Volume 5, number 1, February 2003 Improprieties Cloud Multimillion Dollar State Building Lease Gary Moore is a freelance political columnist living in Fairbanks. Three months ago, the employees of the Fairbanks Department of Transportation moved into a new building on Peger Road, across the street from their main office building. The move into the new facility, which houses more than 150 state employees, took place amid controversy and litigation involving the bid process and award for this leased building. After inverviewing participants and reading internal documents obtained by the parties involved in the dispute, I agree the process appears tainted and the award was made under false pretenses. As such, it should not be permitted to stand. In March 2002, the state Department of Administration awarded McKinley Development, Inc., a building lease contract in excess of $22,829,558 to provide a DOT administrative office complex in Fairbanks. Other bidders were suspicious of the award since McKinley's bid was the second highest and several millions higher than the lowest bid, submitted by Bachner Company, who proposed a renovated building on College Road. After reviewing state evaluator's score sheets, two of the bidders, Bachner Company and Bowers Company, filed appeals. They accused state evaluators of disregarding Request for Proposals (RFP) criteria so that McKinley's proposed new facility received the award rather than the renovated building proposed by Bachner or other bidders. In spite of the allegations of fraud against state evaluators, State Procurement Officer Jan Madson, who participated on the evaluation committee, ordered McKinley Development President Kevin Shields to proceed with construction. Both Bachner and Bowers say a hearing to settle the dispute was unreasonably delayed by the state until July 31 and Andrew Hemenway, Department of Administration hearing officer, did not release his official findings until October 9. Hemenway found that at least one evaluator, Jim Weed, "improperly lowered the score to the Bachner facilities in order to counteract what he perceived as (another evaluator's) favoritism for that offeror." In the opinon of the appellate attorney, John Burns, this constitutes fraud. Moreover, since only one point separated McKinley and Bachner's overall bid scores, the outcome would have been different had Weed not improperly altered his scores. Just as serious were Hemenway's findings that inflation costs over the building's potential 40-year lease life were not considered, as required by the RFP. Had they been, Bachner's building bid would have beat McKinley's by $10 million, not the $5 million originally believed. Surprisingly, though, Hemenway's decision, while finding several of the allegations valid, said the state's only obligation is to reimburse both Bachner and Bowers for pre-bid costs. Legal fees incurred in substantiating the allegations in the appeal would not be compensated. "The ruling will only encourage further bid manipulation and corruption in the state procurement/bid process," said Bachner. I agree, as it appears there are no penalties for anyone violating the procurement code, particularly state employees. Bachner said what troubles him most, though, is the state's decision to ignore the 10% preference to which his company is entitled as an employer of the disabled. According to AS 36.30.170(f), if a qualified employer with 50% or more disabled employees "is the lowest responsible and responsive bidder with a bid that is not more than 10 percent higher than the lowest bid, the procurement officer shall award the contract to that bidder." Bachner's bid met that criterion, but the Department of Administration maintains in a letter that department regulations permit them to alter the preference amount or not apply it at all. Appellant's attorney, John Burns, says, "the department has no authority to implement rules or regulations that are contrary to statutory mandates." Burns went on to say that "the department's decision to deny the disability preference or to apply it differently than specified in state statutes violates state procurement code, RFP language specifications, the department's own regulations and is blatantly discriminatory." Aside from this one point, Hemenway found that the state erred at nearly every step—at the bid evaluation, protest, award, appeal, and in delaying the decision. Furthermore, the state also gave McKinley many special considerations not provided to other bidders. For instance, pushing back the building's occupancy date after the contract was awarded, waiving the $21,000/month penalties for not completing the project by deadline, waving the requirement for public transportation within 720 feet, and other requirements in the RFP. In my opinion, this bid should be re-scored and re-awarded to the rightful winner. At a minimum, Bachner and Bowers should be commended for trying to force the state to abide by the principles of the procurement code in publicly-funded state projects and in expecting state employees who knowingly violate state law and commit fraud to be prosecuted and punished. Why isn’t anyone in state government being held accountable for this fiasco involving tens of millions of dollars? Governor Murkowski's press office did not return phone calls for comment on this story. Murkowski, who ran on a platform of accountability and proven leadership, should review this particular contract closely and take appropriate action where officials under the Knowles administration failed. In a time of huge budgetary shortfalls, it is imperative that agencies of the state, particularly DOT, perform their procurement duties with honesty and fiscal responsibility. That certainly doesn’t appear to have been the case here. The next time DOT says it wants to close the Elliot Highway due to a shortfall of a couple hundred thousand dollars, think about the millions they wasted in the contract for this single building project. The underlying question is whether this is an isolated incident or just the tip of the iceberg. Millions were wasted in this one DOT contract, and millions more are likely to be wasted in litigation. The procurement code was established to insure integrity, fairness, credibility, and to provide the state the best value for its dollar. Considering the hearing officer's findings in this DOT lease contract, it is a mandate that rings hollow in the face of reality. Alaskans and bidders such as Bachner and Bowers deserve better. | ||
 | | |
