Tag Archives: jones lang lasalle

Sunday column: Following the niceties to keep JLL inquiry alive

A group of state legislators plan to file a bill that would knock two years off the state Department of General Services’ legal lifespan because of questions about the handling of a contract for management of state buildings by Jones Lang LaSalle.

In doing so, the Republican leaders of the House and Senate Government Operations Committees stressed that they weren’t really interested in terminating the existence — or “sunsettting” — of a major arm of state government’s executive branch.

They were just following what House Government Operations Vice Chairman Rep. John Ragan called “legislative niceties” to ensure that the proper procedural steps were taken to hold a special meeting of the House and Senate panels during this year’s session devoted to the Jones Lang LaSalle arrangement and other contracts through the new state procurement system.

“This is not an intent to kill the agency,” Ragan told General Services Commissioner Bob Oglesby and other department officials on hand at the meeting, adding the lawmakers do not wish to be seen as launching “a Spanish Inquisition.”
Continue reading

Legislators want more answers to Jones Lang LaSalle questions

With questions piling up on the Jones Lang LaSalle contract and other aspects of the state’s procurement system, the the House and Senate Government Operations Committees have decided to bring the contract and other issues back before the legislative committees in the coming session, reports Andy Sher.

“There were just a lot of questions from the members and we knew we didn’t have time,” Senate Government Operations Committee Chairman Mike Bell, R-Riceville, said over the weekend.

Bell noted that the state made a “pretty radical change” to the procurement process.
“And I know there have been some aspects to it that have not been fully understood by the Legislature or the public,” he said. “And it’s looked bad.”

The lawmaker quickly added that “whether the appearances of impropriety are actual, I’m not sure. I haven’t seen any evidence of it and, again, it may be that this is a business model that will benefit the state in the long run.”

Among other things, the comptroller’s audit echoed questions raised in news accounts about potential conflicts of interest. The company is in charge of making recommendations about leased office space needs and also is paid commissions on deals struck with real estate firms.

Haslam says the overall outsourcing will save taxpayers more than $200 million over 10 years. Jones Lang LaSalle also now runs many state office buildings and was put in charge of assessing state office needs and the condition of existing buildings, as well as consolidating state office space.

…At the Dec. 18 hearing, members delved into the conflict issue as well as how the contract with Jones Lang LaSalle expanded. The contract grew from an initial $1 million assessment of state real estate functions into what was envisioned as a $19 million per year contract estimated at $100 million over five years.

Thad Watkins, general counsel for General Services, disagreed with the audit’s conclusion that the scope of the original contract was too broad or that it grew even more by amendments beneficial to JLL.

“We want to put to rest once and for all that this contract grew from its original conception,” Watkins said.

He pointed out that the original contract, as approved by the State Building Commission, “was planned from the very beginning to be grown by amendment as funds became available.”

Rep. Joe Carr, R-Lascassas, was skeptical of a General Services official’s assertion that lists of services attached to the original contract were either specifically set forth or “logical extensions” of the contract.

“So if the amendments were an obvious and expected extension of the contract … then why are they amendments?” Carr asked. “Why aren’t they part of the contract as originally written and proposed?”

Told that they weren’t included because the money wasn’t available, Carr said, “your logic poses some challenges.”

Senate Minority Leader Jim Kyle, D-Memphis, pounced on the issue.

“That is probably true,” Kyle said. “And if it is, it has to be the greatest disrespect I’ve ever seen to the General Assembly’s budgeting process in 30 years — ‘We know we’re going to be spending the money, but we’re not going to tell you we’re going to be spending the money.’”

Kyle said he didn’t know of anyone in the Haslam administration ever making a presentation to a legislative committee discussing how the administration planned to embark on a major change in state policy.

Note: WTVF-TV did a one-hour special on Jones Lange LaSalle dealings, coupled with a review of Haslam’s contracting with lobbyist Tom Ingram. IT’s available HERE.

Harwell, Ramsey block Haslam plan to expand JLL contract by $5.3M

From the Commercial Appeal:
Less than a month after state auditors criticized the Haslam administration for the way it contracted with Chicago-based real estate giant Jones Lang LaSalle to manage state buildings, the administration wanted to expand the contract by $5.3 million — a 50 percent increase — to cover state prisons, parks and other buildings.

But the top two Republicans in the Tennessee legislature, Senate Speaker Ron Ramsey and House Speaker Beth Harwell, asked Gov. Bill Haslam’s office not to proceed with the non-bid expansion of the contract because of the controversy swirling around the two-year-old contract. The state comptroller’s office on Nov. 13 said the contract had “created organizational conflicts of interest in which the contractor could profit from its own recommendations to the state.”

So instead of an expansion and extension of the contract term, the state Department of General Services asked the State Building Commission on Thursday to approve a scaled-back amendment to the contract that “reallocates” $195,625 in previously approved funding.

The contract remains in force, however, with the company continuing to manage much of the state’s owned and leased office space.

Excerpt from The Tennessean’s story:
“We were tired of expanding, expanding, expanding without (rebidding),” Ramsey said. “I don’t want to even imply that I think there’s something wrong. There’s not. But at the same time, there has to be transparency.”

Kelly Smith, a spokeswoman for the Department of General Services, confirmed that administration officials had weighed an expansion but ultimately decided not to move forward without rebidding.

“What’s important to remember is this was just discussed,” she said. “It was not brought forth.”

The decision does little to change Jones Lang LaSalle’s relationship with the state. The firm will continue to negotiate leases for the state, and it will continue to lead the “T3 Project,” a reorganization of state office buildings. A second contract that made the Chicago-based firm the state’s property manager also was not affected.

But the vote does represent a check on the Haslam administration’s affiliation with Jones Lang LaSalle following an audit released last month by state Comptroller Justin Wilson, who sits on the State Building Commission. Haslam had invested in the company before he placed his assets in a blind trust and now says he doesn’t know whether he owns stock in JLL.

And from WTVF-TV:
“What happened? Did someone say hold on, enough?” we asked Lt. Gov. Ron Ramsey.

“Well, yes, absolutely,” he answered. “The speaker [of the House Beth Harwell] and I both spoke to them.”

At the center of the controversy is a JLL consulting contract that had ballooned to 10 times its original amount through a series of no-bid contract amendments. Despite all the controversy, the administration had still wanted to give the company millions of dollars in new work.

The real debate, according to Ramsey, occurred behind the scenes of the State Building Commission.

That contract had been increased from $1 million to almost $11 million, and the administration had recently circulated a proposed amendment to expand it to $16 million.
At the same time, administration officials had warned members of the State Building Commission about dire financial consequences if it was not approved.

“That’s the biggest thing that bothered me,” Ramsey said, “is don’t come to me on December 11th and say ‘if this is not renewed by the end of the year that the world is going to come to an end.’

“I don’t like working under those circumstances. You should have brought that to us in October.”

Finney drafts bill to stop contractors ‘profiting from their own recommendations’

News release from state Sen. Lowe Finney:
NASHVILLE – State Sen. Lowe Finney has drafted legislation that will stop any state agency from entering a contract that allows a contractor to profit from its own recommendations.

“This bill stops companies from profiting from their own recommendations, as we’ve seen in the state’s building management contracts,” Sen. Finney said. “This bill sets a standard of ethics and protects taxpayers.”

The bill follows an audit by the state comptroller’s office that found flaws in the way the Department of General Services handled its contract with Jones Lang LaSalle for facility assessments, master planning and facility management services.

Auditors found that in two cases, the state’s contract with that company created organizational conflicts of interest where the contractor could profit from its own recommendations to the state.

The standards set forth in the legislation would put Tennessee in line with federal contract standards.

“The ideas of saving taxpayer dollars and having a standard of ethics on conflicts of interest are not mutually exclusive,” Sen. Finney said.

Note: Post on the audit, HERE.

Herron: If Republican comptroller finds something wrong…

News release from Tennessee Democratic Party:
NASHVILLE, Tenn. — Tennessee Democratic Party Chairman Roy Herron called for new rules to protect taxpayers from insider contracts that keep growing — and padding the contractor’s pockets.

The state comptroller’s office Wednesday issued what reporters called a “scathing” review of a contract Gov. Bill Haslam’s administration gave to the governor’s former business partners, Jones Lang LaSalle, a big Chicago-based corporation. JLL’s property management contract has exploded from $1 million to $330 million and the company keeps adding to its profits by making new recommendations to pay itself more for leasing office space.

“The comptroller’s office for decades has been the authority on right and wrong in government,” Herron said. “Additionally, our new Republican comptroller has contributed tens of thousands of dollars to Republicans, so when he issues a scathing audit of this Republican administration’s dealings, you can be sure they have done wrong.”

Herron said there should be state rules in place to eliminate conflicts of interest that allow contractors to benefit financially from advice that increases the scope and size their contract. Federal ethics guidelines prohibit putting consultants in a position to profit from their own recommendations.

“When the state seeks advice from a business, that advice is supposed to be in the best interest of taxpayers, not the advisor,” Herron said. “If you ask a multi-billion dollar corporation for advice, don’t be surprised when their advice is to pay themselves more.”

New state architect eyes demolition of Cordell Hull

The Tennessee Building Commission named a new state architect Thursday and one of his first big tasks is deciding whether to tear down the 10-story Cordell Hull office building beside the state capitol. WPLN reports that, at this point, he’s not convinced it has much historical significance.

Real estate consultant Jones Lang LaSalle determined that the 60-year-old complex had fallen into such disrepair, it would be cheaper to tear it down and build something entirely new.

“The argument that I’ve heard the historical commissions make is that it’s a good example of the type of architecture that was built at the time, which is true,” newly-named state architect Peter Heimbach said. “But that still doesn’t answer the question of whether it gives it historical value, and what that value is.”

The original demolition decision is now being reviewed by Centric Architects of Nashville. The same firm oversaw a 2003 restoration of the Tennessee House and Senate chambers in the capitol building. Its report is expected by the first of the year.

Also Thursday, the head of the state’s real estate division said he still thinks the best option is demolishing Cordell Hull.

“We still feel that it’s in the best interest of the state,” General Services Commissioner Bob Oglesby told reporters after a budget hearing.

Oglesby says the fate of Cordell Hull may ultimately be left to the General Assembly.

Audit says JLL contract created ‘organizational conflict of interest’

A state comptroller’s audit says the Department of General Services mishandled contracting with Jones Lang LaSalle for management of state buildings and created an “organizational conflict of interest” by letting the Chicago-based firm earn commissions when the state followed recommendations it was paid to make.

The department’s State of Tennessee Real Estate Management Division (STREAM) disputed the auditors’ findings. (Note: The full audit is HERE; the JLL part begins on page 24.) Excerpts:

Based on our review of the RFP and the Master Planning Contract, we found that STREAM’s original contract with JLL described a broad scope of services, making it difficult to know what services JLL would be providing for the $1,000,000. As of July 31, 2013, STREAM management amended the original scope and contract dollar maximum with five amendments which increased the maximum contract liability to $7,650,000.

We discussed the contract amendments with STREAM management to determine the basis for the amendments and why the original contract did not specifically include the services procured through the amendments.

According to the Director of Real Estate Compliance, STREAM intended from the beginning of the contract period to obtain all the services it ultimately secured through the contract amendment process. Based on our review and our discussion with the Office of the Comptroller of the Treasury’s Office of Management Services, we could not determine that some of the amendments were within the scope of services of the original contract. In two cases, the amendments created organizational conflicts of interest whereby JLL could profit from its own planning and leasing recommendations.

..The Comptroller stated “he met personally with the former commissioner and advised him that the proposed RFP seemed broad and that the department could avoid potential future problems if it defined more specifically what services were requested. The former commissioner replied that he did not want to slow the process down.”

…We believe the first and second amendments also placed JLL in a position to offer the state advice and then reap the benefits of its own recommendations, creating an organizational conflict of interest. Although Tennessee law, rules, and regulations are silent on the matter, it is presumed that a vendor who offers the state advice should not be permitted to bid and be awarded a contract which would allow the vendor to act on the advice it originally provided. In our review of other governmental procurement processes we found that, to avoid conflicts of interest in procurement situations, the federal government took steps to address organizational conflicts of interest such as these in federal regulations.

…In our opinion, its work on the original contract gave JLL an unfair advantage to be paid for both recommending the Project T3 plan and then ultimately supervising/administering the plan. Also, because JLL can benefit financially from the advice it renders to the state, we believe that it cannot offer unbiased, impartial advice in the state’s best interest.

Similarly, STREAM allowed JLL to advise management on leasing arrangements while also allowing JLL to charge lessors leasing commissions and keep a portion of those commissions.. The authority given under this amendment increases the risk that JLL may recommend unnecessary leases so that it can profit from them.

From Department of General Service’s management rebuttal:

We do not concur with the audit report’s finding that the contract’s scope of services was both overly broad and under‐inclusive at the same time. There is no statute, rule, or policy that prohibits a contract from having a broad scope…The Real Estate division’s business intent was to have one contract that would serve all real estate needs that could not be handled in house and that were not satisfied by the existing Statewide Management Assistance Contract. Therefore, the Request for Proposal and resulting contract were drafted to attempt to cover as broad a scope as possible.

…We do not concur with the report’s finding that a vendor’s participation in both facility assessments and leasing can create an organizational conflict of interest posing risk to the State. It should be noted that the potential conflict of interest identified in the audit report is not prohibited by any statute, rule or policy, as the report itself notes .. The Real Estate division does not believe there was any organizational conflict of interest” relative to the 1st or 2nd contract amendments, but even if such “organizational conflict of interest” existed, it was fully disclosed, reviewed, and ultimately waived by the Executive Subcommittee in its approval of said amendments.

Note: The comptroller’s office has done a news release on the audit. It’s below
Continue reading

On Jones Lang LaSalle and the state building deal in Knoxville

From the News Sentinel:
State government will pay 60 percent more to provide office space for about 180 of its employees in Knoxville under a reshuffling recommended and negotiated by Jones Lang LaSalle, the Chicago-based firm that last year won a contract to manage state buildings and leases.

In doing so, officials involved say the state will avoid spending millions of dollars on needed renovations to the Henley Street State Office, which has been sold to a developer, and will consolidate state employees once housed there with those from other locations into one leased building with substantially improved working conditions.

Department of General Services spokeswoman Kelly K. Smith says the Knoxville consolidation is “one piece of the puzzle” in a statewide plan that JLL projects will save the state $102 million over the next 10 years.

But the outsourcing of the state’s building management has also inspired objections, including the contention last week of state Rep. Sherry Jones, D-Nashville, that the state is “moving people around just so JLL can make money” under circumstances that amount to a “serious conflict of interest.”

Jones’ comments came in a report by WTVF-TV of Nashville on reshuffling and relocation of state employees in state capital, including one case where Tennessee Education Lottery employees were moved out of a building deemed unsuitable and Department of Children’s Services employees, exiled from a building being closed, were moved in.

The contention of a conflict stems from JLL making recommendations under the management agreement negotiated by Gov. Bill Haslam’s administration, then getting a commission — generally 4 percent, paid by the owner of the leased premises — for negotiating new leases for displaced workers. The company also gets fees for decommissioning closed state buildings in Nashville, Memphis and Chattanooga and for overseeing the process of moving employees, furniture and their equipment from one location to another.

In Knoxville, Smith says $7.9 million in “deferred maintenance” had accumulated at the Henley Street State Office Building downtown that would be required to make the building suitable for continued use.

John Fetz, a senior managing director at JLL, says the company initially considered renovation and using the Henley Street building as a place to consolidate state offices. But after a review prompted by the then commissioner of General Services it decided to get out of the building and go with new leased space.

The state sold the Henley Street building to the city of Knoxville for $550,000, which in turn sold it to developer Nick Cazana for the same price. Cazana, who also owns the adjacent Holiday Inn World’s Fair Park, has discussed plans to convert it to a hotel. He said in July the initial renovation cost is estimated at $16.5 million.

Under the state’s Knoxville office plan approved by the State Building Commission on Oct. 21, employees from the Henley Street building, from facilities at the former Lakeshore Mental Health Institute and from a building at 1525 University Ave. that is being sold to the University of Tennessee will all be relocated. They work for the Department of Intellectual and Developmental Disabilities, the Department of Health, the Department of Mental Health and the Department of Labor and Workforce Development.

Full story HERE

JLL reshuffling moves TN Lottery out of building, then moves DCS in

In another report on the state’s contract with Jones Lang LaSalle, Phil Williams enlicits commentary from state Rep. Sherry Jones, D-Nashville, on some of the shifting around of state employees as recommended by the company.

Take, for example, JLL’s recommendation that the state demolish the Cordell Hull state office building and sell off four other state buildings.

The company not only got paid for that advice, but the State Building Commission has already approved commissions of $2.7 million for JLL to negotiate just five leases for new space.

On top of that, invoices show that the Haslam administration agreed to pay JLL another $1 million dollars to supervise the decommissioning of the state buildings.
And when state employees are moved, JLL also gets paid to supervise that process, as well.

…But the best example of the potential conflict may be a building in MetroCenter.

JLL got paid to advise the Tennessee Lottery to move out.

Then, the company got paid to advise the Department of Children Services to move in to the very same building.

Part of the concerns that JLL voiced to the Lottery was the building’s “mechanical and electrical systems,” a less efficient “floor plate design” and “the risk of another flood such as MetroCenter has experienced” before.

Children’s Services is moving out of the Cordell Hull.

“With all of the problems that DCS has and continues to have, we’re going to move them into a building that’s not efficient enough for the Lottery to work in, but it’s gonna be okay for DCS,” Jones said.

And one of the buildings where JLL took the Attorney General’s Office for a tour, the Fifth Third Building at 5th and Church, is leased and managed by JLL itself.
The Attorney General’s Office is also scheduled to move out of the Cordell Hull.

“This is totally ridiculous,” Jones said.

…JLL said, in a statement, that state officials make the final decisions — and that these questions about a potential conflict of interest disregard the company’s own projections that it will ultimately save the state “tens of millions of dollars.”

Another questioned state contract: ‘We’ve broken several laws’

Phil Williams has a new report questioning the Haslam administration’s handling of state government contracts, this one on cancellation of a contract held by Sanders Moving Company of Nashville. Sanders has filed a legal claim against the state and contends the contract was wrongfully canceled so the state’s business would go instead to Flood Brothers Moving of Atlanta.

“This is not a company that is afraid of competition,” said Harold Donnelly, attorney for Sanders Moving. “They are fierce competitors. They just want everybody to be following the same rules.”

In emails that Sanders’ lawyer filed with the state’s claims division, Kurt Herron — a career employee in the Tennessee Department of General Services — said bluntly: “We’ve already broken several laws.”

He specifically blamed Atlanta native Leah Shrock, an employee of Jones Lang Lasalle. That’s the big corporation that the Haslam administration put in charge of the state’s real estate.

“I know we redid [the statewide contract] four months early so Leah could get Flood Brothers on there,” Herron wrote.

Donnelly said the emails speak for themselves.

“The original contract was broken, according to these emails, in order that Flood Brothers be brought on to the contract,” he added. “You shouldn’t breach the contract and you shouldn’t break the rules and regulations just so one bidder could be favored.”

JLL has been supervising a multimillion-dollar redesign of state offices that has required the relocation of whole departments.

In one email, the career state employee wrote, “JLL only wanted to use the bigger companies and therefore made the requirements so strenuous that the smaller companies couldn’t compete.”

This summer, Haslam administration officials told lawmakers that the contract was redone partially so that durable shipping crates like the ones shown in a Flood Brothers video could be used for the moves.

“This is unprecedented, unprecedented moves,” the governor’s chief of staff, Mark Cate, told the legislature’s Fiscal Review Committee. “So to do that, we had to get the right, we needed the movers that could do this in a way that was the most efficient.”

Still, the emails indicate that diversity experts within the Department of General Services had “has declared the mandatory use of crates to be discrimination” against smaller moving companies that might want to compete for the work.

In addition, the claim filed by Sanders Moving alleged that state officials also allowed Flood Brothers to illegally change the prices on its bids to undercut its competitors.

In a statement, JLL admitted that it has worked with Flood Brothers in the past, but insisted that any suggestion that it steered state business to anyone is “entirely false.”

Here is the company’s statement:
Continue reading