Editorial: Outlaw questionable rebates SC colleges receive from vendor contracts

07/19/2014 9:00 PM

07/18/2014 5:36 PM

WHAT DO you call it when a public college extends lucrative contracts to vendors with the requirement that the companies provide large gifts that are funneled to foundations or used to pay for projects unrelated to the agreement?

While colleges may portray them as “rebates” or “gifts,” these are kickbacks, pure and simple. And given the competitive nature of some multi-million-dollar public contracts, this creates an environment ripe for graft and corruption, where the size of a gift — or bribe, if this practice gets out of hand — trumps the quality of service.

That’s why South Carolinians should be troubled by the state inspector general’s report criticizing S.C. State University for its handling of rebates from vendor contracts. But it’s not just S.C. State. While the Orangeburg school was chided, the report said other state colleges also engage in the questionable practice of requiring gifts from companies they give state business.

The inspector general said vendor contract rebates are “common practice” at colleges and that a “witness with broad experience said universities seem to be driving this practice rather than vendors.”

The inspector general had the most concern for S.C. State’s practice of directing some of the funds from rebates — $2.3 million over a three-year period — to foundations with no public oversight. But we believe the overall practice is suspect and the General Assembly should outlaw it.

Public colleges — and state agencies, if they engage in such behavior — shouldn’t be allowed to require or pressure vendors into giving kickbacks for being awarded public business. Whether the “rebate” goes through a foundation or stays with the public entity, it still allows colleges to steer money to whatever project they prefer without that expenditure being open to the normal scrutiny all public spending should receive.

As the inspector general explained it, colleges shouldn’t clutter contracts with side deals that lead to rebates that will pay for projects unrelated to the contracts. Instead they should “get back to old fashion management of driving a hard bargain and then making sure you get what you paid for.”

S.C. State’s food service contract includes a $5 million rebate for a wellness center; a $200,000 gift to the school on the first day of the contract; a $350,000 annual contribution thereafter; $800,000 for upgrades on campus; and $710,000 to make over dining halls.

A spokesman said that while USC receives profit sharing and other funds from contracts, it doesn’t direct any of it to the school’s foundations and that the money goes for uses related to work by the vendors.

Perhaps there are some circumstances under which rebates are appropriate; if so, the Legislature could spell out strict requirements in the law for allowing them, or else require agencies to submit them to an outside entity for vetting. But the practice of soliciting unregulated rebates should be ended.

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