Why Value Procurement Is Critical to I-9 Compliance

In the world of procuring goods or services, there is an ongoing debate between value procurement versus price procurement.  As applied to the field of I-9 compliance though, this critical debate can mean the difference between exposure to hundreds of thousands of dollars in fines and other risks or reducing overall I-9 non-compliance risks.

In recent articles, and in light of consistent reports from OSC, OCAHO and ICE regarding I-9 compliance related fines and penalties, we’ve emphasized the need for organizations to conductdue diligence when evaluating electronic I-9 vendors.  Procuring an actual vendor though, can be quite an involved and lengthy process.  Procurement usually includes establishing a purchasing life cycle, setting standards, researching vendor’s reliability, solvency and trustworthiness and analyzing overall value vis-à-vis price. To be realistic, price can be an important factor in all procurement processes.  But as all too often is the case in I-9 penalty cases, price procurement can leave organizations exposed to many other liabilities.

Example: Minnesota State Colleges and Universities

Minnesota State Colleges and Universities procurement process for an I-9 vendor back in 2009 which ultimately led to a security breach of employee I-9 records on the internet. After a formal review by the Minnesota State Office of the Legislative Auditor, it was determined that Minnesota State lacked a formalized I-9 vendor review process.

According to the report, Minnesota State had selected its I-9 vendor overwhelmingly because the low price offered by the I-9 vendor, which was four to five times lower than competing vendors’ prices, and because the I-9 vendor waived “set-up” fees.  The Office of the Legislative Auditor also determined there was a lack of a meaningful assessment of the I-9 vendor’s security claims made in its marketing materials and no meaningful review of contract provisions to safeguard encrypted data provided by the Minnesota State to the I-9 vendor.  What ensued was a legal battle between the two parties and a complaint filed by the Federal Trade Commission against the I-9 vendor (which led to a settlement).

Focusing on a vendor’s price offerings as the primary motivation, at the expense of a thorough vetting of a vendor, can lead to expensive lessons learned.  This is where proponents of value procurement argue that organizations will get a better return on investment when value (rather than price) is the central focus during procurement.  Value is “a fair return or equivalent in goods, service, or money for something exchanged.”

For example, if the procurement process was fixated on a low price, important considerations to determine what value the service/product will bring to the organization will be completely eclipsed.  A vendor could fail on all counts (below) yet still survive a Request for Proposal due to its low price.  While some might call this approach “penny wise pound foolish,” the results, as described in the Minnesota State example, can be costlier in the long run. On the other hand, value procurement focuses on the overall fit a vendor has with the company and the long-term benefits the company will gain by partnering with that vendor:

  • Does the vendor’s solution fit with the organization’s needs?  If not, what kind of flexibility, customization or configuration is offered?
  • What type of human capital will the vendor provide for substantive assistance?
  • What type of legal expertise does the vendor possess to ensure its software complies with federal (and state) guidelines each time the law changes?
  • What experience can the vendor bring in migrating paper or electronic I-9 records?
  • What data privacy protections does the vendor offer?
  • What cybersecurity protections does the vendor offer?
  • What additional protections to clients does the vendor offer?

I-9 compliance is more than just a routine business process because it requires considerations from data security experts, legal experts, and compliance experts, in addition to procurement team members, and because non-compliance is costly to an organization.  The risks are numerous and come from random government inspections, whistleblower complaints, employee complaints, citizen complaints, and in-depth government inspections triggered by the preceding sources.

Organizations whose procurement teams recognize the importance of value procurement are in the best position to reap the greatest value for their investment.  They understand the nuances between an expensive vendor and an overpriced vendor.  Vendors who provide significant value to an organization may tend to be more expensive (as is the case in many industries).  Meanwhile, vendors who offer lower (or little) value tend to be overpriced. From a value procurement perspective, it may well be that even though Minnesota State selected a low-priced I-9 vendor in 2009, that vendor was still overpriced.  Thus in the case of I-9 compliance, organizations may be best served when taking the value procurement approach to due diligence.