current lack of an independent review process. The Senator received multiple questions from Committee members, focused primarily on whether the limited review proposed by LB 814 would lengthen the protest process, delay contract implementations, or impose additional costs on the State. Sen. Schumacher advised that LB 814 would provide a more streamlined, focused review process than the current procedure, and, instead of increasing costs, it would eliminate the litigation risks, costs and delay the State currently faces in large bid protests. The bill would shorten the process, save litigation costs incurred by the State and create an efficient process to ensure contracts are being awarded lawfully, and to the most qualified bidder.
In addition to offering his own introduction and support, Sen. Schumacher introduced into the record written testimony from Kerry Winterer, who had formerly been the CEO of the Nebraska Department of Health and Human Services, and who, in that role, had participated in multiple State procurements as the State official responsible for hiring large, outside technology and other vendors. Mr. Winterer’s testimony outlined prior procurement failures, which, in his view, might have been avoided had the procedure proposed in LB 814 been in effect. In particular, Mr. Winterer’s testimony reflects direct losses the State has sustained due to these procurement inefficiencies. A copy of Mr. Winterer’s testimony is available here.
Testifying next were two Kutak Rock attorneys, Ed Fox and former U.S. Senator David Karnes. Ed Fox, along with Thomas Kenny and Meghan Blinn, authored the article, "Caveat Vendor: The Case for Repairing Nebraska’s Contract Procurement Process," which was published in the July/August 2017 issue of The Nebraska Lawyer bar journal. This article had been read by Sen. Schumacher, along with other Nebraska legislators, and it sparked the drafting of LB 814. Ed Fox, who had been invited to testify by Sen. Schumacher, described his background in Nebraska bid protests, and his support for general reform of the procurement process, along with the specific method of reform offered in LB 814. Mr. Fox outlined his group’s experiences in litigating bid protests in multiple states, including states in which limited administrative review was available by statute, and which demonstrated the efficacy of the system proposed by LB 814. He also noted that, in communications with various national companies, concerns had been expressed by those companies about whether further bidding in Nebraska could be justified under the current and inadequate protest system. In response to questions from members of the Committee, Mr. Fox reiterated the positions taken by Sen. Schumacher that the review process proposed in LB 814 would be more efficient than the current system, which encourages unsatisfied bidders to pursue litigation, focusing on the process instead of the merits, and that reform would improve Nebraska’s business climate for large companies seeking State contracts.
Proponent testimony in support of LB 814 concluded with the testimony of Sen. David Karnes, who testified on behalf of ITAPS, the IT Alliance for Public Sector, a national industry group that advocates for improved procurement policies and practices on the federal, state, and local levels of government. (https://itaps.itic.org) As noted by Sen. Karnes, ITAPS members include many of the largest commercial and public sector companies from the IT, communications, and defense industries. Sen. Karnes testified that “a streamlined and transparent review process for major state procurement decisions is long overdue in Nebraska.” In particular, Sen. Karnes testified that the system proposed by LB 814 would bring Nebraska in line with a majority of states and the federal government, which all have some formalized independent review procedure for bid protests. The current deficiency in the Nebraska procurement process, in the view of ITAPS, “not only limits the number of competitive bids and leads to higher costs for the State and its taxpayers, but could leave the State with less qualified solutions that do not fully address the State’s needs.” A copy of the letter Sen. Karnes presented to the Committee on behalf of ITAPS is available here.
One individual, Doug Wilken, then acting Director and General Counsel for the Nebraska Department of Administrative Services (“DAS”), testified in opposition to LB 814. Mr. Wilken’s testimony focused on the procedures available under the Nebraska Administrative Procedures Act and DAS’s concern that procedures contemplated by LB 814 would delay contract implementations and would create additional litigation. In response to questioning from members of the Committee, Mr. Wilken stated his view that, if reform in the procurement process were determined to be necessary by the Legislature, then the procedure proposed in LB 814 would be the only possible reform.
No further action has yet been taken by the Committee on LB 814. Due to various procedural realities of the Nebraska Unicameral, including because the 2018 legislative session is a 60‑day session as opposed to a 90‑day session, and because LB 814 has not been designated as a “priority bill,” LB 814 might not have sufficient time for floor consideration by the full legislature during this session. With that in mind, and taking into consideration the conversations and suggestions that have been received since the current legislation was introduced, we believe the potential for success for this legislation is greater in 2019, both because 2019 will be a longer legislative session and because this reform, while simple in form and concept, represents a new path for Nebraska procurements, a path that needs to be better understood by some legislators and agencies.
Additional information regarding the public hearing for LB 814 is available from the Unicameral Update, the Nebraska Legislature’s official news source, at: http://update.legislature.ne.gov/?p=23357, or from the Kutak Rock procurement lawyers listed in the right-hand column of this page. Kutak Rock’s Procurement Team has experience in procurement matters in multiple states.