Bluegrass Area Development District awards workforce contract to itself

The Bluegrass Area Development District building at 699 Perimeter Dr. in Lexington, Ky., on Monday, March 8, 2014.
The Bluegrass Area Development District building at 699 Perimeter Dr. in Lexington, Ky., on Monday, March 8, 2014. Herald-Leader Staff

Correction:  This story incorrectly characterized a request for proposal to administer a federal grant awarded to the Bluegrass Area Development District. According to the proposal, the total amount of the grant will be $11.4 million from Dec. 2, 2015, to Sept. 30, 2017, which includes carryover money from 2014. District director David Duttlinger said the annual amount of the grant in 2016 would be $4.8 million. 


A group of elected officials who oversee the Bluegrass Area Development District picked themselves over two other bidders Thursday to manage an 18-month grant worth $11.4 million for regional workforce development.

The only dissenting voice was Lexington Mayor Jim Gray, who said he wanted more information on the scoring process for the bids, given two audits of the district that found questionable spending of workforce dollars and numerous conflicts of interest.

The district has given itself the contract to manage workforce development for decades without competitive bidding, but opened the process to competitors this year because of past scandals. Many of the previous problems were blamed on former district executive director Lenny Stolz, who left the organization.

State officials changed the process for awarding the contract last year, and two other companies — Community Action of Kentucky and the National Able Network of Chicago — submitted written bids.

Area development districts were created to assist local governments in regional planning for economic growth. The Bluegrass ADD, in Lexington, serves 17 counties in Central Kentucky. It has an annual budget of more than $24.4 million, 90 percent of which comes from federal and state grants. Its executive committee or governing board is made up of the chief elected officials of each of those counties.

The grant breaks down to about $4.8 million per year, said David Duttlinger, district's executive director. The $11.4 million includes some carry-over funds from 2014.

In a subcommittee meeting, Gray had ranked the candidates differently than the majority of other county leaders, and asked for interviews with each company, but he was outvoted. Each company was ranked in five areas. According to the scoring sheet, the development district had the highest score in every area but “fiscal integrity,” where it was outscored by Community Action of Kentucky.

“This is a large contract that affects thousands of citizens throughout the region,” Gray said. “I felt we had a responsibility to go beyond the normal standards to demonstrate diligence, objectivity and credibility.”

Rob Jones, executive director of Community Action of Kentucky, said he wants more information.

“We will be looking into the process,” he said. “We want to ensure that it was fair and once we have additional information we will decide on possible further action,” such as a bid protest.

My concern is what was the real process and what were the real criteria? There are lots of clouds out there, lots of questions. This process should be credible and transparent so no one can ask that question.

Kim Menke, chairman of the Bluegrass Workforce Investment Board

Another person concerned about Thursday’s vote was Kim Menke, manager of external affairs for Toyota Motor Manufacturing Kentucky and chairman of the Bluegrass Workforce Investment Board.

“In business, we have certain best practices to make the best decisions,” he said shortly after the vote. “Did we follow those? I have not seen that. My concern is what was the real process and what were the real criteria? There are lots of clouds out there, lots of questions. This process should be credible and transparent so no one can ask that question.”

The questions stem from former State Auditor Adam Edelen’s investigation, which found numerous problems in the relationship between the district and the workforce board. The district appoints members of the workforce board, which in turn is charged with directing how the $10 million in workforce development money is spent by the district under a contract that the district awards itself.

The state followed up with another investigation, finding $2.8 million in questionable costs, many relating to workforce programs. The district’s response in still under review by the state.

Last January, Workforce Investment Board Chairman Daryl Smith resigned because of what he said were continuing problems between the two entities.

Smith, who works in economic development for Kentucky Utilities, said when he resigned that he thought the situation was worse than when the audit was issued.

“From my private-sector perspective, I have witnessed what I believe is a disregard for federal law,” he said at the time. “I see a culture of organizational conflicts of interest with related-party insider contracts that have choked out competition when I view open and fair competition as a fundamental tenet of federal grants.”

However, 16 of the 17 leaders in the counties that make up the development district disagree that there are any problems with the district awarding itself the contract.

“I feel fairly confident this was a good process,” said Garrard County Judge Executive John Wilson. “It is fair and we have to trust those numbers.”

Other elected officials pledged better oversight of both the district and the Workforce Investment Board, whose members they appoint.

Charles Payne, who first raised questions about the district as president of the River Park Neighborhood Association said he thinks the problem is structural, since county leaders oversee both the district and the workforce board.

“I think the current organizational structure makes it impossible for any local elected officials to act in an unbiased fashion,” he said.

Meanwhile, there is desperate need for better-trained employees in the region. A July report from the Kentucky Chamber of Commerce found that despite hundreds of millions of dollars spent, only 8 percent of employers statewide said they were satisfied with the skill level of the state’s workforce.

“We have more opportunities than solutions,” Menke said.

Linda Blackford: 859-231-1359, @lbblackford