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Wednesday, Jan. 15, 2014

Documents Show Possible Flaws in Abele Administration’s Bus Contract Bidding Process

Company with the worst service score won the $492 million contract

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The Abele administration was set to award a multiyear transit contract worth between $492 million and $820 million to an out-of-state company that received the poorest scores for bus service but provided the lowest bid.

And the administration made their decision on this huge contract without interviewing any bidders or, aspparently, picking up the phone to verify references.

Those details were found in the thousands of pages of documents a judge forced aides to Milwaukee County Executive Chris Abele to release to the losing bidders on the contract to operate the Milwaukee County Transit System (MCTS) for three to five years.

Two of the losing bidders—the nonprofit Milwaukee Transport Services (MTS), which currently operates MCTS, and the for-profit Veolia Transportation—are appealing the Abele administration’s decision to award the contract to the for-profit MV Transportation, based in Texas.

MV had the lowest score on the questions dealing with service and operations. But because MV had the lowest cost proposal, the Abele administration decided to award it the contract last summer.

 

‘Rammed Through’

MTS’s and Veolia’s appeals will be held in front of a review committee made up of Milwaukee County supervisors. The county will file its response by Jan. 23; arguments and deliberation are scheduled for Feb. 18.

In its appeals, the companies are only allowed to argue if the request for proposal (RFP) process was fair or not.

If the review panel decides that the process wasn’t fair, it can require the proposals to be re-scored or it can order the contract to be re-bid.

Brendan Conway, Abele’s spokesman, said he couldn’t comment on the specifics of the RFP, but that “we remain confident in the integrity of this process.”

In its RFP, the county provided a set amount of revenue—$164 million annually—and asked what the companies could do with it.

Kaitlyn Devine, a public procurement expert at the Sunlight Foundation, a nonpartisan Washington, D.C.-based watchdog group, said the county’s approach was unusual. A more typical RFP would state the services the county wanted to be provided under the contract and then would ask bidders to submit its proposed costs.

“I’d be interested to hear if there is a name for that process and if this is something new that they’re trying and what their motivation is for trying it,” Devine said.

Each of the five proposals submitted could earn a total of 1,000 points—800 for service operations and 200 for price. The companies were told that the county would offer them $164 million annually, then asked the companies to allocate those funds to management, administrative and operating expenses.

With 650.5 points out of a possible 800, Veolia was the top scorer on the service portion of the proposal; in second place, MTS earned 636.7 points. MV had the lowest service score of the five bidders—540.5 points.

The results were reversed in the cost portion of the proposal, with MV being the lowest bidder and Veolia reporting the highest costs.

Since MV’s proposal had the lowest expenses, the county awarded it all of the possible points—200. McDonald Transit won 105 points; First Transit, 88 points; MTS, 72 points; and Veolia, 59 points. 

That allowed MV to leapfrog over its competitors and win the contract. The final results were MV, 740.5 points; McDonald Transit, 734 points; Veolia, 709.5 points; MTS, 708.7 points; and First Transit, 680 points.

Eric Van Schyndle, the attorney representing MTS who went to court to force the administration to release the documents, said the bidding process needs to be thoroughly scrutinized in public not only because the contract is worth half a billion dollars, but because transit and paratransit services are vital to the health of the local economy.

“Transit is kind of the heart of the community to a large degree,” Van Schyndle told the Shepherd. “And it feels like [the contract] was rammed through as quickly as possible without real deliberation on any issues. That’s scary. It’s scary that’s the way the process has moved forward.”

 

Questions About Service and Pricing

In the separate briefs submitted to the county, MTS and Veolia argue that MV submitted an unrealistically low cost proposal, and that the county allowed MV—and only MV—to correct its proposal, skewed the questions in favor of a new company over MTS, and provided insufficient guidance to those who were scoring the proposals.

Dick Alexander, senior vice president of business development for Veolia Transport, said that MV “gamed the system” by low-balling the costs that the county was scrutinizing and omitting critical data that would increase expenses. But he said the RFP itself included vague instructions about how the bidders should break down the costs the county would evaluate. That prevented the county from doing an apples-to-apples comparison between bidders, he said.

“When we saw that we were ranked highest [on the service portion of the proposal], but lost, obviously it raises questions,” Alexander told the Shepherd. “And then when we got the pricing [results], and saw how that was done, the pricing was very unusual and very different from any other RFP I’ve seen.”

 

Only MV Got a ‘Do Over’

The documents show that the day after MV won the top overall score, the county sent it a list of 22 questions about its proposal. No other company appears to have gotten a chance to answer questions about its bid.

Unless there was something substantive that disqualified the other bidders, it seemed “unusual” that only one bidder was allowed to respond to further questioning, said the Sunlight Foundation’s Devine.

“That’s very surprising to me that they only did it for one of them,” Devine said.

The county had a slew of questions about how MV would provide bus service. But it also questioned MV’s cost proposal and stated that “any amounts for management and administration not provided for by the proposed amount in the RFP will be the responsibility of MV Transportation.”

In response, MV more or less said that it wanted to renegotiate its expenses after it won the contract.

“If selected, the company respectfully requests to sit down with the county to decide on a final allocation between the three cost components, based on the county’s interpretation of the individual cost elements,” MV answered. “Then the final amounts written into the contract would be binding to MV for the contract term.”

In its appeal, MTS argues that MV’s expenses are drastically—and unrealistically—lower than the cost to operate similar bus systems. The national average of management and administrative costs as a percentage of the total budget is 17.74%. MV proposed 4.03%. MCTS’s is 13.86%.

 

No Interviews or Reference Checks

Although the RFP stated that oral presentations “may be requested by Milwaukee County” and didn’t require them, and Devine said that in-person interviews aren’t required when granting federal contracts, Veolia’s Alexander said it’s a good idea to conduct them anyway to gain a better understanding of the company and management team.

“We’ve never had any proposal for any project not have an interview,” Alexander told the Shepherd. “This was a first. And for something of this size, it was really surprising.”

MTS’s attorney Van Schyndle agreed that the absence of interviews was “crazy,” and added that many of the questions in the RFP penalized MTS in favor of a new operator. For example, one question asked for up to three references from cities in which the bidder has operations similar to Milwaukee County’s system. Since MTS only operates in Milwaukee County, it provided just one reference but more than 20 letters of recommendation from local leaders. MTS scored just 41 points for its answer, while MV earned 55 points.

MTS argues that if MV’s references had been checked, the Abele administration would have discovered that MV doesn’t operate any bus systems that are as large as Milwaukee County’s.

“At no point in the record that we received did it show any indication or a memo saying they called references or anything like that,” Van Schyndle said. “That’s crazy to me. I don’t like to throw out words like dereliction of duty, but that is crazy to me.”

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