District Dodges Spending Laws

Barrow questioned the agency in an e-mail, asking if that would create a "conflict of interest situation" that could endanger her ability to get more contracts. "I'm trying very hard to follow all the rules," she wrote.

Officials at the agency said the employee's son was given the internship, but there are no records to determine which of many consulting companies was used to pay him. Barrow said her company never hired him.

Peck said she has done so much business with Barrow because she is reliable.

"She has done very well for us and we for her," Peck said, noting that DBTS is considered a small, local business that the city is committed to support.

Barrow declined three requests to be interviewed or answer questions in writing about her firm. "We are proud of the work we have done for the D.C. Government," she wrote in an e-mail.

Peck, a demanding, energetic leader who spent much of her career in private industry, said she bristles at the constraints of government purchasing. When she wants to hire someone, she wants it done quickly, without the delays of bidding and competition. She said she told Witty to stay within the law, but "exploit the hell out of the gray area."

Witty said the streamlining in D.C. contracting has made it easy to send work to DBTS or any other company without open bidding.

"Once you start working with someone, you hang in there with them," he said. "You form your partnerships and keep them. You have to do it within the law, but that's how you work today."

The D.C. Inspector General released a study this spring of sole-source contracts in Peck's office, including some from DBTS, and found that every one of the contracts examined should have been put out to bid and estimated that the agency overpaid by 24 percent.

Peck, however, said her approach saves money because it allows her to hire good workers as consultants rather than city employees. And, she said, her deputies negotiating for sought-after specialists get lower prices than she would get through competitive bidding.

"With the government pay scales, I can have more mediocre people or I can find creative ways around it," she said, "and I find ways around it."

Among those she relies on to negotiate is Sandy Lazar, a Pennsylvania consultant who had worked with Peck in private industry.

Lazar is directing an $80 million project creating a massive computer system to revamp the way the city coordinates spending, procurement, personnel and payroll. He was hired four years ago, after the D.C. Council gave Peck a waiver to bring in consultants as managers. Until officials noticed the problem last year, the law put him in the unusual position of approving his own consulting contract on behalf of the city.

City records show he has been paid $1.4 million since 2001 and recently has been given an additional contract for $719,000.

"I'm proud of what I've done," Lazar said. "I've been remunerated fairly, and I've given back many times over."

No-Compete Competition

In early 2002, Debi Gasper, co-owner of a D.C. public relations firm, The Ad Agency, was sitting in Peck's office working on an agency project when Lazar came by. He asked if she'd be interested in promoting his new software, which was being rolled out to city workers.

Gasper's firm prepared a proposal and began work that March. That first contract, for $15,000, was too small to require competition under city rules. But four months later, when a $40,000 follow-up project was on the table, city rules required competition.

With Gasper's existing proposal in hand, the city needed two other bids. But rather than advertise the job to gather competing bids, a contracting officer wrote that he contacted two other companies, and they declined to bid. That was considered sufficient competition, and the contract went to Gasper.

Officers at the two businesses listed in records said they did not remember being asked to bid on the project. One of them, John Vance, managing director at Levine and Associates, said the firm was seeking work at that time and, "I can't imagine anyone here picking up the phone and saying we wouldn't bid."

Lazar said competition for the contract was fair.

Over the next two years, The Ad Agency received a series of sole-source contracts as "good will ambassador" for the project, records show. It created posters and did other work to encourage city workers to get training on the new computer system. The total price was more than $680,000.

"We just really work hard," said Gasper, who added, "We give the government very good rates."

In one case, when the money under the contract was gone, the firm submitted another bill for more than $58,000. The agency paid it with a direct voucher.

Gasper's firm received another direct voucher payment, for $250,000, about the same time. She produced a proposal and an invoice saying the funds were used to buy advertising to promote the city as a destination for technology companies. But city officials said they could find no contract or invoices for the payments.

Repeat Business

The city said it also put out for competition a contract that ultimately went to former city official Harry Black, though there were no competing bids. Black had held several administrative jobs for the city in the 1990s, including deputy director of the contracting department.

In 2003, his former contracting office colleagues needed consulting help to review and approve a backlog of contracts. They didn't advertise the job but sent faxes to two firms, one of them Black's. When the other firm didn't bid, Black had no competition. Despite city rules requiring three competitors, the officials sought no more bids and granted the contract to Black for $64,000, records show. The business was extended several times and the city ended up paying $128,000.

Last year, when the city was seeking a consultant to review its buying rules, the city manager's office chose Black and sent his proposal to the contracting office without any competition, records show. The city later called two other consulting firms to request bids, and one replied. Black's price was 9 percent higher, but he was awarded the contract for $86,000.

In the past two years, records show, Black's firm was paid more than $550,000 through no-bid contracts or through competitive bidding when he was the only bidder or the high bidder. Black said his understanding was that competition for all contracts was fair.

Black said city contracting problems persist despite adequate laws to prevent employees from squandering money. City government has not developed a culture that holds people accountable for failing to live up to the laws, he said. "We don't attack the issues because we don't deal with the human element."

The urgency of solving spending problems, he added, has been lost amid the attention to the surplus caused by rising tax revenue.

"The beautiful thing with D.C., not like other jurisdictions, is the economy is booming so much that the inefficiencies get overshadowed."

Staff researcher Bobbye Pratt contributed to this report.