Combating corruption in government construction requires a new approach

By Rich Purtell 

At a young age we are all educated about the USA gold standards of “innocent until proven guilty” and double-jeopardy.  These are fit and proper standards for criminal convictions, and even with these beliefs, we still wrongfully convict innocent people.  But when it comes to holding our government accountable, what did the constitutional framers have in mind?

I submit that more of the opposite was intended.

Government activities were to be heavily scrutinized, with a rigorous system of checks and balances, and citizens were to have a right to demand proof at any time that what government and its’ agents were planning to do was not going to bring harm to the citizenry.  Haven’t we strayed far from this mantra?  Are we now too far in the direction of presumption of innocence for government activities, such that only the most glaringly obvious, corrupt activities can be called out?

I submit for your consideration a case decided against my company in spring of 2012, 3 years ago.  Climate Control Technologies (CCT) vs. the State University Construction Fund (SUCF) and State University of New York (SUNY).  Index No 12-212.  Petitions and rulings are publically filed and something you can locate and review.

The substance of the case was CCT’s complaint that a “single sourcing” procurement effort undertaken by SUCF/SUNY was illegitimate and that there was an inadequate meeting of the burden of proof to demonstrate a need for this competitive buying bypass on the grounds of financial savings to the taxpayer.

In a letter from the director of facilities at SUNY Cortland dated 2/9/2012 there were requests to desire limited sourcing options for building automation (to one vendor), and fire alarm systems (to three vendors, so therefore still some competition).

In the letter was a key section:

“We do not want to have separate head ends (one for each system), separate training for each, and maintaining and managing multiple products, inventory and vendors.  Therefore we are asking to limit the sourcing for DDC panels to ALC.  We BELIEVE {my emphasis} this will limit the long-term operating/training costs and this is done without sacrificing any quality, and provide a more consistent campus-wide controls infrastructure.”

Applying critical thinking skills to the above section, I would make several points:

• This line of reasoning could be applied to enable single sourcing of most any product or service.  There is always a degree of inconvenience from having multiple brands of anything.
• The belief of net savings is all based on speculation.  No calculations have been provided on time spent by staff on these kinds of tasks, nor value of inventory for single brand vs. expected impact for multiple brands.
• Historical spending on this category of goods/services was not mentioned, so as to demonstrate a magnitude of cost inflationary risk by removing free market bidding default procurement standards.

To help alleviate these kinds of problems procurement should take a “guilty until proven innocent” approach and demand that facility operational staff have detailed job descriptions, with time expenditure profiles for all significant tasks documented and kept refreshed.

In this manner, facility personnel cannot exaggerate the lost time and added costs from the pain and suffering of maintaining multiple brands.  The descriptions and work profiles should be developed well in advance of any project undertaking, so that there is not a temptation to “cook the books” in the name of cronyism.

In another section of the same letter:

“We BELIEVE {my emphasis again} that having three FA {Fire Alarm} companies will provide enough competition to keep the price down. As for the BMS {Building Management System), ALC has been selected by the low bidders, so we know it is a competitive product, and we will follow the procurement procedures to verify and satisfy competitive standards.”

Comments on this:

• The product has been competitive when the vendor has been bidding under free market, low bidder conditions.  What assurance will there be that prices are kept low when competition is removed?
• What steps are being taken, if any, now 3 years later to “verify and satisfy competitive standards.”?  My experience has been that BMS vendors in this single sourcing circumstance assist design engineers an excessive amount with project design, and even help produce the construction budget for the A/E firm!  That’s an enormous conflict of interest when a single source bidder is also doing the budgetary calculations.
• Again the historical background of costs spent for this trade in the past, when there was competition, should be tracked against future prices for similar projects, when competition has been removed.

Jumping ahead to the end of March the SUCF replied back and approved the single source request.  However the initial letter was dated May 27, 2012.  It was then amended to March 27, 2012 with a hand-written change of the month.  Who gets a month wrong in a letter?  Day sure, even the year in January when we are all getting accustomed to the new year.  But to be off 2 months?  There is an appearance of back-dating the letter to demonstrate approval in the appropriate time frame.  There was a lack of effort by all parties to sort out the actual date of production of this letter. Again a presumption of innocence when more scrutiny was called for.

Then came our petition and the opposing council response.  These documents are technical in nature but if you look them up will see a pattern to where we at CCT made specific arguments about why we felt there were more prudent approaches that would enable competition yet still offer the owner good value.  Opposing council response was “DENY” for a good many of our allegations, with no substance for the rejection offered whatsoever.  Again, this is a flipped burden of proof whereby the state offered nothing in response to complaints from its’ citizenry which it is charged to represent.

Last but not least was the ruling in court.

“Single source procurements are lawful where a formal competitive process is not feasible {State Finance Law, Section 163(l)(h) and (10)(b)(ii)].  This statute also provides that the state agency must document the circumstances and rationale for such a determination.

The respondent Fund has done so and the Court cannot substitute its judgment for that of the Fund.  Pell v. Board of Education et al, 34 NY2d 222 (1974).”

Our attorney referred to this judgment as a “punt” by the judge.  In so many words he essentially said that the SUCF was infallible so long as they followed procedure, even if all logic and reasoning applied in said procedure was flawed.  SUNY Cortland could have said “We want to use this product because we like it most”, and if the SUCF signed off, by the judge’s logic he would have ruled the same.  As such we wasted a lot of time and money on a monkey trial with a pre-determined outcome.  None of our technical arguments about why a cost/benefit analysis, WHICH WAS NOT DONE BY SUNY, would likely demonstrate that other avenues would offer a more optimal outcome were even considered.

Three years have passed and the hard questions that should be asked:

1. What trend has there been in costs for this expensive building trade now that there is no competition?
2. Is the vendor offering budgetary guidance to design firms?
3. Have additional single sourcing efforts been made for equally costly building and campus services since this rather dubiously obtained bypass was upheld?

Again looking at the big picture for this case, you see a flipped burden of proof.  From the lack of a CBA (cost/benefit analysis) by SUNY Cortland, to a possibly falsified date on an approval document, to a rebuttal letter badly lacking of substance, to finally a judge with a response tantamount to “it’s not my job to judge”, the outcome of this case was far from just.

We’ve got to get back to a “guilty until proven innocent” scrutiny of government.  The process and outcome of our case against SUCF/SUNY Cortland are exemplary of a system that is based on criminal standards which give the government and its’ agents too many ways to escape culpability.