published Saturday, December 14th, 2013

State Building Commission curtails building contracts

JLL's contracts

The Department of General Services signed a $1 million deal with Jones Lang LaSalle in March 2012 to study state office buildings. Through a series of amendments, that deal eventually grew into a $10.7 million agreement to lead the reorganization of state office space and to represent the state in lease negotiations.

One of the firm's most controversial recommendations has been to close six state offices. Critics say the firm stands to benefit if state buildings are closed.

A state panel balked at a proposal to give real estate adviser Jones Lang LaSalle more work and instead approved a plan to wind down part of the state's two deals with the firm in the wake of a scathing audit that highlighted potential conflicts of interest.

The State Building Commission voted this week to phase out its initial agreement with Jones Lang LaSalle to study the use of state buildings by the end of the year, and it agreed to suspend commissions the firm collects when it negotiates leases for the state until rules are put in place to keep the firm from profiting from its advice.

The plan, put forward by the Department of General Services, came after the Haslam administration had suggested to the commission that it wanted to expand Jones Lang LaSalle's advisory role and pay the firm an additional $5.3 million, despite rising concerns about the state's relationship with the firm.

That recommendation followed an audit last month that found that in at least two instances, JLL was positioned to profit from its own recommendations. Gov. Bill Haslam defended the arrangement, saying the firm ultimately had saved the state money.

But members of the commission, including Lt. Gov. Ron Ramsey and House Speaker Beth Harwell, were uneasy about expanding the arrangement without a new round of bidding. Through private meetings, they halted the expansion proposal before it was presented Thursday, noting the scrutiny that has arisen around the state's relationship with the firm.

"We were tired of expanding, expanding, expanding without [rebidding]," Ramsey said. "I don't want to even imply that I think there's something wrong. There's not. But at the same time, there has to be transparency."

Kelly Smith, a spokeswoman for the Department of General Services, confirmed that administration officials had weighed an expansion but ultimately decided not to move forward without rebidding.

"What's important to remember is this was just discussed," she said. "It was not brought forth."

Little effect

The decision does little to change Jones Lang LaSalle's relationship with the state. The firm will continue to negotiate leases for the state, and it will continue to lead the "T3 Project," a reorganization of state office buildings. A second contract that made the Chicago-based firm the state's property manager also was not affected.

But the vote does represent a check on the Haslam administration's affiliation with Jones Lang LaSalle following an audit released last month by state Comptroller Justin Wilson, who sits on the State Building Commission. Haslam had invested in the company before he placed his assets in a blind trust and now says he doesn't know whether he owns stock in JLL.

Wilson's office noted potential conflicts of interest in Jones Lang LaSalle's dual role in advising the state to shut some office buildings, including two in Chattanooga, while also representing it in negotiations to lease office space. The comptroller's audit also faulted the Department of General Services for expanding an original $1 million agreement with JLL to perform a study of state office buildings into a $10.7 million deal through a series of amendments, without putting the contract out again for public bidding.

Each of those amendments had been approved by the State Building Commission, though members raised reservations as it expanded.

"We had said on the last amendment that this was an unusual way to proceed," Harwell said. "I was not pleased."

Despite the comptroller's audit and those concerns, the Haslam administration put together a plan that would have expanded the contract yet again by asking Jones Lang LaSalle to review the state's "nonrevolving fund" real estate. These include assets, such as parks and prisons, that are not ordinarily under the management of the Department of General Services, Smith said.

Haslam has said the firm will save the state millions of dollars. Smith reiterated that point Thursday.

"Through this contract we have been able to address some serious life safety issues and a lot of deferred maintenance, as well as improve the quality and efficiency of state office space, all while saving a considerable amount of taxpayer dollars," she said. "We are extremely proud of the services JLL has provided."

A spokesman for Haslam deferred questions to General Services.

Contact Chas Sisk at 615-259-8283 or csisk@tennessean.com.

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