Senate President Joseph Montalbano attends a news conference yesterday to announce a legislative package resulting from an investigation into the state’s contracting practices. Sen. Frank Ciccone III, D-Providence, is at right.

The Providence Journal / Connie Grosch

PROVIDENCE — Having already issued a report skewering the Carcieri administration’s award of a multimillion-dollar, no-bid contract to a fledgling Foxboro company to supply hundreds of privately employed state workers, a Senate investigating committee yesterday recommended a package of bills aimed at heading off a repeat occurrence.

The bills outlined by Sen. J. Michael Lenihan yesterday were an outgrowth of the Senate Government Oversight Committee’s months-long inquiry last year into the administration’s hiring of Smart Staffing Services Inc. — after its predecessor went belly up — without seeking competitive bids or offering similarly favorable terms, such as a pledge by the state to advance the money for each payroll, to any other private-staffing company.

What had started in the final months of former Gov. Lincoln Almond’s administration as a limited contract with DataLogic Consulting to provide temporary workers to the Department of Health at a cost that was not to exceed $10 million over a five-year period, had by then been expanded by the Carcieri administration into an $11-million-a-year arm of the state work force.

In a highly critical report issued in February, the committee chaired by Lenihan, D-East Greenwich, posed this question: “At what point do pervasive errors and omissions of state officials constitute incompetence and a blatant disregard for statutory process?” The answer: “At this time, the committee cannot make a determination as to whether the incompetence was due to ignorance, or arrogant and willful violation of the law. However, the committee is certain that the public deserves better.”

The 10-bill package that Lenihan unveiled yesterday includes legislation to require the rebidding of any contract that balloons as this one did in both cost and scope.

More specifically, the bill would require rebidding if the contract price increases by more than 10 percent or there is a “material change’ in terms “that would have been important to or have tended to influence the decision to award the original contract or that would substantially increase the value to the contractor.”

Another bill in the package is aimed at reinforcing the need for the responsible government official to explain in writing why competitive bidding was eschewed and why one company, such as Smart Staffing, was chosen over any other possible contender. The legislation would also require the documentation — lacking in this case — of the oral negotiations that took place with all companies that were contacted.

In most such cases, the legislation also requires a 30-day waiting period before a contract awarded in this atypical manner is formally awarded, to allow for public review and comment.

Among the senators’ stated frustrations during their inquiry into the Smart Staffing contract: “The information provided by the administration provided no detail about the basis for any emergency or even basic information about how Smart Staffing was selected, such as [how many] competing companies were invited to participate.”

Lenihan yesterday told a news conference the package of bills doesn’t have a catchy nickname like “Merlot-to-go” or “The Preservation Of Life in the Western Hemisphere As We Know It Act of 2008, yet as a group they have a quiet significance beyond their seemingly dry and simple appearance.”

He said they very specifically address his committee’s findings, “which included the failure of the Department of Administration and/or the division of purchasing to obey existing state laws and … the purchasing of goods and services in a manner which was undermining accountability, transparency and public confidence in the process.”

He said they also “have the potential to save the State of Rhode Island considerable sums of money over the years by … mitigating venal and sloppy [procedures] in awarding bids.” Asked for an example, he cited the Smart Staffing contract as “a case in point.”

“You have a situation with Smart Staffing and DataLogic where a contract starting at $2 million grew to $11 million with nobody approving the increase except the executive. There was no rationale for it; there was nothing put out there to justify it. That’s a dangerous precedent,” Lenihan said. “That’s where the savings are … the proof is in the pudding.”

When the Carcieri administration put the staffing contract out to bid, it found a company willing to provide the same recruitment and payroll services that Smart Staffing Services provided at less cost.

Smart Staffing charged the state a 22.5-percent markup over and above the salaries paid the employees it provided the state. The New York-based Adil Business Systems Inc. won the contract away by offering to provide the same services in exchange for a 16.7-percent premium. The lower rate is expected to save taxpayers an estimated $700,000 each year over the list of the three-year contract. The Senate committee did not focus on how much more, or less, a Smart Staffing employee costs versus a full-fledged state employee. But the hearings drew attention to the thin line between many of the Smart Staffing employees and the state workers with whom they worked side by side, doing the same job.

Carcieri spokesman Jeff Neal yesterday suggested the proposal of a “passel of new purchasing laws demonstrates that their fundamental problem was not with the Department of Administration’s [execution] of the laws currently on the books, but with the laws themselves.”

“In the case of Smart Staffing,” he contended, the administration followed all of “the procedures outlined by current law.” The senators have repeatedly taken issue with that assertion, citing the administration failure to even produce a “letter of determination” explaining how and why Smart Staffing was chosen. But Neal said: “they may have a concern with the level of detail included in that letter, but it did exist.”

At this point, he said: “the administration is very happy to review the bills and have a conversation about changing the laws to satisfy the committee and make the process more transparent.”

The administration also made public a March 4 letter from former Administration Director Beverly Najarian to Lenihan, defending her department’s actions. “While I was pleased that the committee could not point to any substantive findings or document any violations, the report as published is somewhat misleading.” Contrary to what the report said, for example, she denied any effort to stonewall the committee’s records requests. She denied that the state’s purchase-card program lacks controls. She denied that the agency improperly raised the dollar threshold forbidden by memorandum, saying the memo in question simply reflected a law change by the General Assembly.

As for the five-fold increase in the cost of the DataLogic contract entered into in June 2002, during the final months of Almond’s administration, she asserted the expansion “occurred many years ago, and well before the tenure of current state officials.”

Until late February, the administration was posting on the state controller’s Web site the names, pay, number of hours worked and job titles of the employees that Smart Staffing and then its successor, Adil Business Systems, had supplied the state. In the last payroll report, the state was paying $350,617 to Adil for 232 workers.

Asked why this public reporting stopped, deputy controller Wayne Hannon yesterday e-mailed this answer: “We have had some processing problems with the files that have been sent over to us from Adil that has delayed us from putting these reports on the Web site. We have been working on resolving the issues for some time now. We are hoping to have it fixed and on our Web site by early next week.”

kgregg@projo.com