Purpose

To assess the procurement practices used by the Department of Corrections and Community Supervision's Division of Industries (Corcraft) to procure textiles.

Background

The Division of Industries, known as Corcraft, is a major component within the Department of Corrections and Community Supervision. Corcraft's mission is to employ offenders in real work situations to produce quality goods and services at competitive prices. Corcraft employs about 2,000 of the State's 55,000 incarcerated offenders in the industry programs it operates at 11 correctional facilities. Sales were about $49 million for the State fiscal year ended March 31, 2013. We focused our audit efforts on procurement practices related to Corcraft textile operations. Production of textile products accounted for about 20 percent of Corcraft's sales. During the five-year period April 1, 2008 through March 31, 2013, Corcraft had 44 textile contracts that began, were in process, or were completed, with a contract value of $32.3 million and payments totaling $16.3 million.

Corcraft contracts with suppliers for the raw materials it uses in manufacturing. Procurement personnel issue an Invitation for Bid (IFB) with product specifications, followed by bid evaluation, sample testing, award recommendation, and contract execution and performance. Key procurement personnel include an Assistant Director of Operations, a Purchasing Supervisor, a Quality Control Analyst, and three Purchasing Agents.

Key Findings

• Current procurement practices allow one person, the Purchasing Supervisor, to control almost all of the process for the procurement of textiles. This includes providing input on specifications, evaluating bid submissions, and approving the final award recommendation. The inadequate separation of incompatible duties and/or lack of compensating controls increases the risk of favoritism in the award process.
• Corcraft officials awarded contracts without testing all of the required specifications, such as textile shrinkage, yarn, finish, and fiber content. Instead of testing all specifications, personnel used their own discretion in deciding whether and which specifications were tested. As a result, they did not adequately ensure open competition, and there was limited assurance that contracts totaling $32.3 million went to the lowest responsive and responsible vendors.

Key Recommendations

• Strengthen textile procurement controls by segregating duties among procurement personnel and/or by developing compensating controls to mitigate the risks identified in this report.
• Actively monitor the Corcraft textile procurement process to ensure that open competition takes place and only responsive and responsible vendors are awarded textile contracts.
• Develop a process for testing products provided by current vendors to ensure they continue to meet IFB specifications after contracts have been awarded and payments are made.

Other Related Audits/Reports of Interest

Department of Correctional Services: Seventeen Years of Fraud by the Former Director of the Department of Correctional Services' Food Production Center (2008-S-176)
Department of Correctional Services: Violations of Law, Conflicts of Interest and Other Improprieties at the Department of Correctional Services' Food Production Center (2009-S-6)