Mark Cate, the governor’s chief of staff, acknowledged to state legislators Tuesday that mistakes were made in handling a multi-million dollar contract for management of state buildings but declared the overall effort a huge success that other states now want to emulate.
Appearing before the Legislature’s Fiscal Review Committee, Cate said Gov. Bill Haslam’s administration entered “unchartered territory” in contracting with Chicago-based Jones Lang LaSalle with inherent “complications and confusion” occurring at times.
One mistake was in not being sufficiently transparent about the move to legislators and the public, he said. Another was not drafting the original, competitively-bid proposed contract to reflect the maximum value to the winning company, he said, instead of listing it just as a $1 million study and later changing the amount upwards as new duties were added.
Cate also said officials have decided to have “a fresh set of eyes” conduct another review on one of JLL’s recommendation – demolishing the Cordell Hull building, which stands next to the state Capitol and is one of six major structures statewide slated for demolition as “functionally obsolete.” This has triggered some controversy in Nashville because of what Cate called the building’s “perceived historical significance.”
Bids under seal with state officials could move the first workers out of the Cordell Hull Building and into private office space by March of next year, reports The Tennessean. Six firms, including Lifeway Christian Resources and Bellsouth Telecommunications LLC, have submitted offers to lease out space for 301 workers in the Department of Children’s Services. The state plans to settle on a deal no later than Aug. 19.
The offers were made last week under a bidding process that also names Jones Lang LaSalle as the state’s broker, giving the Chicago real estate firm a 4 percent commission if a deal is closed.
The Department of General Services has refused to release information about the offers — apart from the bidders’ names — until a winner is chosen and a recommendation sent to the State Building Commission. Officials maintain that the state’s open records law allows them to accept real estate bids under seal.
About 1,000 state workers currently work in Cordell Hull, a nine-story office block next to the state Capitol. Citing a review done by Jones Lang LaSalle, state officials say water persistently seeps into the nearly 60-year-old building. They say it would cost the state more than $24 million to keep Cordell Hull in service.
Lawmakers approved a state budget in April that included funding to shut down Cordell Hull, an annex called the Central Services Building, the Tennessee Regulatory Authority’s headquarters and three other state buildings in Chattanooga and Memphis.
See also the Chattanooga TFP, which reports on six sealed bids for housing displaced Chattanooga state employees.
Phil Williams has collected emails from state officials involved in a multi-million dollar contract for managing state buildings, focusing on the commission Jones Lang LaSalle receives. An excerpt from the WTVF-TV report: Three months later, state Comptroller Justin Wilson’s staff discovered JLL was negotiating new lease agreements and telling landlords they would be expected to pay an extra 4 percent commission to the firm if they wanted to lease the state a building.
“A commission to JLL at first blush seems very wrong,” Wilson emailed his staff. “I am suspicious to say the least.”
He was suspicious because, when JLL put in a bid for the state’s business, they were asked how much extra they would charge to work on leases.
Their contract said: $0.00.
Notes from contract reviewers in the comptroller’s office show that an attorney working for General Services Commissioner Steve Cates “agreed that there was no statute, rule or policy that authorized the commission, nor did the contract authorize it. It was her understanding that, since the Lessor and not the State was paying JLL the commission, it was OK.”
But Wilson subsequently wound up approving the arrangement as a member of the State Building Commission. The TV station says his office won’t discuss the matter now because the Department of General Services is going through a scheduled audit and the contract is part of that review.
The Chicago-based company that holds a controversial multimillion-dollar contract to manage state government buildings and leases has hired a lobbyist who formerly worked for House Speaker Beth Harwell and the state Republican Party.
Gregory Gleaves registered June 18 as lobbyist for Chicago-based Jones Lang LaSalle, according to the Tennessee Ethics Commission website. That was about the time media reports emerged on how the company’s dealings with the state expanded from an initial $1 million study of state buildings into a contract worth up to $330 million, prompting legislative leaders to say they’ll have a committee look into the matter.
“Obviously Jones Lang LaSalle has gotten some attention lately,” Gleaves said in an email response to an inquiry about his new lobbying position. “My job is to ensure that what they are doing for the state is clearly understood. Jones Lang LaSalle is helping the state in its vision to save money for Tennessee taxpayers. I am pleased to play a role in telling that story.”
Gleaves was executive director of the Tennessee Republican Party when hired by Harwell as her chief of staff in 2011. He stepped down in July 2012, to become a lobbyist with Hall Strategies, which declared in a news release that he “spearheaded efforts that led to dramatic change in Tennessee politics” while at the state GOP.
Gov. Bill Haslam fielded several questions about state government outsourcing contracts Monday, insisting that a few mistakes might have occurred but that the public’s interest was his only motivation.
From WTVF’s report: Surrounded by reporters, the governor was emphatic about his administration decision to outsource large chunks of state government — the most recent being a $330 million contract to manage all state buildings.
“This is a contract that’s going to save the state a hundred million dollars over the next years,” Haslam said.
That contract went to Jones Lang Lasalle — a company that candidate Bill Haslam listed among his investments.
“Is there any sense in which you stand to gain personally from that contract?” NewsChannel 5 Investigates asked.
“Absolutely zero,” the governor answered.
…The governor did acknowledge that a meeting with JLL officials at the Governor’s Residence in April 2012 was about more than just the $1 million consulting contract they had at the time to study the condition of the state’s buildings.
After that meeting, the administration began pushing a string of amendments to extend the JLL contract — without any bidding.
“Were you involved in those conversations about those extensions?” NewsChannel 5 Investigates asked.
“No,” the governor said.
“We had the dinner because at this point in time we were thinking about them obviously managing a big chunk of the state’s business, and I wanted to have a face-to-face conversation just like I was if I going out to hire an individual to do something. To me, there’s nothing extraordinary about that at all.”
But when the facilities management contract was put up for bids, two of the three members of the selection committee came from the governor’s own staff.
“Did you interview any of their competitors?” we asked.
“I didn’t,” the governor admitted, “because I wasn’t part of the selection process.”
Still, Haslam insisted that he believes taxpayers will be the winners.
“Look, anytime you make a big change in state government, does everything in the process go about properly? No. This is new territory we’re in. There’s literally no other states who have done what we’ve done.”
See also the Commercial Appeal, HERE
Despite a controversy over his outsourcing of state building operations, Republican Gov. Bill Haslam says he intends to continue privatizing state government operations where he believes it is practical, reports the Chattanooga TFP. “I think our job is to deliver the very best service at the lowest price, and I’ve said that from the very beginning,” Haslam said last week, adding, “I think particularly this case with the real estate space is a great example of that.”
Haslam was referring to a contract with Chicago-based real estate services firm Jones Lang LaSalle to manage state office space.
…State employees and their representatives, meanwhile, argue that in at least some outsourcing ventures, the promised savings don’t materialize.
“As far as I know, state employees were doing a good job managing the buildings,” said Robert O’Connell, executive director of the Tennessee State Employees Association.
What employees “think we’re seeing here is an execution of a certain political philosophy” of privatization wherever possible of even “appropriate” public functions, O’Connell said.
Haslam said outsourcing state functions where it makes sense is one of several strategies his administration is using to keep government costs down.
“Right now we’re in a good revenue period, and the revenue’s always exceeding [estimates],” he said. “That doesn’t always last. When it doesn’t, we’re going to have to provide for that. This is a direct result of the top-to-bottom [reviews of state functions]” Haslam ordered after taking office.
The reviews have resulted in any number of cost-cutting measures and elimination of some state services.
Haslam argues the reviews don’t always lead to trimmed or eliminated programs, job cuts or privatization.
“There’s other things we’re taking back” from private vendors, Haslam said.
“I was talking to a highway contractor the other day who’s kind of mad about some things we used to let private contractors do that we’re bringing back in house” at the Department of Transportation.
House Speaker Beth Harwell and Senate Speaker Ron Ramsey said Thursday a legislative committee should look into the handling of a multimillion dollar state contract with a Chicago-based firm that once counted Gov. Bill Haslam among its investors.
But they also said they believe there was no wrongdoing in the contract with Jones Lang LaSalle or two other contracts negotiated by the Haslam administration to outsource to private businesses work formerly done by state employees.
“Just the whole idea of sole-bidding, I think that’s a legitimate concern for us to examine,” said Harwell. “I do not believe anything has been done wrong, but (a review by legislative committees) is appropriate.”
Ramsey also said he supports having the Fiscal Review Committee, a joint House-Senate panel tasked with oversight of state spending, study the contracts. The panel tentatively plans to do so at a meeting next month.
Yet the Senate speaker, who also serves as lieutenant governor, was adamant in voicing confidence that no misdeeds occurred in contracts negotiated through the state Department of General Services, headed by Commissioner Steve Cates.
“I don’t believe this department has ever been run any better than it is right now,” Ramsey said. “I don’t think anything was done that was illegal and I don’t think that anything was done that was unethical.”
State Comptroller Justin Wilson said his office will be looking into “procedures” involved in the contract “to see whether or not they need to be modified or changed in any way.”
As initially reported by WTVF-TV, Jones Lang LaSalle initially won a $1 million consulting contract, competitively bid, to make a review of state-owned buildings and leases of property with recommendations for an office space “master plan.” That contract was subsequently expanded in stages to authorize up to $11 million in state payments.
The resulting master plan calls for the state to dispose of six buildings deemed “functionally obsolete,” for outsourcing of jobs now performed by Department of General Services employees and for leasing of more office space for state workers in Nashville, Chattanooga and Memphis. It is called “Project T3” or “Transforming Tennessee for Tomorrow” and officials project it will save the state $135 million over the next decade.
Earlier this year, Jones Lang LaSalle won a second contract for management of office leasing for the state that is valued at up to $330 million, including pass-through costs such as utility and maintenance payments. The company stands to receive up to $38 million.
Also under one of the contract amendments, the company will act as the state’s broker for the new leased office space to replace the six buildings being abandoned. The firm will receive a 4 percent commission from the buildings’ owners based on the total gross rental fees the state pays over the coming 10 years.
In 2010 while running for governor, Haslam included JLL among a list of companies in which he had invested more than $10,000. He has refused to disclose the amount of any of those investments and, after his election, most of his investments — an exception being the governor’s stake in Pilot Flying J — were placed in a blind trust.
“He doesn’t know what went into the blind trust. He doesn’t know what’s in it,” gubernatorial spokesman David Smith said. “If someone is suggesting that Jones Lang LaSalle got this contract because the governor had a previous investment in it, that’s absolutely untrue.”
WTVF reported Haslam hosted top JLL executives for dinner at the governor’s residence on April 24, 2012, including former NFL star quarterback Roger Staubach and Herman Bulls, CEO of the company’s public institutions division. Also attending were Cates, Herbert Slatery, the governor’s legal counsel; and Mark Cate, the governor’s chief of staff.
Three months later, Cate joined Bulls and other JLL executives in a presentation to the State Building Commission that led to approval of contract amendments by the panel.
Harwell and Ramsey are members of the Building Commission and commented to reporters after a meeting of the five-member panel Thursday on other matters.
Ramsey said that Haslam, like anyone coming into government, would naturally have interests that could become a conflict. The governor handled that appropriately by putting his interests in a blind trust, said Ramsey.
“I don’t know that you could do anything more than that,” he said.
Ramsey acknowledged, in response to a question, that JLL could have an incentive for negotiating higher rental fees for the state since that would mean higher commissions for the company.
House Democratic Caucus Chairman Mike Turner of Nashville told reporters he plans to write Harwell a letter asking that the Government Operations Committee be assigned to investigate the JLL contract and others.
Harwell said she had not received the letter, but believes the Fiscal Review Committee is the “most appropriate” vehicle for reviewing the contracts.
The Department of General Services has also negotiated a contract with Bridgestone/Firestone for outsourcing maintenance and repair of state-owned vehicles and a contract with Enterprise Rent-a-Car for providing rental vehicles to state employees. The latter contract came without competitive bidding and with a former Enterprise executive hired by Cates to oversee the department’s motor vehicles division.
A Democratic legislative leader said Tuesday he will ask legislative committees to review a five-year $330 million contract with the Chicago-based multinational consulting firm Jones Lang LaSalle , reports the Commercial Appeal.
Gov. Bill Haslam disclosed an investment in the company while running for governor in 2010, but not the amount of that investment. He now has most of his investments — except for Pilot Flying J — in a blind trust. Jones Lang LaSalle is the firm that last year recommended the state move out of its 43-year-old Donnelley J. Hill State Office Building in Downtown Memphis and five other state-owned buildings in Nashville and Chattanooga because it said they are “functionally obsolete.” JLL is helping the state find 100,000 square feet of leased office space Downtown where employees of 12 agencies and departments currently working in the Hill Building would move.
The state’s involvement with JLL has come under increasing scrutiny since its initial $1 million contract has grown to $4.5 million to $7.6 million and it won a new contact that pays Jones Lang LaSalle about $38 million over five years for management and labor for managing state buildings. It has a maximum liability to the state of $330 million, which includes costs that JLL will pay on a pass-through basis from the state, such as electrical, ventilating, janitorial, security and landscaping vendors with no markup in costs, the Department of General Servicers said.
JLL is essentially assuming responsibility for an ambitious Haslam administration plan to consolidate as much state office space as possible called “Project T3” for “Transforming Tennessee for Tomorrow,” which state officials believe will save taxpayers over $135 million during the next 10 years.
— Note: See also the Chattanooga Times-Free Press. Excerpt: (Gubernatorial spokesman) David Smith said Tuesday the governor himself is unaware whether he still has any investment and wouldn’t be swayed even if he did.
“That’s the whole point of a blind trust,” Smith said, adding, “This is a project that is slated to save the state millions of dollars and it’s good government.”
At least at one point, Gov. Bill Haslam was an investor in a company that has landed a $330 million contract to manage state buildings under a new outsourcing plan put into place under the Haslam administration’s leadership, reports WTVF-TV. The Haslam administration insisted that the contract is about saving taxpayer money, not about making the governor richer.
But our investigation discovered the governor’s office was directly involved in the decision to give hundreds of millions of dollars of your money to a corporation he knew well.
Recently, the state signed a $330 million, five-year contract with a multinational corporation, Jones Lang Lasalle, to manage all of the state’s buildings. It’s a company that, our investigation discovered, candidate Bill Haslam listed among his major investments.
“The fact that he was invested in this company that got this contract is disturbing if he’s still invested in it,” said House Democratic Caucus Chair Mike Turner of Nashville.
…The governor’s office said that they don’t know if JLL is still among the investments that Haslam put into a blind trust.
“Even the fact that he was invested at one time, there was a relationship there,” Turner added.
The Haslam administration insisted the contract was awarded through an above-board, competitive process with no political influence.
Still, our investigation discovered that the selection committee was composed of procurement officer Mike Perry and two members of Haslam’s own team: chief of staff and former campaign manager Mark Cate and special assistant to the governor Larry Martin.
…A photo taken during that process — at an intimate dinner on April 24, 2012, at the Governor’s Residence — shows Haslam with JLL executives, including former quarterback Roger Staubach. Also present were Commissioner Cates and Mark Cate, who would eventually serve on the selection committee for the big facilities management contract.
…Just three weeks after that dinner at the Governor’s Residence, the Haslam administration began lobbying the State Building Commission for an amendment that expanded JLL’s consulting contract from $1 million to $4.5 million.
The administration wanted JLL to supervise efforts to modernize state offices — a program known as Transforming Tennessee for Tomorrow (T3) — as well as analyze requests for future building projects.
Emails show the lobbying of the commission was done by the governor’s legal counsel and Mark Cate.
…But, six months later, the commission approved increasing that $4.5 million to $6.5 million. Four months after that, the Commission approved increasing that contract to almost $11 million — again, without any bidding.
“It’s a good deal if you get it, I think,” (House Democratic Caucus Chairman Mike) Turner said. “If it’s not a sweetheart deal, it’s the closest thing to it. They’ve pretty much wrote their own check.”
And, in the middle of all that, our investigation discovered, the Haslam administration decided to take all lease negotiations out of the hands of career state employees.
So they amended JLL’s contract again, this time giving the company the right to demand a 4 percent commission from anyone who wanted to lease the state a building.
Now, as a result of JLL’s recommendation that certain state buildings – like the Cordell Hull – be demolished, the company stands to make commissions on new leases it is negotiating.
A Chicago-based real estate services firm that recommended Tennessee government unload six state-owned office buildings will benefit financially as the state moves to lease new space in the private market, reports Andy Sher. According to state General Services Department documents, Jones Lang LaSalle is poised to take 4 percent off the top on deals with private companies for leased office space in Chattanooga, Nashville and Memphis.
Hired as a consultant to review and assess 33 state-owned buildings, Jones Lang LaSalle last year recommended closing five “old and obsolete” state buildings. The list included the 59-year-old State Office Building at 400 McCallie Ave. in Chattanooga and the nearby James R. Mapp Building, which is newer. Both buildings require expensive repairs; the firm said it would be cheaper to build new or move into leased space than renovate.
Then last month, the General Services Department quietly inked a five-year contract with Jones Lang LaSalle to manage and maintain all state property overseen by the department as well as leasing.
“We do not see a conflict of interest,” said Kelly K. Smith, General Services’ assistant commissioner for communications. “The services were publicly procured through an open bid process that was approved by the State Building Commission.”
The department employs 126 people for the duties that Jones Lang LaSalle will assume July 1. The employees will lose their state jobs but can apply for work with the firm, although there is no guarantee they will be hired.
Jones Lang LaSalle beat out CBRE United States for the contract, Smith said.
Smith also noted that Jones Long LaSalle recommended the state build and own new space in Chattanooga as opposed to leasing commercial space because it was cheaper.
“However, the state evaluated their proposal and decided to move forward with the leasing option,” Smith said.
The State Office Building (former Interstate Life Building) and the Mapp Building collectively required $15.8 million of capital investment to continue operations. Yet both would have been functionally obsolete and expensive to operate.
…Smith said General Services chose the leasing route for several reasons, including that it “offered greater flexibility to meet the needs of our clients/tenants.”
Jones Lang LaSalle estimated that over 20 years, the state would save $28.4 million on a new, smaller, more efficient building in Chattanooga. Leasing is expected to save $18.4 million over the same period, according to a February report by the firm.
…What employees think they’re seeing from Republican Gov. Bill Haslam’s administration and especially from Cates “is an execution of a certain political philosophy, which is privatization” of what many think of as public functions, McConnell said.
But he said he’s skeptical that privatization is always a big cost saver.
“The prime goal [for the private contractor] is to make a dollar, and every decision they have to make about what they’re going to do has to be filtered through that.”