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Wednesday, Jan. 29, 2014

Abele Administration Defends Controversial Transit Contract

Critics say MV low-balled its bid to win $492 million deal

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In new legal documents, the Chris Abele administration defended its intent to award a $492 million transit contract to MV Transportation, despite the Texas company’s scoring lower than all of the other vendors on the service portion of the request for proposal (RFP).

MV’s low bid for operating the Milwaukee County Transit System (MCTS) allowed it to leapfrog over the other vendors to win the contract, a bidding process that is now under review by a panel of Milwaukee County supervisors.

Abele’s critics view this as a test case of the county executive’s new powers, which were expanded by last year’s Republican-backed Act 14. Now, the county board has less oversight over day-to-day operations of the county and contracts. Under Act 14, supervisors can only vote up or down large contracts. Act 14’s opponents warn that Abele’s control over contracts will allow him to channel Milwaukee taxpayers’ money to his favorite companies without the necessary public vetting of private vendors’ proposals and qualifications. This RFP is being vetted by a special appeals panel, not a standing committee.

MV Transportation argued that it needed just $8.4 million annually for management and administrative costs to run MCTS. MV’s bid was approximately half of what its nearest bidder estimated and it’s more than $20 million less than the offer from the high bidder, Veolia Transportation ($29.5 million annually) and $10 million less than the bid placed by the current operator, Milwaukee Transport Services (MTS), at $18.7 million annually.

The losing bidders—MTS and Veolia—are appealing the county’s decision and must prove that the administration’s RFP process was flawed. If they can make their case, the county can re-score the bids or issue an entirely new RFP.

In the documents, attorneys for the Abele administration say that MV’s low bid will be locked into the final contract, which MV will have to live with for the duration of the three-year deal, which can be extended for an additional two years.

In an email to the Shepherd, Abele spokesman Brendan Conway wrote, “This is not a case of cheaper but rather better service and much more money going into transit. The contract MV has agreed to, not just proposed but agreed to in writing, will put tens of millions of new dollars into service.”

W.C. Pihl, executive vice president of business development at MV Transportation, defended his company’s price offer.

“It is very common in the transportation industry for the evaluating panel to choose the lowest responsible bidder—more than 90% of the time,” Pihl wrote in an email. “MV’s proposal was vetted through the same filters the other bidders’ proposals were vetted through, references were checked, and MV’s proposal is responsible and sound.”

The Abele administration also argues in the documents that MTS and Veolia can’t protest the way that it scored the RFP, since they didn’t raise those objections before the RFP was scored. It says that the companies are only appealing the MV contract because they lost and don’t like the result of the process—not the process itself.

 

Is $8.4 Million Reasonable?

The county’s critics say MV intentionally low-balled its bid to win the contract and will eventually ask the county for more money to continue operating MCTS.

Eric Van Schyndle, the attorney representing MTS, said that the county’s assertion that the contract locks into place MV’s low bid wasn’t enough protection for MCTS riders and taxpayers. He said that Federal Transit Administration (FTA) requires that prices are reasonable so that the vendor doesn’t threaten to leave after a few years because it isn’t making enough money to run the system. Van Schyndle said MV threatened to do exactly that in Santa Clarita, Calif., and elsewhere.

According to the Santa Clarita Valley Signal in a September 2010 article, “MV Transportation Inc. officials have told the city that company officials underbid a $16 million contract in 2008.”

In 2008, MV won a 10-year contract with Santa Clarita by being the lowest-priced qualified bidder, less expensive than the city’s previous operator.

Van Schyndle said that playing hardball with a transit system and threatening to leave isn’t in the best interests of businesses, residents and taxpayers.

“That’s exactly what the FTA wants you to avoid because having that kind of disturbance is not all that conducive to having a well-functioning transit system,” Van Schyndle said. “It’s something that’s obviously very important to the lifeblood of the economy and the human beings that live in the location in which the system operates.”

If MV wins the contract and decides to pull up stakes because it isn’t able to run MCTS on $8.4 million, the county would lack ready alternatives. If MTS, the current operator, loses the contract to run MCTS, it would dissolve immediately.

“That’s the unique aspect here,” Van Schyndle said. “You can make one bad decision, but that one bad decision eliminates your competition to some degree. You’re left with only the for-profit entities that are left at that point.”

While the county says that MTS’s and Veolia’s appeals should be denied because they didn’t object to the RFP prior to awarding the contract to MV, Van Schyndle told the Shepherd that the county flatly stated that it would not answer any questions about the evaluations of the RFP while it was being let out. Since the vendors didn’t have that information prior to their appeal, they couldn’t raise concerns about it.

“They wouldn’t tell the proposers how they were going to score something,” Van Schyndle said.

MTS also argues that the RFP was biased in favor of new bidders. For example, one question asked vendors for up to three references. MTS could only provide one—MCTS—and earned a low score because of it.

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