A Performance Audit
An Audit Report on Selected Contracts at the Texas Education Agency
August 2018
Summary Analysis
The Texas Education Agency’s (Agency) planning and procurement of the two contracts audited had significant weaknesses that affected the award outcomes. In both cases, management did not follow processes designed to maintain the integrity of those procurements.
Tembo Contract
Agency management overrode controls in order to award a contract to its preferred vendor, Tembo, Inc. The Agency also made errors in its planning and procurement of that contract. Collectively, those management actions and errors affected the award outcome. However, in executing and overseeing its contract with Tembo, the Agency followed its contract formation processes, properly approved payments, and monitored Tembo’s progress during the initial design phase of the contract.
SPEDx Contract
Significant weaknesses in the Agency’s control environment allowed Agency management to direct the SPEDx procurement without following required steps, which are designed to safeguard the integrity of the procurement process. In addition, weaknesses in the Agency’s contract formation resulted in the Agency paying SPEDx $2.5 million and receiving only one deliverable valued in the contract at $150,000. The Agency also did not review SPEDx’s data security practices prior to sharing confidential student data.
On multiple occasions, Agency management overrode contracting controls in order to award the contract to its preferred vendor when it:
- Inappropriately requalified Tembo’s proposal,
- Incorrectly advanced Tembo’s proposal to the final round over a higher scoring proposal, and
- Awarded Tembo the contract over another vendor with the same final score without an explanation for that decision.
The Agency generally followed its contract formation process for the contract that it awarded to Tembo. It also ensured that its contract effective date coincided with the execution of the contract. However, the Agency should ensure that it complies with applicable statutes and other requirements.
The Agency properly approved invoices prior to payment and made payments to Tembo in a timely manner. The Agency also monitored Tembo’s initial progress on contract deliverables, met regularly with Tembo to discuss contract specifications and status, and provided feedback on Tembo’s preliminary designs.
Significant weaknesses in the Agency’s control environment resulted in the Agency awarding the contract to SPEDx without following steps designed to safeguard the procurement process. When taken together, the following factors adversely affected the integrity of the procurement: (1) the Agency’s failure to complete critical planning and procurement steps, including the selection of SPEDx prior to fully identifying the Agency’s needs; (2) the use of a non-competitive sole source procurement to award the contract to SPEDx without completing sole source processes; and (3) the Agency’s primary decision maker’s preexisting professional relationship with a SPEDx subcontractor.
The Agency’s contract did not tie payments with demonstrated progress on deliverables. Instead, the contract established a predetermined schedule of equal monthly payments. As a result, when it cancelled the contract in December 2017, the Agency had paid SPEDx $2.5 million but it received only one deliverable valued in the contract at $150,000.
While the Agency required SPEDx to execute a written agreement related to its access of confidential student information before it shared that information, it did not verify that SPEDx had appropriate data security controls in place.
Timelines
Timeline of Tembo Procurement from May 2017 through January 2018
Timeline of SPEDx Procurement from January 2017 through May 2017
Timeline of SPEDx Procurement from May 2017 through March 2018
