The state of Oregon has forced furlough days on its workers and cut services to the poor, but it remains a cash cow for private contractors who charge as much as $300 an hour for their services, an investigation by The Oregonian shows.

Reporters reviewed thousands of state contracts and identified nearly $10 billion in state commitments to outside vendors, some of which appear to contradict the penny-pinching messages coming from state leaders. Others simply show a state quite willing to pay top dollar when it needs outside help.

Examples include $100,000 to the pro-consumer group

to drum up opposition to insurance rate increases; at least $100,000 for diversity training and other employee workshops; and tens of thousands of dollars to a headhunting firm to place help-wanted ads on the Internet and in local newspapers.

"It's truly not rocket science to go to Craigslist and place an ad," says freshman

R-West Linn, who recently began scrutinizing state contracts. "I mean, how much hiring are we doing anyway? You can't manage that in-house?"

The Oregonian's review found:



Money flows elsewhere.

Of Oregon's $9.7 billion in active contracts with more than 4,000 private vendors, at least $3.3 billion, or about a third, is going to out-of-state companies. A Michigan-based printer, for example, got a $133,000, 10-year contract to print and bind the Oregon Blue Book, the state's official almanac.

Sometimes there's no competition.

State law that requires competitive bidding to keep costs down is riddled with exceptions, and some deals go through without public bids. For example, the Oregon Health Authority inked a $650,000, no-bid contract with a Washington, D.C., consultant to help navigate state and federal health reforms.

Retirees get a piece of the action.

The state spends millions of dollars on contracts that go to former state employees who "retire," form consulting companies and work on contracts at rates that can exceed $100 an hour.

The size and scope of state contracts range widely, from plastic chairs for prison inmates at $133 apiece, to highway construction projects and computer technology upgrades that run into the tens of millions of dollars.

That spending does create jobs and stimulate the economy. But questions remain about the wise use of taxpayer money. Lawmakers, both conservative and liberal, and union leaders complain about the difficulty of monitoring how much is spent and who gets paid.

In one case, a psychiatric nurse working for the Department of Human Services' Seniors and People With Disabilities Division retired in 2006 and then was rehired as a consultant twice before anyone outside the division reviewed her no-bid contracts. The agreements, totaling $242,000, ranged from $42,000 to $150,000.

"We've been trying to draw attention to the number of contracts, the type of contracts and the accountability of contracts for a long time," says Heather Conroy, executive director of Service Employees International Union Local 503.

"It's such a large expenditure, and a lot of times these go unscrutinized."

Out-of-state firms benefit

Oregon lawmakers gritted their teeth last year and approved spending more than $4 million on an international consulting firm to represent the state's interests in the Portland harbor Superfund cleanup.

State officials, led by Attorney General John Kroger, persuaded the Legislature to spend the money in order to defend itself against paying too large a share of what could be a $1 billion project. Lawmakers said it was a tough decision because that money could have prevented more teacher layoffs or paid medical bills for the state's growing ranks of unemployed and uninsured.

Cashing In: An occasional series

Oregon lawmakers, hamstrung by the economy, have cut programs and reduced the public payroll to plug a $3.5 billion budget hole. Recent forecasts show they may have to cut more. But amid the austerity, The Oregonian has found plenty of business as usual.

Join the discussion about your tax money and your services by finding contact information for state leaders at

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To

, the Netherlands-based engineering firm that got the no-bid contract, it was a juicy addition to a $2.8 billion portfolio. Oregon taxpayers are now on the hook for the $270-an-hour rate charged by the top engineers at the multinational firm, which has 16,000 employees and a website that boasts about the company's extensive art collection.

The state also has an open-ended $1 million contract with another global corporation,

, a New York-based recruitment company.

Under state rules, all agencies must run their job placement ads through the private firm, which places the ads and tracks responses. Over the past year, the state spent $200,000 for the work.

"It's a convenient way to place ads," says Barry Emmerling, who handles recruitment at the Oregon Liquor Control Commission. "We've had some good luck with them."

Under the contract, state agencies that need to run a help-wanted ad send the copy to Bernard Hodes, which designs the ad and places it in a variety of print and Internet outlets. From June to July, the state spent nearly $50,000 on Internet ads, records show. The money goes to a company with offices around the world and whose CEO made the society pages of The New York Times last month when he remarried.

The liquor commission spent $21,577 on Bernard Hodes in 2010, according to state records. Emmerling says he expects that sum to go down this year. "With the current job market," he says, "we're not doing much advertising."

There are times when it makes sense to seek expertise outside the state, says John Tapogna, economist and president of

in Portland. But he adds, "If Oregon firms routinely can't compete well in some areas, it's important to ask why."



No bid but still legal

The Legislature sets the goals for Oregon's public contracting law: The process must be fair, open and efficient.

But the state statute isn't nearly so simple.

Most agencies have the authority to make purchases of less than $5,000 without jumping through hoops. Contracts for goods or services costing between $5,000 and $150,000 get more scrutiny but often no attention beyond the awarding managers or agency. State contracts above $150,000 must go to the Department of Justice for legal review.

The Oregonian found a number of contracts that fell below $150,000 but eventually grew much higher. Some contracts did not go through a formal bidding process -- perfectly legal under Oregon law.

In 2009, the Legislature decided it could save money by splitting the Department of Human Services into two agencies, one solely dedicated to health, the other to all nonhealth-related services. The department then signed a $50,000, no-bid contract with

to consult on how to manage the upheaval. Two months later, the contract was amended to $950,000.

Jim Scherzinger, DHS chief operating officer, says the agency needed the expertise from AKT's Salem office. He says he interviewed other firms and talked to other state agencies before asking state procurement authorities for permission to award the contract to AKT without soliciting other bids.

"There's no way you can make that kind of change without spending some money for the transition," Scherzinger says. "It's just too big."

Though the general public may not have paid much attention to the inner workings of a giant bureaucracy, it turned into a sweet payday for consultants.

AKT partner Geoff Guilfoy billed $295 an hour. He spent 17 years in the executive ranks of Oregon government and makes no apologies for what he charges for his time: "The rates we charge are based on our costs and on what similar-sized companies charge."

Sweeping changes in health care policy nationally and in Oregon have translated into opportunities for consultants who command a premium for their inside knowledge.

Last year, the Office for Oregon Health Policy and Research signed a $150,000, one-year contract with the Institute for Health Policy Solutions in Washington, D.C., to help the state agency analyze new federal and state health care laws. The next year, the agency extended the contract until June 30, 2013, and raised the potential payout to $650,000.

Tina Edlund, chief of policy at the Oregon Health Authority, says her agency wanted to tap the institute's director, Rick Curtis, who was director of health policy for the National Governors Association and the National Academy for State Health Policy. So the agency got special permission to hire him. It is paying the nonprofit $290 an hour for Curtis' time.

The consultant helped launch Oregon's health fund board and is helping design the state's health insurance exchange, Edlund says. "He has an incredible depth of knowledge of the health insurance market and how that works."

Coming back for more

Oregon doesn't contract just with giant, international firms. It also does a brisk business rehiring former state employees.

For example, computer specialist Wes Taylor took the route many others have from full-time state worker to temp to contract consultant.

After retiring from the DHS in 2004, Taylor was hired by the Oregon Department of Transportation in 2005 as a temporary worker for $40.36 an hour.

In 2006, when Taylor's temp gig ended, he signed a one-year contract that paid $63 an hour, or $74,970 that year, for part-time management of various technology projects. ODOT offered him a similar contract for $74,945 the following year.

Taylor says he worked a short time for Comsys, a large consulting firm, but decided to strike out on his own.

"I could get more money in my pocket, and ODOT could pay less," than they would for a Comsys contract, he says.

In April 2008, Taylor signed a third contract for which he'd be paid $292,489 over three years for part-time project management of a new technology system that tracks pavement, guardrails and other road information.

Ron Winterrowd, who manages ODOT's application development group, says he feels he got a deal.

Still, an internal agency cost analysis found that ODOT might have saved $182,163 if it had used a regular staff employee to do the same job.

"It would be cheaper to do it in-house," Winterrowd acknowledged. But he said he didn't have a qualified manager at the time or authority to hire one.

Sometimes retirees get state contracts simply because they are well connected and an agency wants their advice.

Mike Greenfield's career includes stints as a legislative staffer and in state agencies. After retiring in July 2004 as deputy superintendent for the Department of Education, Greenfield signed a contract the next month to stay on the payroll as a consultant.

Since then, he has been paid $125 to $150 an hour, for a total of $197,661. Invoices reviewed by The Oregonian show Greenfield worked on improving the agency's relationships with the Legislature and the governor's office.

"This agency needed to improve its relationships in general with government," said Ed Dennis, the current deputy superintendent. At the same time, however, Dennis says he has advised Greenfield he will not renew his contract after it expires in December.

The secretary of state's auditing staff is looking into the number and type of contracts agencies have with their former employees. Some legislative leaders suggest it may be time to look at all contracts.

, D-Ashland, who works almost exclusively on state budget issues, says he has faith that agency directors "push aggressively" for the best deals whenever possible. But he acknowledges it's difficult for lawmakers, much less the public, to get a firm handle on the thousands of state contracts and billions of dollars they represent.

"We need to do a better job of reviewing contracts."

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