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HIGH-TECH DEBACLE: From no bid-contracts to a network that doesn't work to sketc

Mr Roger K. Olsson | 15.07.2007 21:12 | Other Press | London | Sheffield

Giuen Media



Sunday, July 15, 2007


Jul. 15, 2007 (McClatchy-Tribune Regional News delivered by Newstex) --
Where did the county go wrong?

That's the million-dollar question now that the county is poised to resuscitate its lifeless wireless system with another influx of taxpayer dollars.

The answer, based on interviews and records

obtained by the Journal: right from the start and at almost every step along the way.

A recent consultant's report says the $1.2 million it cost to design and build an affordable broadband network essentially bought 'vaporware.' An estimated $950,000 will be needed to get a network up and running.

The county has spent more than $2.6 million on the project since 2004, but officials say not all the money has gone down the drain. They say subcontractors have come up with related educational and health programs that have value -- even without a countywide wireless system.

'It was never just about building a backbone,' said County Manager Debbie Hays.

But, for the most part, the initiative has been an embarrassing bust that is attracting the wrong kind of attention for county officials who once hyped the project and said it would bring national accolades.

For the past several months, private investigators hired by the State Auditor's Office have been conducting interviews and poring over project records.

There is plenty to pique their interest. For example:

The man hired to write the county's bid specifications for the project master plan was allowed to bid on and ended up winning the master plan contract -- a practice banned by the state and many local government entities.

The county only put $300,000 of the project to competitive bid -- a process designed to ensure the best work for the best price. And that piece of the project is arguably tainted by the fact that the winner wrote the specs.

The county paid thousands of dollars up front rather than waiting for detailed bills -- in effect, loaning contractors money to do work, some of which wasn't performed.

The county didn't require the primary contractor to post a performance bond to ensure the job would be completed as promised. Liability insurance for the project wasn't purchased until last September, a year into the implementation.

The county shelled out more than $50,000 to set up a private company, Sandoval Broadband, to oversee the project -- a move that allowed the hiring of subcontractors and disbursement of public dollars to be shielded from public scrutiny.

Sandoval County had $3 million for the project, of which $2 million came from the proceeds of a revenue bond deal it approved for Intel. (NASDAQ:INTC) The state kicked in another $1 million.

Now the county is seeking to recoup some of its costs after design engineer Dewayne Hendricks of the California-based Dandin Group walked off the job in May.

The Dandin Group was paid $1.2 million to design and build the network, but county officials have estimated that the equipment installed is worth about $80,000 and the project will have to start over practically from scratch.

The county spent another $300,000 for a master plan. Other money went to consultants, travel, public relations and other expenses.

'New Mexico had a chance to leap frog and to really be in the game,' said Marshall Monroe, a Corrales consultant who created Gov. Bill Richardson's strategic plan for film in New Mexico. He believes the ambitious project -- in the right hands -- can still be salvaged.

Monroe chairs a communications task force for the National Intelligence Science Board, which advises the director of the CIA.

He said he worked on the Sandoval County project in 2005. But he bailed within months.

'They had a little team and that's where it just started to smell,' he said.

Former County Commissioner William Sapien said, 'There have been some challenges that should have been addressed as we went along and they weren't. I think if the oversight had been closer, a lot of these things would have been caught beforehand.

'Pretty much the commission was left out of it, certainly in speaking for myself,' he added.

Hays, who refers to the Sandoval Broadband project as her 'baby,' called the shots and signed off on payments.

Looming over the project is an inquiry by State Auditor Hector Balderas, who told the Journal last week that he has decided a special forensic audit is now needed.

Balderas said the special audit will make recommendations on how to improve accountability and ensure lawful conduct.

Utah man takes

charge

Jonathan Mann came to the Sandoval County broadband project as a business consultant from Salt Lake City in 2004.

He had no background in wireless technology but was put in charge of a cutting-edge broadband venture -- and said he earned an estimated $350,000 by the time he walked away two years later.

Hays said she hired Mann and his one-man firm, AQV Communications, in October 2004 after getting his name from Intel government relations manager Terry McDermott.

Hays said she never considered anyone else for the task, in part because she hoped Mann could bring private funding to the project through his business contacts and acumen.

Mann's initial assignment was to write the request for proposals for the broadband master plan, for which he was paid $5,000.

His RFP didn't award points for a company's

experience

and didn't require references.

A model request for proposals published by the New Mexico Public Procurement Association says a minimum of 30 calendar days should be given between the date an RFP is issued and proposals are due.

The county RFP written by Mann gave companies just 11 business days to respond.

Mann himself bid on the project, stating in his proposal that he would coordinate a team that included Intel, the University of New Mexico 'and 10 to 15 other interested parties' in developing the master plan. The 10 to 15 parties weren't identified.

A review by four county employees, including Hays, rated Mann's proposal better than those of four other firms -- some with national experience in the field.

Mann's proposed cost of $300,000 was higher than all the other bidders.

The state Governmental Conduct Act bars state agencies from accepting bids on a project from anyone who had direct or indirect involvement in developing the specifications.

New Mexico counties aren't technically covered by the act, but contractors and government officials interviewed said the prohibition makes sense.

'If you write the specifications, the same company should not be allowed to bid on it. It's good practice is what it is. It would be a conflict of interest,' said Ramona Gutierrez, president of the New Mexico Public Procurement Association.

Peter Baston of Ideas Inc. of Albuquerque came in second in the competition to create the master plan. Baston told the Journal he talked with county officials about a broadband project before Mann came on the scene.

He said that, at Hays' request, he met with Mann in October 2004.

Baston said that, during the meeting, Mann told him he would see to it Baston got the master plan contract if Baston would hire him and several people who were 'close to county government.'

'I felt like I was being shaken down,' said Baston.

Mann met with Baston, according to an e-mail obtained by the Journal. But in an interview with the Journal, Mann disputed Baston's account of the conversation.

'That's a lie,' Mann said. 'There were no commitments made to Peter Baston of any nature.'

Baston said he told investigators for the state Auditor's Office about the meeting with Mann and passed a polygraph they asked him to take.

Balderas said he couldn't address specifics of the inquiry but said his office is using a 'vast amount of tools ... to make sure we're getting accurate information.'

No-bid project

In 2005, the project went from a master plan to a $2 million implementation without ever going to another public bid.

Instead, the county created a private company to develop the system and named Mann's company to oversee it.

Monroe, former creative executive for The Walt Disney company (NYSE:DCQ) (NYSE:DIS) , said the Sandoval Broadband project was 'an enormously sophisticated technology challenge.

'One of the main problems is that the county gave a no-bid $2 million contract to somebody with no technical background,' he said.

Hays contends the implementation phase didn't need to be put to bid 'because we had competitively bid it in the beginning.'

But the 2004 request for proposals for the master plan didn't require contractors to bid on implementation costs.

One unsuccessful bidder on the master plan proposed a national RFP to find candidates to build the system.

To retain Mann for the next phase of the project, the county in 2005 rolled 11 new duties into his old contract by issuing addendums.

Such a practice is often frowned on in government procurement circles, said Gutierrez.

'That's a really gray area. Normally, we don't allow it,' she said.

A July 2005 addendum said AQV would be paid $250,000 a year plus a stock option to act as 'executive director' for the private company. Initially called Olla Grande, the company was later renamed Sandoval Broadband.

Mann retained his former business associate, Betty Anne McDermott of Rio Rancho, and Hendricks to work for the new company. Both had helped on the earlier master plan.

A November 2005 addendum stated that AQV 'is now providing oversight to all the development and deployment efforts to facilitate completion of the broadband project and is now incurring expenses.'

It added: 'It is necessary for the county commission to now authorize expenditure of $2 million infrastructure funds to reimburse the Contractor for the costs.'

Sapien, commission chairman at the time, said he didn't recall anyone asking whether

the county should go to bid for the $2 million portion of the work.

'I think we were relying on Debbie Hays' recommendation that what was taking place was the right thing to do,' he said.

Monroe said he was assured by county officials that Mann wouldn't continue to lead the project after the master plan was submitted in July 2005.

Mann said he never intended to stay on but said Hays talked him into it.

Monroe said a number of people in New Mexico were qualified to build the system.

'And keep in mind,' Monroe added, 'there is a global stampede in this area to roll out municipal wireless infrastructure.'

Paid in advance

State law generally bars government from issuing checks for any purchase of services, construction or tangible personal property unless it has actually received them and they have met specifications.

Yet the county frequently paid contractors in advance.

County records show that during the last six months of 2006, more than $500,000 was paid in 'anticipated costs' for engineering, equipment and administration.

Mann said he was reimbursed for roughly $125,000 he personally spent before December 2005 but was later advanced funds to distribute to subcontractors.

Hendricks in a Journal interview said his company never had to shell out a dime for any work on the project.

Hays has said the county wasn't looking for immediate results with early invoices and payments. She said the county was prepared to spend $3 million for a finished product and wasn't as concerned with the process.

She signed off on many early invoices that contained little or no detail about where money was being spent, explaining that line-item detail would have been technical jargon she would never understand.

No performance bond

William Bridges, owner of RITE Brain consulting of Littleton, Colo., worked for Mann in 2005, investigating the costs of setting up a trial for the broadband network.

He said that, after he submitted the plans, Mann told him 'to take a hike,' leaving the Dandin Group as the primary engineer.

Bridges said government agencies usually require performance or surety bonds on public projects in case contractors don't finish the job. The contractor is supposed to pay for the bond.

'There is not a single RFP that I have seen in the last five years for any wireless network where the municipal government didn't require a bond and/or some equivalent,' he said.

The city of Albuquerque, for instance, plans to deploy an affordable, wireless broadband network. One requirement of the city's RFP is that the winning contractor obtain a performance bond.

Mann's contract and the addendums contained no such requirement.

Hays said through a spokesman that there was no need for a performance bond because Sandoval Broadband had insurance.

But invoices show that a commercial liability insurance policy wasn't purchased until more than a year into the project. Sandoval Broadband bought two policies in September 2006 at a cost to the county of $23,300.

Hendricks said his firm wasn't required to provide proof of insurance because Sandoval Broadband was insured.

A private company

Sapien said he understood that the purpose of the county setting up a private company was so 'that when the project got up and running, there'd be a private company that would come in and buy it and take it over.'

Mann told the Journal that the private company wasn't obliged to adhere to government standards.

After Mann resigned in August 2006, Hendricks became president of Sandoval Broadband.

In response to Journal inquiries, Hendricks refused to produce receipts and records of how money was being spent. He refused to name anyone else working on the project.

Mann said that, after he left, Sandoval Broadband paid him $50,000 as part of the transition.

But Hays told the Journal she knew nothing about the payment because it involved the private company.

During the investigation by Caswell Investigations of Albuquerque earlier this year, the county lacked detailed records about how project money was spent. So the state auditor went to court to obtain subpoenas requiring the documents from Mann and Hendricks. By that time, both men had resigned.

Today, the private company -- Sandoval Broadband -- has no CEO, board of directors or employees. It also owes money to vendors.

Bridges said he's saddened to hear how the project deteriorated.

As part of his work for Mann, he proposed creating an oversight team representing county government, the private firms involved and an independent member who wasn't associated with any of the parties involved.

'You have to have oversight,' Bridges said. 'There has to be reporting.'

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Mr Roger K. Olsson
- e-mail: rogerkolsson@yahoo.co.uk
- Homepage: http://giuen.wordpress.com