Atlanta schools defy bid rules on wireless contracts

AJC Investigation: Again, federal mandates ignored in the granting of wireless contracts

Questions about favoritism surround two contracts for which the district is seeking reimbursement from the federal E-rate program, an investigation by The Atlanta Journal-Constitution shows. The irregularities put Atlanta at risk of losing more than $30 million in E-rate requests and could invite other penalties from federal regulators.

In particular, a contract for wireless Internet equipment — worth as much as $10.5 million over five years — suggests the district is again disregarding local and federal mandates on fair and competitive bidding.

School district officials awarded the work to a company with the fifth-lowest bid and the third-highest overall ranking among seven competitors, records reviewed by the AJC show. Further, the district’s solicitation for bids copied most of its specifications from the catalog of the wireless equipment manufacturer that later was part of the winning proposal.

“It was slanted to one manufacturer,” said Bob Patrick, whose Woodstock-based company, MXN Corp., opted not to bid on the project.

The bid request was “written almost to the point that no other [company] could come in,” said Trevor Kelly, an account manager for Coleman Technologies. “I have not seen very many that were that blatant.”

Kelly’s company also passed on the bidding.

School district officials dispute that problems existed in the contracting process.

Nevertheless, the district’s selection of Technology Integration Group, or TIG, and its subcontractor, Xirrus Inc., came at a high price. Four other bidders offered to do the same work for less — three of them for nearly 40 percent less. The difference could add up to almost $4 million over the life of the project.

A second technology deal — cabling work worth more than $1 million — is the subject of a lawsuit filed last month.

A school district vendor, R.B. Communications, claims it won two contracts and performed some work installing cables but was not paid in full. Instead, the suit alleges, the district gave some tasks to other vendors who had not been approved by the city Board of Education, as board policy requires. The district has not filed a formal response.

Such aberrations would conflict with E-rate regulations that require school systems seeking federal reimbursement to award technology contracts through competitive bidding and to comply with their own purchasing policies. Price is supposed to be the dominant factor in choosing a vendor.

The E-rate program, paid for by a fee on customers’ telephone bills, disburses $2.25 billion a year to help schools across the nation pay certain technology costs. Atlanta collected $60 million from 1998 to 2001, but nothing since.

In 2004 the AJC reported on widespread, costly abuses in the district’s technology contracting. E-rate officials cut off the district’s funding and cited a failure to award contracts through competitive bidding, among other problems. A criminal investigation resulted in bribery convictions against two former Atlanta school officials and one vendor.

Now, after being shut out of the program for almost a decade, Atlanta hopes to again tap into E-rate.

The school district has amassed nearly $33 million in E-rate requests since 2005 that are still under consideration. Among them: roughly $1.7 million to help pay for the cabling work and $2.3 million for the wireless networking contract.

Officials with the Atlanta Public Schools took 14 days to respond to written questions from the Journal-Constitution about the wireless contract. In a statement late Friday, officials offered explanations that at times contradicted their own records of how the bids were evaluated, particularly regarding the role that price played in the award. For instance, they claimed that the lowest bidder’s price quote was not considered because the firm failed to submit the correct form. However, district records show the firm did submit the same form as other bidders, and actually received the highest possible score for its price.

“Although price was the primary consideration, it was not the only consideration,” the district’s statement said. It said TIG rated highest on technical criteria “and thus presented the best overall value for the district even considering price.”

The newspaper asked to interview Superintendent Beverly Hall and Randall Sellers, the district’s procurement director, who recommend contracts to the school board for approval. The district initially offered interviews with two other top officials instead, but by Friday would answer questions only in writing.

In 2004, when reports of E-rate abuses first surfaced, Hall said they “come as no surprise,” dismissing problems in the program as one of several “management challenges” she inherited from her predecessors five years earlier. In 2009, she said she had been unaware of criminal activity in 2004 and had since increased oversight of technology purchasing.

Executives with TIG did not respond to numerous requests for interviews. A Xirrus spokesman, John Merrill, said: “As far as I know, everything is completely on the up and up. Everything was scrutinized and was fair.”

For the school district, the stakes are high. With budget cuts slicing into staff, the E-rate money is perhaps more needed than ever.

But misstatements on E-rate applications can lead to civil or criminal punishments, authorities warn. Failing to engage in competitive bidding also opens the possibility that the district again paid too much for technology upgrades.

Policies disregarded

The district decided last year to rip out old wireless technology in nearly 100 schools and replace it with new equipment. On Sept. 2, officials issued a request for bids.

Already, however, the district had engaged vendors for some of the work: TIG, based in San Diego with an Atlanta branch, and subcontractor Xirrus, a manufacturer of wireless networking products based in Thousand Oaks, Calif.

Last August, at the district’s request, TIG provided price quotes on installing Xirrus wireless equipment at seven schools and in the central office in downtown Atlanta. On Sept. 4, two days after the bid request went out, the district issued purchase orders agreeing to pay TIG the quoted amount. In October, school officials sent the company a $387,000 check signed by the superintendent.

What attracted school officials to TIG is not apparent, although school board records show members have approved five other contracts with the company and a local firm it acquired since 2004. The district has paid TIG and the firm it bought about $16.9 million under those contracts, records show.

Last fall’s transaction, however, violated district purchasing policies.

District employees may not spend more than $2,000 without obtaining four price quotes from vendors. They got just one, from TIG.

The district prohibits spending more than $25,000 without competitive bidding; expenditures that exceed $100,000, or $200,000 for capital projects, require school board approval. Employees obtained neither, records suggest, before TIG and Xirrus went to work.

The September purchase orders justified the expenditure by citing a 2004 contract with Entré Business Technology Group, an Atlanta company that TIG acquired in 2008. But that contract covered desktop and laptop computers and had nothing to do with wireless equipment.

On Friday, the district said the purchase orders were incorrect. Instead, officials said the work was done under another wireless contract from 2006 with a different firm. That contract was canceled. But officials said they gave the job to TIG because it had received the second-highest rating when it sought that contract three years earlier.

Contracts that don’t follow purchasing policy are “of no effect and void,” school board policy says. The board may hold employees who purchase goods or services outside the policy’s bounds personally liable — or discipline or fire them. Board chairwoman LaChandra Butler Burkes did not respond to three phone messages.

‘Forget this’

The district did not disclose to potential bidders that it was already employing TIG and Xirrus on the wireless project. Nevertheless, several companies came to a pre-bid conference at the district’s headquarters on Sept. 15 with doubts about the integrity of the process.

Dell Inc. and AT&T asked why the district wanted vendors to base their proposals on the cost of equipping a single school campus with wireless equipment. Because building design and campus topography vary from school to school, a Dell executive wrote, detailed plans were required “to accurately estimate the cost.”

More serious questions were raised about the content of the district’s request for proposals, known to vendors as an RFP.

E-rate rules forbid school districts from using one vendor’s technical language in an RFP. Yet much of the wording in Atlanta’s solicitation matches word-for-word Xirrus’ “Guide for Designing a Wi-Fi Network,” posted on the company’s Web site.

At the pre-bid conference, participants said, school district employees sat at a broad table in the front of the room. Their audience consisted of 47 representatives of 32 technology firms, some of whom began posing what Kelly, of Coleman Technologies, described as “very direct, uncomfortable questions.”

The district said it has no transcript or other record of what was said at the conference.

Hours after the conference ended, Greg Talsky, an account manager for Cisco Systems who had asked some of the most challenging questions, sent an e-mail to Mark Hawks, a district purchasing agent, that repeated many of his concerns:

“Is it the intent of the RFP to award this RFP to a pre-determined technology manufacturer?” Talsky asked. “Who was responsible for creating this RFP? ... Outside contributors?”

And, referring to the district’s request for bids: “Why is the table from Page 5, section 3.3, virtually an exact match to the same table from the [preferred] vendor’s design guide?”

The district said Friday that the contract specifications “were not written for TIG or any other specific vendor.”

Talsky did not respond to several messages requesting an interview. Hawks has since left the school district and could not be reached for comment.

At the vendors’ conference, several participants said, district employees wouldn’t answer questions from Talsky or others. Instead, the employees insisted that queries and comments be submitted in writing.

“Most people,” Kelly said, “left that thing saying, ‘Forget this.’”

Just seven of the 32 companies submitted proposals.

Two evaluations

In its E-rate application, filed in February, Atlanta school officials pledged that the project had followed federal rules — that it was bid competitively and that price had been the most important factor in awarding the contract.

The district’s records suggest otherwise.

In its request for proposals, the district said price would account for 40 percent of bidders’ scores when submissions were evaluated. The next two most important categories, methodology and technical responses, would count for 20 percent apiece. The company’s qualifications would be worth 15 percent, and the final 5 percent of the score would be based on “value-added benefits.”

On Nov. 11, five district employees — four information technology workers and one secretary — assembled to assess the bids. Each received a scoring matrix that combined the methodology and technical categories, giving them equal weight to price.

The request for proposals asked for bids based on providing Wi-Fi service to a single campus, purportedly the most expensive of the 90 schools and 11 other facilities to be covered by the contract. AT&T submitted the lowest bid: a maximum of $52,268 for each campus. Another bidder, Athena Wireless Communications, proposed a top per-campus figure of $53,533.

TIG’s price: a maximum of $89,895 per campus, fifth-highest among the seven proposals. If the highest prices applied to all 101 sites, TIG’s offer would exceed the lower bidders’ by as much as $3.8 million.

The evaluators gave the highest overall score to AT&T, followed by Smartwave Technologies and TIG.

But the evaluators took another look at the proposals, the district’s documents show. This time, they awarded no points to any bidder for price.

Only then, with cost disregarded, did TIG emerge on top.

Most of the losing bidders declined to comment, or else discussed the contract only in general terms.

“We feel we submitted a competitive bid for the Atlanta Public Schools wireless networking contract, as we do for all our bids,” said Dawn Benton, a spokeswoman for AT&T in Atlanta.

On Dec. 14, more than three months after TIG began the project, the contract came before the Board of Education. It called for the work to be completed within 18 months, but allowed payments to extend over five years: $2.5 million the first year and as much as $2 million each year thereafter, at the superintendent’s discretion.

The board approved it without discussion.

Lowest bids don’t win contract

Atlanta Public Schools officials gave a contract for wireless Internet equipment to Technology Integration Group, even though four other companies submitted lower bids. The bids — representing the maximum charge for each of 90 school campuses and 11 other facilities — fell across a broad spectrum:

AT&T $52,268

Athena Wireless Communications $53,533

Smartwave Technologies $57,521

MCS of Tampa $88,325

Technology Integration Group $89,895

IBM $133,207

Hayes Security Services $296,500

Source: Atlanta Public Schools

From third to first

Seven companies submitted bids last year to install wireless Internet equipment for the Atlanta Public Schools, a project worth as much as $10.5 million. When the district’s evaluators considered each company’s quoted price and other factors, AT&T came out on top. But when the evaluators disregarded price, a company that had already performed some of the work was ranked first.

With price taken into account, as required by federal rules, the scores — based on a 100-point scale — were:

1. AT&T 74.06

2. Smartwave Technologies 72.58

3. Technology Integration Group 69.12

4. MCS of Tampa 68.37

5. IBM 56.26

6. Hayes Security Services 32.52

7. Athena Wireless Communications 24.79

When evaluators disregarded the bidders’ quoted prices, the scores came out differently:

1. Technology Integration Group 45.86

2. MCS of Tampa 44.70

3. IBM 40.56

4. Smartwave Technologies 36.23

5. AT&T 34.06

6. Hayes Security Services 25.47

7. Athena Wireless Communications 24.79*

*Athena was the only company that received no points for price in either evaluation.

Source: Atlanta Public Schools.

How we got the story

For this story, The Atlanta Journal-Constitution reviewed roughly 2,000 pages of documents related to multiple technology contracts, including invoices, purchase orders and court documents, along with records kept by the non-profit that administers the E-rate program for the federal government. The newspaper used the Georgia Open Records Act to obtain documents from the school district.

The AJC also interviewed vendors involved in the bidding process and submitted detailed questions to Atlanta school district officials concerning the bids.

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