Kansas gave $180K megaproject consulting gig to LLC of top economic development official

A top economic development employee at the Kansas Department of Commerce bid on and won a $180,000 a year contract to consult for the agency.

State officials maintain there was no conflict of interest in awarding the consulting contract to Paul Hughes, whose contract went into effect two and a half weeks before he left his government job.

Hughes was the deputy secretary of business development at the Commerce Department, a role that included high-profile efforts to entice the Panasonic megaproject during a reelection campaign of Gov. Laura Kelly and Lt. Gov. David Toland that touted economic development successes.

While Hughes was still employed by the state, he formed his own company, Catapult Kansas LLC. He then bid on and was awarded a contract to consult for the Commerce Department on megaprojects.

"RFP procurement process was handled by the Department of Administration and complied with all procurement policies," said Commerce Department spokesperson Pat Lowry. "It was competitively bid, open to the public, followed all established policies, and the vendor met all criteria, therefore there was no concern of a conflict of interest."

While deputy secretary, Paul Hughes bid on and won Commerce contract

Paul Hughes, right, the former Commerce Department deputy secretary, shakes hands with Commerce Secretary and Lt. Gov. David Toland before the groundbreaking ceremony for the new Panasonic plant in DeSoto on Nov. 2.
Paul Hughes, right, the former Commerce Department deputy secretary, shakes hands with Commerce Secretary and Lt. Gov. David Toland before the groundbreaking ceremony for the new Panasonic plant in DeSoto on Nov. 2.

Procurement documents show bidding opened Feb. 26 and closed March 31 for a megaproject and headquarters attraction consultant.

Generally, the purpose of bidding is to seek competition. But there was no competition in this case — Catapult Kansas LLC was the only bidder.

"I can't speak to why I was the only bidder in such a public process," Hughes said. "Procurement posts these RFPs and maximizes the responses by pushing new RFP notifications out to all contractors registered on their site."

Lowry said Commerce wasn't concerned by receiving only one bid because that isn't uncommon.

"The vendor awarded the contract met all RFP criteria and is fully capable of providing the necessary services," Lowry said.

Kansas Secretary of State business records show Catapult Kansas LCC was formed March 12.

The articles of incorporation list United States Corporation Agents Inc. at 2000 E. 13th in Hays as the registered agent and office with Legalzoom.com Inc., of California, as the organizer — even though the contract requires the contractor to be based in the Kansas City metro area.

Contract documents do list a Westwood Hills address for Catapult Kansas LLC and Hughes as the contact person. Johnson County property records show the address is a residence owned by Hughes. He listed that as his home address in his Kansas Governmental Ethics Commission statement of substantial interest form filed May 1, which also shows he is the sole owner of the LLC.

Hughes' company was awarded the consulting contract on May 16, and it went into effect the same day — but his job with the state didn't end until June 2.

The Commerce Department posted the job opening for Hughes' old job on May 17. The position, which has a salary of $150,000 a year, has not been filled. The agency's online staff directory still lists Hughes as the deputy secretary.

The contract runs through June 30, 2024, with options to renew for up to two additional years.

Is it Kansas commerce department's bid approval a conflict of interest?

The contract has a conflict of interest provision with language similar to a state ethics law governing contracting with current and former state employees. The facts of the situation don't appear to violate the law, especially because the contract was publicly bid and officials say Hughes as deputy secretary wasn't involved in preparing the contract.

The job description for the deputy secretary of business development includes serving on the secretary's leadership team, supervising staff, making recommendations on hiring decisions and organizing consultant events. Under the terms of the contract, the consultant reports to the deputy secretary and the secretary of commerce.

But Hughes and Lowry said Hughes wasn't involved on the government's side of making the contract.

"No, that type of involvement is expressly prohibited by state ethics laws," Lowry said. "The procurement was handled through the Department of Administration and complied with procurement guidelines, statutes and procedures.

"Additionally, we went to great lengths in drafting the RFP to ensure there was no involvement from any staff on the business development team in case there were any internal candidates that would be interested in the position."

Hughes said he didn't inform agency officials that he was bidding on it.

"I did not participate in the development of the RFP or posting of the position, which was done by the state's procurement office," Hughes said. "My response to the RFP took place several weeks after it was publicly posted. I did not discuss my interest in the role with Commerce because procurement rules prohibit doing so while the RFP is open."

The contract also prohibits Catapult Kansas from employing, during the period of the contract, any state employees whose state job involves "services similar in nature to the scope of this contract."

Paul Hughes is Kansas commerce's megaproject guru

Paul Hughes, right, former deputy secretary of the Kansas commerce department, spoke to colleagues before the groundbreaking ceremony for the new Panasonic plant in DeSoto on Nov. 2.
Paul Hughes, right, former deputy secretary of the Kansas commerce department, spoke to colleagues before the groundbreaking ceremony for the new Panasonic plant in DeSoto on Nov. 2.

While a Commerce Department employee, Hughes was instrumental in introducing the concept of megaprojects to Kansas politics.

He was the one who authored the agency's testimony advocating for the bipartisan APEX legislation, an ambitious set of taxpayer-funded incentives designed to entice what was, at the time, a secretive megaproject. He explained to lawmakers that a megaproject "is an economic development opportunity where the company will be spending $1 billion or more on their facility and equipment." He said Kansas had been considered for 11 such megaprojects, but had lost out to other states.

Hughes later returned to the Legislature to ask for an extension to the APEX legislation, citing interest from several companies, though it failed to pass amid bipartisan hesitance.

The program has been successful in securing investment from Japanese company Panasonic to build an electric vehicle battery plant in De Soto, plus a promised expansion of Wichita semiconductor manufacturer Integra Technologies. Panasonic was the crown jewel of economic development in the Kelly-Toland administration, with a groundbreaking ceremony a week before Election Day.

But as deputy secretary, Hughes also had to handle administrative duties for managing a variety of divisions, offices and initiatives, Lowry said. As a contractor, Hughes will be focusing more exclusively on megaprojects.

"Successfully recruiting megaprojects requires a significant amount of time and effort focused solely on that project, which is what this consultant role is tasked with," Lowry said.

"The role I'm in now is accountable for sourcing new deal flow for the state, and managing these projects to their conclusion," Hughes said. "Additionally, I am overseeing the state's pursuit of a regional tech hub under the CHIPS Act. Previously, I was in a more strategic role, whereas now I report to a more junior level of the department's org chart."

The contract specifies that Hughes' job is to attract megaprojects and corporate headquarters to Kansas.

"This position requires extensive knowledge of executive decision-making considerations regarding corporate relocations as well as a strong network of contacts within the site selection industry," the contract states. "Additionally, previous experience with megaprojects and headquarter attraction efforts is required."

There is an emphasis on certain industries, including advanced manufacturing, aerospace, logistics and agriculture. The contractor is also supposed to be on the lookout for more opportunities for electric vehicle batteries and semiconductors, the two industries of the current megaprojects.

"The role must balance competing earnestly for the win and advocating on behalf of the client with the responsible deployment of incentive programs and other state and local resources," the contract states.

The contract requires a monthly activity report outlining work on new leads and existing projects. Lowry said the reports aren't considered public records because the information is confidential.

Kansas contracts out to economic development consultants

Hiring contractors to perform economic development work isn't uncommon for the Commerce Department.

The agency has contracts in place with other firms, including one in Mexico City focused on export opportunities in Mexico, another in the Tokyo area focused on foreign direct investment from Japan, another in the Los Angeles area focused on businesses opportunities on the West Coast, one in the Chicago area focused on the Great Lakes region and one in South Carolina focused on the East Coast.

The agency also has a current bidding event for a contractor based in Europe focused on foreign direct investment from Germany, Austria and Switzerland.

More: First, it was Panasonic and now Integra. Are tax-driven megaprojects good for Kansas?

"The key for the state is obtaining these critical skills, and allowing that individual to focus exclusively on the duties and activities necessary to recruit these projects," Lowry said. "By using consultants, the agency is better able to find the best talent available."

Kansas also has a separate megaproject liaison contract with a Kansas City, Kansas, consulting firm that is paid $150,000 a year. That firm was formed by Doug Bach five months after he retired as administrator of the Unified Government of Wyandotte County and Kansas City, Kansas.

"These are completely different roles and duties," Lowry said of Hughes' megaproject consulting and Bach's megaproject liaison consulting.

He said the liaison works with local communities on the Panasonic project and related supplier opportunities.

"The megaproject contractor focuses solely on recruiting new megaprojects and headquarter projects to Kansas," Lowry said. "This requires subject matter expertise not only to identify these critical opportunities but how best to recruit them to the state. The skill set for recruiting is very different from the liaison role which is geared toward leveraging economic development opportunities once the megaproject chooses to land in Kansas."

Jason Alatidd is a statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jtidd@gannett.com. Follow him on Twitter @Jason_Alatidd.

This article originally appeared on Topeka Capital-Journal: Kansas $180K megaproject consulting job went to deputy secretary's LLC