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Florida Huckster State Practice #33 - $500-million South Florida Commuter Rail Contract Dispute Illustrates Poor Contracting Procedures?
Florida Huckster State Case #33
A Florida Commuter Rail Contract for $500+million was awarded using possible Crony Capitalism and Bid Manipulation politics
There just seem to be weak standards for ethical contract selections procedures in Huckster Florida, especially in independent agencies in Florida. In this case, the deciding agency, the South Florida Regional Transit Authority (SFRTA - aka Tri-Rail) is also partially funded with Florida taxpayer funds.
Suspicious methods were used to award a $500+million contract to a company whose bids were much higher than other competitive bidders who were deemed "ineligible".
" The winner of the South Florida Regional Transit Authority (SFRTA) contract operates Tri-Rail, a commuter rail service that runs on 70.9 miles of track between Jupiter and downtown Miami. The contract could be up a 10-year term."
"The public authority that oversees a South Florida commuter rail service is set to award a more than $500 million contract to a company whose bid was tens of millions of dollars higher than its competitors, each of whom was deemed ineligible for the same technical flaw."
"Officials from the rival bidders said the process raised red flags, and at least one prominent state senator is angered by the issue, which also comes steeped in lobbying and political intrigue."
Some of the clear Florida Huckster practices showing the FIX was possibly in were:
- Five LOWER PRICED competitors were thrown out from the bidding with no details or ability to respond.
- The winning firm, Hertzog, had all sorts of ties to politicians and the deciders. "does have close ties to SFRTA. Lobbyist Dave Ericks has a contract to represent SFRTA and also lobbied for Herzog until Aug. 31, roughly one week before bid proposals were submitted." Ericks daughter also works for a firm where a founder ALSO sits on the SFRTA Board. (Get the trend here of cronyism connections?)
- The SFRTA decision would also then overspend using partial funding from Florida taxpayers.
- An aggravated Florida Senator, Jeff Brandes, told Politico.com that "state law does not allow authorities like SFRTA to be taken to state administrative court, which is usually the place for state contract or procurement fights." (How convenient).
- The bid application contained strange wording allowing bidders to be excluded due to "conditions" that were not specified. Then five were excluded based upon that vague wording, which is a red flag to this former internal auditor.
- In a lawsuit filed by a denied bidder, the SFRTA Procurement manager was deposed and said other bidders were denied based by that vague "conditions" term. The suing bidder said neither they or other denied bidders were "given a chance to explain or clarify the issues...".
- There was no mention that SFRTA staff created their own internal bid estimate to determine bid credibility.
The Sun-Sentinel published a later Feb. 2, 2017, editorial AND video saying that the Rail firm should be required to justify their decision. After the above crony decision was disclosed, Florida Gov. Scott removed SFRTA's $42-million State Funding from his upcoming budget proposal. However, the newspaper says the rail system is needed for 14,000 riders per day. This article clarified the "conditions" issue. Apparently the SFRTA did not want any responsibility for changing prices over time so they said the bid should be without conditions, which is like specifying a fixed price contract. In my experience, as a former internal auditor of very large oil company and government contracts, fixed price contracts are always more costly to cover unknown expenses or increases. Conditional contracts provide flexible and variable costs that could change and go up. Fixed price contracts almost always get better managers since they need to control costs, while flexible contracts can use weak managers because they can pass the cost along.
So, the question are:
- Why did the other bidders include conditions that were used to deny their bid?
- Why didn't SFRTA disclose if they had an internal engineering bid to compare to outside bids to evaluate credibility?
- Was the winning bidder bidding WAY too high?
- Why didn't procurement kick the contracts back to the bidders and tell them to bid without conditions so there WERE competitive bids?
- Why did the losing bidders include conditions when SFRTA says they were told to bid without conditions? Were the instructions intentionally vague to sucker them into including conditions so they could be excluded?
- Why was there no process to get an independent State audit or investigation to ensure the process was legitimate?
Florida contract bidding procedures clearly need an overhaul and this case study needs to be reviewed by an Inspector General to get all the facts out, including all the apparent crony connections.
Or, we could just accept that Florida contract bidding procedures will always be vague enough that losing bidders will always dispute large contracts.