ATLANTA -- A legislative panel in Kentucky has concluded that state officials improperly chose a developer to oversee a $10 million bond-financed university project, and it called for tighter rules for awarding state contracts.

A report approved last week by the Capital Projects and Bond Oversight Committee of the state's General Assembly focused on allegations that the administration of Gov. Wallace Wilkinson showed favoritism in giving a contract to a developer that had pumped $58,000 into political campaigns waged by the governor and his wife. The governor's wife, Martha Wilkinson, ran for governor earlier this year before dropping out.

While the committee avoided judging the legality of the selection of Northern Kentucky Venture One Inc. to build a dormitory at Northern Kentucky University, it did find that finance cabinet officials were insensitive to the appearance of favoritism and subsequently stone-walled the investigation. The committee also recommended that Kentucky lawmakers consider legislation next year to prevent potential abuses in the bidding for state contracts.

"We are not a judicial body, and it is not our role to accuse anybody, but I think the report speaks for itself in showing that there were problems with the selection and that there is the need to reform the selection process," Rep. Marshall Long, the chairman of the bond committee, said yesterday.

Rep. Long said a number of bills would be prepared by the committee early next month for submission to the General Assembly when it convenes in January 1992. Those bills, he said, would focus on clarifying the membership of evaluation committees for lease-purchase contracts and requiring such committees to keep better records and have clearer criteria for making selections.

At the very least, Rep. Long said, the finance cabinet should not control the selection. "It can't be somebody who is a dog in the fight," he said.

Doug Alexander, Gov. Wilkinson's press secretary, said the administration officials had followed guidelines laid down by the General Assembly. "If there is any blame here, it should be laid at the feet of the General Assembly, which makes up the rules in the first place," he said.

Neither Finance Secretary L. Rogers Wells, who chose the seven-member evaluation committee that chose Venture One, nor his spokeswoman Jennifer Street returned phone calls yesterday.

The controversy over the dormitory contract began in January after press reports suggested that the selection committee controlled by Mr. Wells had chosen Venture One over Spartanburg, S.C.-based Pulliam Investments despite university officials' apparent preference for Pulliam.

In addition, Venture One reportedly received a copy of part of Pulliam's original proposal and plagiarized it before submitting a final bid.

After the committee began its investigation, Gov. Wilkinson subsequently rescinded the award to Kentucky One and gave it instead to Pulliam. Pulliam has secured financing to build the proposed dormitory through a lease-purchase borrowing arranged by McDonald & Company Securities Inc., which sold a $15.5 million issue of tax-exempt certificates of participation for the project in June.

"It appears that the role the evaluation committee was to play was never clearly defined," according to the report. "Its membership was appointed by the finance cabinet...with no concern that there may be actual or perceived conflicts of interest," the report continued. "The committee has every reason to believe that the state's employees engaged in an organized effort to thwart the committee's endeavors."

To prevent such abuses, the committee recommended that legislation should limit the membership of the bid-review committees and require members reveal possible conflicts of interest. The report also suggested the award process for state contracts should be revised to employ a grading system that numerically evaluates the strengths and weaknesses of competing bids. Many states now use such a system to award contracts.

"The statutes governing the built-to-suit lease should be rewritten to conform with the competitive negotiation procurement process established to complete with the Kentucky Model Procurement Code."

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