Introduction

Under a 1945 law, the Board of Education and Services for the Blind (BESB) is authorized to operate vending machines in all state and local public buildings. Until the late 1990s, BESB contracted with dozens of vending machine contractors to service machines in a number of state buildings and a few local buildings. In 1999, BESB signed a statewide contract with a single vendor and began expanding the number of locations under its operation, especially in town and local school buildings.

Prior to the statewide contract, BESB rarely exerted its right of first refusal to operate in local government buildings. As a result, BESB's efforts to start enforcing the requirement came as a surprise to many people. Local government officials expressed concern about the loss of product choice as well as revenue for local activities. BESB eventually agreed to give up commission revenue from local schools, but it wanted the locations to continue operating under the state contract in order to create a large sales base for the contract.

In March 2002, the Legislative Program Review and Investigations Committee voted to study the BESB vending machine program. In particular, the committee wanted to determine whether state policies and procedures related to BESB vending machine operations provide adequate accountability and promote the most efficient and effective use of the revenues generated. The committee also sought to clarify whether the process BESB used to enter into the statewide food and beverage vending machine contract met state requirements.

The committee found BESB used a multi-stage, publicly advertised process to select the contractor for the statewide food and beverage vending machine contract. However, BESB did not follow all of the procedures normally used by a state agency to enter into such an agreement because BESB believed those requirements did not apply to contracts that produce revenue. In terms of contract oversight, the committee found BESB failed to take the steps needed to ensure the program operates uniformly and the vendor complies with all provisions of the agreement.

The committee found the parties benefiting from the program vary considerably. Factors affecting the results include the scope of vending services at a location, whether BESB has made contact with the administrators of the site, and if BESB has voluntarily waived revenue. BESB also has been slow to spend the revenue it receives, with the year-end balance in the nonlapsing account growing from $228,000 at the start of FY 98 to $2.7 million at the start of FY 03.

The key recommendations of the program review committee call for:

• reiterating the intent of the vending machine program is to provide funds for the creation and maintenance of employment opportunities for blind individuals;
• improving contract management through the adoption of operating procedures and increased oversight of vendor compliance with all contract provisions;
• limiting mandatory participation under BESB's vending contracts to state government locations;
• revising the allocation of program revenue to ensure money does not go unused for long periods of time; and
• requiring clarification of the products and services that can be offered for sale in state buildings.

The committee further recommended that if BESB cannot demonstrate it has taken specific steps to manage the statewide vending machine contract by March 1, 2003, then BESB shall become a subdivision of the Department of Social Services (DSS). This change would provide BESB with the management and oversight assistance it needs to achieve its program goals.

Methodology

Program review staff conducted multiple interviews with BESB staff involved with the vending machine program and reviewed the agency's files related to the statewide vending machine contract process in detail. In September 2002, the committee sent a survey to all municipalities asking for information about the placement of vending machines in town facilities as well as communication between BESB and the towns. Separate information was requested for school and general government buildings. Responses were received from 105 towns for at least one of the building categories.

On November 14, 2002, the committee held a public hearing. Representatives of BESB, the statewide vending machine contractor, other vending machine operators who previously had contracts with BESB, and representatives of local government all testified. The committee adopted the findings and recommendations contained in this report on December 18, 2002.

Report Format

The report contains two chapters. The first provides background information about BESB and its operation of vending machines in government buildings. The second presents the committee's findings and recommendations regarding future operation of the program.

Appendices A and C contain additional information about the history and structure of BESB. Appendix B presents a detailed chronology of the actions taken by BESB and other state entities during the multi-year process leading to the current statewide food and beverage vending machine contract. Appendix D is an excerpt from existing requirements state agencies are to use when entering into contracts, while Appendix E summarizes BESB efforts to monitor vendor compliance with specific provisions of the current statewide contract. Appendix F presents the results of the program review committee's survey of municipalities.

Agency Response

It is the policy of the Legislative Program Review and Investigations Committee to provide agencies subject to a study with an opportunity to review and comment on the recommendations prior to publication of the final report. Appendix G contains the response from the Board of Education and Services for the Blind.