Ports consulting work ‘vital,’ but documentation issues worry government watchdog

SPA CEO Jim Newsome said consultants were critical in improving the agency’s image and in obtaining approval and funding for the Charleston Harbor deepeining project. A container ship approaches the Ravenel Bridge Sunday, September12, 2015.

The State Ports Authority has paid nearly $1.5 million over the past three years to politically connected South Carolina consulting firms and Washington, D.C., lobbying groups without any written contracts, performance reviews or competitive bidding for the work.

The practice, which is legal because the SPA doesn’t have to follow state procurement laws, has drawn criticism from a government watchdog group. But Jim Newsome, the maritime agency’s president and CEO, said the longstanding work agreements are vital to the Port of Charleston’s competitiveness.

“We pay for expertise that we don’t have internally,” Newsome said, adding that the arrangement saves money because the SPA can focus on its core business while leaving such things as public relations and lobbying to outside experts. Newsome said the consultants were critical in improving the SPA’s image statewide and in obtaining approval and funding for the Charleston Harbor deepening project.

But John Crangle, director of government spending watchdog Common Cause of South Carolina, said the lack of transparency and documentation of work the consultants are providing is troublesome. And he questions how the SPA can say it saves money when there’s no record of what it’s paying for.

Invoices from the consultants, who are paid on a retainer basis, include descriptions such as “monthly agency fee for consulting services” or “public relations services” but no detailed breakdown of those services or the amount of time spent doing the work. The invoices range from $6,000 to $40,000 apiece.

“It’s typical of how stuff is done in South Carolina,” Crangle said. “What is the benefit to taxpayers? It raises the question of whether they (the SPA) need the consulting services in the first place.”

The payments to South Carolina firms McAlister Communications and Richard Quinn & Associates and Washington lobbyists Podesta Group Inc. and Nelson Mullins Riley & Scarborough are among more than $8.1 million the SPA has paid to third parties since fiscal 2013 for legal, public relations and government relations services. That represents a small portion of the agency’s roughly $175 million a year in operating expenses.

Those four consultants are the only ones working without a formal contract and submitting invoices that typically don’t include details about the services being rendered. The Post and Courier obtained copies of invoices for that work through the state’s Freedom of Information Act.

In addition to their communications and lobbying expertise, the consultants are well-connected politically. McAlister Communications owner Bob McAlister is a Republican Party strategist and former chief of staff for the late Gov. Carroll Campbell. Richard Quinn, another Republic Party consultant, ran John McCain’s presidential campaign in South Carolina.

John Podesta, former chief of staff for President Bill Clinton and chairman of Hillary Clinton’s presidential campaign, is co-founder of Podesta Group Inc. And the Nelson Mullins firm counts former U.S. Secretary of Education Richard Riley and former Ambassador to Canada and S.C. House Speaker David Wilkins as partners.

Crangle said that political influence could be what the SPA is really paying for. For Newsome, influence and relationships are certainly part of the mix.

“We engaged Podesta when we had to get in the game of harbor deepening,” he said. “We needed to find a firm that had Democratic connections because, with the earmark ban, we had to be in the president’s budget. It’s not easy to find firms with Democratic connections in the state.”

McAlister, in a joint statement with Quinn, said the two companies “are paid by monthly retainers as general consultants to the ports. We advise them on strategic communications and public relations issues. We do not lobby. But we help educate the public on the key role the (SPA) plays in job creation and its importance to the statewide economy. “

McAlister said “the great majority of funds that have been paid to us over the years have been ‘flow through’ expenses for television and radio air time and media production costs.”

Such consulting work is drawing scrutiny from members of the SPA’s board of directors, who said this month they want to know more about the agency’s finances and annual budget.

“I’d like more information on who’s doing business on our behalf,” board member Rick Stanley said. “Are there any conflicts? Are the amounts right?”

Newsome said the consultants, some of whom were hired before he arrived at the SPA in September 2009, help the agency stay in touch with South Carolina residents through image campaigns, marketing and promoting last year’s economic impact study showing the port’s importance to the state’s economy.

“We have a responsibility to the people of South Carolina — they are our shareholders and we obviously want to remain in touch with how they perceive us and to selectively make some statements about what we do for the state,” Newsome said, adding that the flat monthly fee helps both sides know upfront what their expenses or revenue will be during the coming year.

Crangle takes issue with the documentation for such work, saying the consultants’ invoices should “specify the subject matter of the services provided” with an hourly breakdown of who did what for the money.

“Flat-fee consulting contracts should never be agreed to in the first place,” he said. “They (consultants) should have to say what they did for every hour that is billed, just like an attorney would have to do. And only after that bill is scrutinized should it be paid.”

Newsome said hiring such consultants on an hourly basis or through competitive bidding would be impractical.

“That’s hard to do because you’re paying for expertise, knowledge and professional competence,” he said. “When you go on an hourly basis, you’re paying so much to bring them up to speed. And you don’t always have the commitment from them to do their best work.”

Those on retainer, however, “are working for us 24/7. If they’re in a congressional club and they see a senator that’s important, they talk to them.”

Contractless agreements such as the ones the SPA has with its consultants are not allowed under the state’s procurement laws, according to Eddie Gunn, chief of staff for South Carolina Comptroller’s office.

However, the SPA is exempt from those laws, which allows the maritime agency to purchase goods and services at its own discretion. The SPA has its own procurement policy, but consulting services are not required to be put out for bids.

Newsome said the SPA “is a business that operates on business terms, with a lot of competition and a lot of things we’re doing that we don’t want out in the public domain” because of trade secrets or economic development efforts. He said the agency solicits competitive bids whenever practical.

“We think it’s good practice as a state agency to mirror that (state procurement) code to the extent that we think it works for us,” he said. “But there are areas where we’re buying cranes or things like that where we might go a different direction, or times when we have to move fast. Our goal is to get the lowest price for the best services we can get.”

There is no formal review process for the consultants’ work, but Newsome said he and key staffers discuss the need for such services during each year’s budget process. For example, he said the SPA likely will curtail some federal lobbying after the harbor deepening project is finished by 2020.

“I like to think we question everything we do from A to Z,” Newsome said. “We’re a restless organization in that sense. My job is to review everything and make sure we’re getting value for it.”

Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_