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Virginia Tourism Corporation has pattern of no-bid contracts

An aerial view of a race track with a "Virginia is for Lovers" sign above the stands.
The Office of the State Inspector General is investigating a nearly $275,000 contract the Virginia Tourism Corporation signed with an ad firm connected to Gov. Glenn Youngkin for a video that prominently features the governor. (Photo: Screenshot)

The Virginia Tourism Corporation signed more than 125 no-bid contracts collectively worth up to $11.8 million since the beginning of 2017, according to information obtained by VPM News through public records requests.

The state tourism office didn’t conduct a public bidding process when it paid for vendors to lobby lawmakers in Congress, administer federal pandemic aid, market Virginia to Black tourists and add tourism-related decor to a reception outside former Gov. Ralph Northam’s office.

In most cases, the decision to spend hundreds of thousands of dollars was justified in a paragraph on a single-page form signed by VTC President Rita McClenny. And in one case, more than a dozen contracts went to a marketing firm whose owner is a Democratic donor who said he personally knows Northam and former Gov. Terry McAuliffe, though there’s no evidence to suggest wrongdoing.

The information adds more context to an ongoing investigation by the Office of the State Inspector General into a nearly $275,000 contract VTC signed with an ad firm connected to Gov. Glenn Youngkin for a tourism video that prominently features the governor.

A spokesperson for the inspector general declined to comment on whether the office was looking into other contracts.

Shruti Shah, president of the good-governance group Coalition for Integrity, said while certain situations — like procuring niche services or software — call for no-bid contracts, the frequency of their use warranted a deeper look.

“I would hope that the state inspector general expands their review to look at other contracts and also look at the policies and procedures,” Shah said.

The taxpayer-funded tourism office initially signed a no-bid contract with Poolhouse, an ad firm best known for its work on behalf of GOP candidates, in early April to produce a “governor’s welcome video” that would be displayed at airports and welcome centers across the state. While campaigning for office, Poolhouse produced more than $1.5 million worth of ads for Youngkin — and continues working with the governor.

A VTC form justifying the Poolhouse decision signed by McClenny noted staff hoped to produce “several videos” that would leverage “the Governor’s high media profile in Virginia and elsewhere.” It noted that while other firms could do the work, Poolhouse was “uniquely positioned based on its previous experience in working with the governor to quickly establish a working relationship with him.”

VTC solicited bids from two other firms only after members of Youngkin’s office pushed for tourism officials to do so. Poolhouse was the only vendor willing to do the work within the timeframe specified by the tourism board. The resulting video was launched in September and will have a wide audience: Dulles International Airport in Northern Virginia alone received 1.9 million travelers that month.

Exempt from state law

Unlike most public bodies, VTC is exempt from state procurement laws and follows its own procurement rules, which were last updated in 2017. In the case of Poolhouse, McClenny previously told VPM that state law gave her the power to overrule those policies at her discretion.

VTC’s rules allow the tourism office to skip the usual bidding process in certain cases, including marketing services related to trade shows, market analysis, writing services and procuring stock photography and film footage.

Mike McMahon, vice president of operations and finance at VTC, wrote in an email last month that all of the contracts complied with VTC’s procurement policy.

“Market research, economic analysis, marketing, and outreach sound like very routine services, but in fact, represent a broad range of services that VTC utilizes for marketing analyses and effectiveness,” McMahon wrote. “Historically, we tried to issue [requests for proposals] and [invitation to bids] but found that these services were not conducive to a bidding process. Just because a firm does market research, does not mean they specialize in services in the tourism hospitality industry.”

In other cases, including three contracts worth up to $1.4 million awarded to the accounting firm HORNE, McMahon said time didn’t allow for a full bidding process. VTC didn’t have the internal resources to set up a process to review and distribute tourism-related federal pandemic relief funds, he said, and HORNE was recommended by Tennessee's top tourism official.

“A formal RFP process would have taken 3-6 months minimum just to select a vendor,” McMahon said.

Shah, the good governance expert, said some situations don’t allow for a full bidding process. Some services are so specialized, she said, that only one vendor offers them. Other cases, like a natural disaster, sometimes require dispensing with ordinary procurement rules to move quickly, Shah said.

She said rules should be baked into an organization’s policies, which should avoid large loopholes.

“If your policy is not robust, maybe that's what the inspector general should look at as well,” Shah said.

Other no-bid contracts at VTC

The pandemic also spurred VTC to hire the Washington, D.C.-based lobbying firm Capitol Counsel in March 2020 to “see if any tourism industry relief programs were available and if not, to advocate for them on our behalf,” McMahon said.

He said the contract, ultimately worth $180,000, ended up lasting nine months.

In the case of another large no-bid contract — a $1.25-million incentives package with Air India to create a direct flight between Dulles airport and Delhi — VTC was directed to use the money by language in the 2017 state budget.

VTC also awarded a series of 14 no-bid contracts since 2017 totaling more than $925,000 to Richmond-based Johnson Marketing to help VTC’s outreach to Black travelers. Johnson Marketing CEO Kenneth Johnson has contributed more than $55,000 to Democratic politicians, including Northam and McAuliffe, since 2001.

McMahon said VTC hadn’t received any outside input in awarding contracts to Johnson. And in an email, Johnson said he personally knows both Northam and McAuliffe but that they did not, to his knowledge, have any influence on the procurement process.

In another case, VTC awarded Hargrove LLC a contract worth nearly $50,000 in 2018 to add tourism-related decoration to the reception area outside Northam’s office. The Democrat’s staff requested that work from VTC, according to McMahon.

“Hargrove was selected based on their technical, creative direction and execution as well as their experience with managing a major [Northam] Administration event and was therefore familiar with the Administration’s needs and requirements,” he said.

Ben Paviour covers courts and criminal justice for VPM News with a focus on accountability.
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