Policymakers | Trusteeship

No public bidding on major University of Nebraska contracts

OMAHA WORLD-HERALD   |  February 15, 2016 by Kate Howard

The University of Nebraska is undergoing a renaissance.

At the medical center, NU’s biggest-ever project — a $323 million cancer center — promises to bring high-paying jobs and international prestige. In Lincoln, a $188 million research park is promoted as a home for cutting-edge innovation.

At the University of Nebraska at Omaha, a new $88 million arena has become a hub of school pride, while new dorms have helped transform the Pacific Campus into an upscale, urban residential setting.

All of the projects have risen up with millions in private support, most notably from philanthropist Walter Scott Jr., who is widely considered one of Omaha’s most influential civic leaders.

But the state’s public university has done more in private than line up Scott and other donors:

» NU has built about $691 million in new facilities without the university issuing public bids, even though public bidding is considered to be a government standard and about $264 million in public money has gone toward building costs.

» To develop the projects, the university has set up private corporations and made other arrangements that share oversight with the private sector donors and that shield contracts and spending details from the public view required by the state’s open records law.

» All of the development work has gone to Tetrad Property Group, a firm chaired by Scott’s son, David Scott. Most of the construction management contracts have gone to Peter Kiewit Sons’ Inc., the Omaha-based, Fortune 500 construction company that Scott led for nearly two decades before his 1998 retirement.

University officials say their private business arrangements are legal and in the university’s best financial interests.

The World-Herald found nothing in Nebraska’s laws that expressly addresses no-bid contracts under such business structures — either allowing or prohibiting the practice. The university’s move toward privacy makes it difficult, if not impossible, for the public to examine independently whether the university is getting good financial deals.

Public bidding is typical for government agencies — even when private donations are involved. In other situations, it is NU’s policy and practice for construction. When big government contracts are at issue, bidding is seen as an equalizer for competing firms to avoid favoritism, and check on value when spending the public’s money.

The situation as a whole raises questions about the possibility that Scott’s status as a donor is influencing the business decisions of NU officials.

University officials say it doesn’t.

NU President Hank Bounds said there is no understanding that Scott’s generosity would garner contracts for his affiliated interests.

“Any story that is not about the tremendous success of this public-private partnership really would be a mischaracterization of the relationship that exists,” Bounds said.

Scott is known for a giving style called “high-engagement” philanthropy, which brings hands-on oversight along with major financial contributions. A donation from Scott is widely seen as a stamp of approval that leads to other philanthropists’ donations, and he has been involved on some level in nearly every major Omaha civic project in the past two decades.

His footprint is equally large at NU, where he has funded at least $110 million of student scholarships, academic programs and capital construction projects for the university since 2005 through his foundation. The Suzanne and Walter Scott Foundation built and now operates most buildings on UNO’s Pacific Campus.

Walter Scott declined to comment, as did Calvin Sisson, the executive director of the Scott foundation. Tetrad CEO Zach Wiegert did not respond to attempts to reach him for this article.

Sisson referred questions about the Pacific Campus to university officials: “The university has done a great job with their campus, and I would defer to them as to how they were able to accomplish the redevelopment.”

Regent Hal Daub of Omaha noted that the Board of Regents approved all of the projects at public meetings in “the light of day.” He said the regents and other university leaders provide oversight and management that taxpayers can trust.

“I think they (taxpayers) should expect that there’s some responsible entity or elected official that has the ability to make sure things are done right,” Daub said.

There’s no question that both taxpayers and private donors have major stakes in the cancer center, Lincoln’s Innovation Campus and UNO’s Baxter Arena.

At UNMC’s Fred & Pamela Buffett Cancer Center, scheduled to open in 2017, funding includes $90 million from the State of Nebraska, the City of Omaha and Douglas County. The cancer center also has received an investment of $73 million from Nebraska Medicine, the hospital associated with UNMC, and philanthropic donations of $160 million. The Scott foundation was a lead donor for the project, and the research tower will bear Suzanne and Walter Scott’s names.

The Innovation Campus has about $89 million in public money, $5 million in donations and $94 million in private capital investment.

Construction of Baxter Arena was split about evenly between the university and donors, including $5 million from the Scott foundation. The City of Omaha paid for $6 million of infrastructure around the arena.
Beginning in 1999, the university started an arrangement that allowed Tetrad, Kiewit and the Scott foundation to develop, build and operate residence halls on the Pacific Campus without a public, competitive bidding process. Three dorms have been built through that arrangement.

A fourth residence hall, to be privately owned by Tetrad, has been approved by the NU Board of Regents — again without bidding.

Bounds, who became the university system’s leader last April, said he reviewed the Pacific Campus dorm arrangements after inquiries from The World-Herald began in June. He said he found them to be legal and proper. The exclusive arrangements with the Scott foundation, many of which included significant donations to construction, allowed UNO to launch housing from scratch, he said.

Bounds later declined interview requests to answer questions about business arrangements surrounding the cancer center, Innovation Campus and Baxter Arena.

Nebraska state law requires competitive bidding on public construction projects and purchases by state agencies. NU is exempt from that state law, but it is still required to bid purchases above $150,000 under its own rules, which were approved by the Board of Regents.

The university has options that allow it to use a more flexible, subjective selection process for major construction contractors — not strictly choosing the lowest bidder. But even then, the process requires an open, public request for interested firms to apply.

In the dorm projects, the university says that bidding was not required because NU simply leased ground to the Scott foundation or Tetrad and allowed them to develop and operate the projects. The university and the foundation share dorm revenue on two projects; the foundation or Tetrad keeps nearly all of the revenue on two others.

For the cancer center, Innovation Campus and Baxter Arena, the Board of Regents approved the creation of nonprofit development corporations. Board members for the corporations maintain that the entities are independent of the university and not required to use public bidding. The structure was designed with the goal of completing the projects on time and on budget, the board members said, with input from the projects’ stakeholders and donors.

When The World-Herald asked the university if those three projects were publicly bid, they referred questions to the university-appointed leaders of the development corporations.

NU Regent Howard Hawks, who is chairman of Baxter Arena’s development corporation, said in a statement — which was provided by an NU spokeswoman — that the new corporation “is not required by Nebraska law or Board of Regents policy to use a particular procurement process.”

When asked why a development corporation overseeing a project would mean the university was relieved of bidding requirements, Hawks referred questions to NU’s general counsel, Joel Pedersen, who declined to be interviewed.

The corporations are closely tied to the university:

» Many of the same people who would oversee a project for the university — the university president, chancellors and regents — sit on the boards of the development corporations.

» Nearly all the non-university board members sit on the NU Foundation’s board of directors or are trustees of the NU Foundation.

» All the board members are appointed by NU regents, except two for the cancer center who were chosen by the Nebraska Medical Center.


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