UH-Verizon deal unfair, competing firms say

By Jim Dooley
Advertiser Staff Writer

The University of Hawai'i short-circuited competitive bidding for a contract to design the telecommunications and computer system at the new UH medical school, giving the work directly to Verizon Hawaii Inc.

Verizon is not charging the university for the design work, but UH officials and their consultants also gave the telecommunications giant special permission to bid on a separate contract, worth between $2.5 million and $5 million, for installation of the system it is designing, according to UH officials and executives of companies who wanted to bid on the design contract.

UH officials and consultants acknowledged that designing the system gives Verizon an advantage over other competitors who might bid for the multimillion dollar installation job, but said that all companies interested in bidding for the work will still have a fair shot at landing the contract. Executives of competing firms said allowing one firm to design a system and then bid on its installation is grossly unfair.

"Obviously, one bidder is going to have a big advantage over the others," said Glenn Boss, head of Boss Communication Technologies Inc.

"I don't know if there's any point in bidding on the installation," said Brian Malacek of Expanets of Hawaii Inc. "I mean, why waste our time?"

Andy Campbell, an account executive at Expanets who tried to bid on the medical school design contract, said the bidding process, handled by Architects Hawaii Inc., for the university, was halted before it ever really got started. Campbell said he made contact with Jeff Nakamura, the lead architect on the project.

Nakamura explained that there would be a two-step bidding process, Campbell said, starting with gathering information from interested companies to determine who was qualified for the work. The second step would be to solicit formal proposals from those deemed qualified. Campbell said his firm had about a week to put together the qualifications portion of the proposal but that it handed in a document on time that totalled between 50 and 75 pages.

"We worked really hard on it," Campbell said. "Then we didn't hear anything. I finally got a hold of Jeff Nakamura and he told me, 'We've awarded the project.' I said, what do you mean? How could you do that? He said, 'The university decided they wanted to do business with Verizon.' "

Campbell, who has since left Expanets and moved to the Mainland, said,"The whole process was killed before it ever really got started.

"I've never been involved in something like that. I've managed other very large state contracts on the Mainland, worth millions of dollars, and I have never seen a system like you've got in Hawai'i."

Nakamura of Architects Hawaii referred questions to Art Lucio, another architect involved in the design contract award.

"We solicited proposals from several companies, including Verizon," Lucio said. "The proposals were reviewed, evaluated at the university and it was decided to give the planning contract to Verizon."

The decision, he said, was "based on qualifications."

The new medical school, called the University of Hawai'i Health and Wellness Center, is being developed in Kaka'ako near the waterfront. The school must be connected by telephone and computer to the main UH campus in Manoa, said Rex Johnson, who was coordinating the $300 million dollar project for the university until last month, when he was named head of the Hawai'i Tourism Authority.

"Verizon are the people that operate the system on the Manoa campus and it was felt that they were best equipped to design a compatible Kaka'ako system," Johnson said.

That's the same reasoning the university used two months ago to award Verizon, without bidding, a $5.3 million job for cable television and Internet wiring of student housing at the Manoa campus.

"Given the vast amount of work Verizon has done here and their familiarity with the campus, the speed required for the work, we felt the price was equitable," UH Vice President Paul Costello said of the Manoa campus Internet/cable work.

Verizon is not charging UH for the medical school design work, and that led to another key change that the university ordered in the middle of the procurement process, Johnson and Lucio said.

The university originally prohibited the consultant hired to plan the information technology system from bidding on the subsequent contract to install the system.

"Initially, that was the directive that we had gotten from our client, the university," Lucio said. "Subsequently, the requirement was changed."

Johnson said Verizon "is providing a heck of a lot of design work" for free so the decision was made to allow the company to bid on the multimillion dollar installation contract.

"It doesn't really give them, I would say, an advantage," Lucio said. "When it comes to bidding, everybody should be on an equal footing at that time because they'll be bidding on the same set of specs and plans."

Lucio acknowledged that knowing the "specs and plans" for a contract ahead of all other bidders "is an advantage. It gives them a head start. But it will be issued later to everybody to bid. That's my understanding."

George Darby, a local attorney who specializes in technology law, said allowing the same company to design a system and then bid on its installation is illegal under federal procurement law.

"It either has to be what's called a 'design-build' contract, where a company submits a competitive proposal to both plan and install a system, or it has to be separate contracts where the designer is prohibited from bidding on installation," Darby said.

State procurement law forbids companies hired to write specifications for government contracts from later bidding on those contracts. But that law doesn't apply to the Verizon design contract, said Aaron Fujioka, the state's chief procurement officer, because the university does not fall under the state procurement code. In 1998, the state Legislature gave the university administrative autonomy.

And even if UH was still covered by the procurement code, Fujioka said, the prohibition on a design consultant bidding on an installation contract "only applies if the consultant was compensated for doing the design work."

Verizon is doing the design work for free.

Reach Jim Dooley at jdooley@honoluluadvertiser.com or 535-2447.