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The Honolulu Advertiser
Posted on: Sunday, July 21, 2002

UH skips bidding process; gives firm $5.3 million job

By Jim Dooley
Advertiser Staff Writer

The University of Hawai'i gave a $5.3 million job to Verizon Hawaii last month to wire student housing for cable television and Internet service without putting the work out to bid. Competitors say the university might have saved money with a bidding process.

The job entails wiring some 1,800 student apartments and dorms, which justified in part a 15 percent to 20 percent increase in dorm rates last April by the UH Board of Regents. Instead of asking for competitive bids, the university amended a telecommunications contract it has had with Verizon and its corporate predecessor, GTE Hawaiian Telephone, since 1988.

That contract, which was supposed to expire in December but was extended for four more years, has exceeded original estimates by more than $20 million, according to university files and court records.

UH officials have offered conflicting versions of why the work was not put out for competitive bids, at first indicating that the university's existing contract with Verizon required that the company get the work.

"We were advised that Senior Vice President and General Counsel [Walter] Kirimitsu had determined that the proposed cabling project fell within the scope of the university's existing telecommunications contract with Verizon and ... would apply to this project," wrote Duff Zwald, the university's chief of procurement, in a June 26 e-mail to The Advertiser.

Kirimitsu disputed that account last week, saying he issued an informal legal opinion that said the university "was not required to go with Verizon" for the Internet and cable work.

Official contract files involving the project reviewed by The Advertiser turned up no records that explained the university's decision to give the work to Verizon without bids or that reflected negotiations on Verizon's price. The files show that Verizon submitted its price proposal to the university on May 29, and it was approved the next day.

UH Vice President Paul Costello said the decision to go with Verizon made sense, given the scope of the work and how quickly it was to be finished. The cable-Internet wiring work is scheduled to begin in August and be completed by the end of the year, according to the UH Student Housing Office.

Costello said the University has been talking to Verizon for years about Internet and cable service to student housing.

"It's a joke that students come here and find there's no connectivity in their rooms," he said. "We're light years behind other universities."

He said that when Verizon first approached UH with a plan to provide Internet and cable television service, plus all the wiring involved, university officials dismissed it as too expensive. Then Verizon proposed just the wiring portion of the work and those costs were negotiated several times until a fair price was reached, Costello said.

"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," Costello said.

Verizon's proposal included a 30 percent discount on equipment supplied by Cisco Systems, Inc.

But other companies, told of the wiring contract by The Advertiser, said they could have matched or improved upon those discounts.

Rob Volker, president and chief operating officer of Pacific Lightnet, Inc., said the manufacturer's 30 percent discount is standard.

"In the prevailing market, with conditions the way they are now and for a contract that size, I wouldn't even talk to a manufacturer for anything less than 40 percent," he said.

Glenn Boss, head of Boss Communication Technologies, Inc., agreed.

"There are others dealers offering Cisco products that could offer the same discount."

Costello said Verizon's discounts apply to installation as well as material costs.

Boss said he would have bid on the university job if he'd been asked. His company has done extensive cable wiring work at five large educational institutions in Hawai'i, including Punahou School, Kamehameha Schools and Iolani School.

Volker said his company, which won the contract last year on cable and Internet service for Brigham Young University's Laie campus, might have bid on the work as well.

"Our feeling is that we may have bid on it, but it's hard to bid on something when you don't know about it," he said. "Our experience with inside wiring work, which is really what this is, is that you get significantly better prices when you have competitive bidding."

Ed Murley, vice president and general manager of Time Warner Telecomm Inc., also was unaware of the UH contract.

"If you don't have competition, how do you know if you're getting the best price, best service and best product?" Murley said.

Verizon spokeswoman Ann Nishida said "the majority" of the cable Internet wiring work was covered by the pre-existing telecommunications contract.

"The enormous scope of the project — 19 dormitories and apartment buildings — required a company of our size and with our capabilities and resources to address the complexity and accelerated time requirements of the job," she said.

The university's original 1988 contract with GTE-Hawaiian Tel also was controversial. One other company submitted a bid but several others, including AT&T, complained that unfair restrictions imposed by the state prohibited others from bidding.

The contract was supposed to cost the university $10.1 million, or $22 million when financed over a 10-year leasing period but it ended up surpassing $40 million. In 1997, the university sued the consultant who designed the system, Telecommunications International, Inc., and obtained what state officials describe as a "substantial" settlement, believed to be approximately $10 million.

The telephone contract was due to expire last year, but in December, the university extended it another four years.

The university said it needed the time to plan for a new Manoa "PBX telephone switching system." In March, UH amended the contract, adding $1.7 million to upgrade that system at the Manoa campus.

Reach Jim Dooley at jdooley@honoluluadvertiser.com or 535-8447.