Rapid City advertising executive Robert Sharp is finally getting a chance to compete for a multimillion-dollar state tourism contract that for years has gone to a Sioux Falls advertising firm without bids or competitive proposals.

A new state law set to take effect July 1 requires the state Department of Tourism and Economic Development to seek competing proposals for the tourism promotion services that have been typically been awarded to Lawrence & Schiller of Sioux Falls. Sharp and his advertising firm intend to compete for the next contract, for work beginning with the 2010 tourism season.

"We're excited about it. We're encouraged by it. And we're going to give it our best shot," he said. "This is one giant step for the state of South Dakota, and it's going to benefit everyone."

The law was, in part, triggered by a Rapid City Journal series in December that revealed the breadth of no-bid contracts given out by the state, and the thousands of dollars in political contributions given to Gov. Mike Rounds by company executives who receive those contracts.

That debate focused attention on the state's lucrative no-bid contract system, which was addressed in the new law, sponsored by Republican state Rep. Noel Hamiel of Mitchell, a former newspaper editor and publisher.

"That was sort of the flash point," Hamiel said. "But it is much broader than that."

Because of the change in law mandated by HB1260, Hamiel estimates that 100 or more services contracts with the state will be opened to competition. Although not required to accept the low bid, agencies are required to issue requests for proposals (RFPs) and provide information on those contracts on the state Web site. Previously, contracts could be awarded by state agencies to favored firms without multiple proposals.

Hamiel thinks that competition will help assure taxpayer dollars are spent wisely and the publishing requirements will improve public access to government.

"It will mean better government, because the government will get better ideas, better proposals from a wider spectrum," he said. "And this is an open-government bill. I think that's a dynamic combination: saving taxpayers' dollars and more openness in government."

The contract issue can be confusing. Most state contracts for materials and equipment and major construction work are awarded on the low-bid and competitive proposals, and have been for years.

But state agencies have traditionally had more latitude in awarding professional services contracts, including consulting, medical, legal and advertising services. Agencies could require competitive bids and proposals and in some cases did. But they also have simply awarded contracts to selected providers, such as tourism did with L&S, arguing that the Sioux Falls firm had proven itself for experience, quality work and productive results.

Prior to the last legislative session, there were about 1,800 active professional services contracts with the state. Hundreds of those were presumed to be awarded without bids or official requests for proposals, "presumed" because state officials didn't keep track of the number of no-bid contracts awarded.

Prior to the last legislative session, Rounds rejected the notion that the contract system was flawed or based on favoritism. He said firms like L&S were doing good work for the state, and were more than worth the contracted amounts. He also denied that political contributions had any role in awarding contracts.

But others, including Hamiel, came into the 2009 legislative session intent on bringing more openness and competition to those contracts. The governor ended up signing HB1260 after his staff worked with Hamiel in shaping it. That work included concessions that began with the original writing of the bill, continued through the legislative process, and troubled some original supporters.

Hamiel began by including professional services contracts of $10,000. That was raised to $25,000, then $50,000. He also exempted legal and medical services in the first version of the bill, a pragmatic move he considered to be essential to bill's chances of being approved.

"Honestly, I excluded legal and medical from the onset, because I didn't think I could get the bill passed if they were in," he said. "I have some understanding of the science of what's possible."

Amendments to the bill exempted professional services of a "unique nature" considered to be the "only practicable source" as well as those needed on an emergency basis to protect health, public safety and natural resources.

Democratic state Sen. Scott Heidepriem of Sioux Falls, a critic of the no-bid, no-competition policy for some state contracts, signed on as a Senate sponsor for HB1260 and ended up supporting the bill. But he also believes the exclusions will limit the benefits of the new law.

"I think it's an example of a bill whose exceptions swallowed the rule," Heidepriem said. "As it is now, the vast majority of professional services contracts will still not be subject to a request for proposals."

It remains to be seen how the change will affect even those contracts covered by the law. The tourism contracts remain a case in point. Tourism Secretary Rich Benda of Pierre said the fall and summer tourism contracts will be combined into one contract for three years under an RFP that went out last week to previous service providers or others who have registered to receive contract notices from the state procurement Web site.

Prior to July 1, the contract RFPs should be available for public review on the state Web site.

The amount spent on the state tourism contract each year depends on how much money the state receives from tourism and Deadwood gambling taxes. Benda estimates that it could range from $6 million to $8 million each year.

"It depends on how the money comes in," he said. "If the economy is hurting, we'll cut back."

More than 80 percent of that state money provided in the contract is likely to "pass through" the agency awarded the contract to make direct media purchases. But the remainder is still serious money, and the tourism work is still considered a plum in the state's advertising industry.

Even so, Media One Advertising/Marketing President John Fiksdal of Sioux Falls was uncertain if his firm would compete for the tourism contract. Preparing such a proposal is expensive and time-consuming, and Fiksdal is wondering about "the willingness of the tourism team to actually move that account." The law doesn't guarantee that all other proposals will receive equal consideration from tourism, but its approval is encouraging, Fiksdal said.

"Mandated review isn't going to change the world overnight," he said. "In the long run, however, providers will know that their work will be scrutinized and inefficiencies will come to light. It's better for the client; it's more challenging for the service provider."

As the favored providers through the Rounds administration, L&S executives are eager to compete for a contract they have been receiving without competitive proposals, company president Scott Lawrence said. It will mean more work and expense without any guarantees of winning the contract, but it also will make the firm sharper, he said.

And Lawrence hopes it will settle the questions raised in the Journal series about favoritism.

"Trust me, as much work as it will be, I'm glad there's a process so we don't have to go through what we went through last fall," he said. "We feel that we've done outstanding work for the Department of Tourism. I think the numbers verify that. We've beaten the national average. But I also think it will be good for the process to take a look and see what's out there."

Even with his reservations, Heidepriem is glad some change will come to a contract system he still believes needs more.

"You know what, any step forward is a good thing," he said. "This is a step."

More steps are likely in the future, including whether medical, legal and other services should remain exempt from the competitive proposal requirement, Hamiel said.

"I fully expect this legislation to be examined after the state agencies have had a chance to work with it for a while," he said. "If somebody comes forward and says legal services should be included, I'm sure we'd look at that."

Contact Kevin Woster at 394-8413 or kevin.woster@rapidcityjournal.com.