Council plans inquiry into bus-card contract
By Ken Kobayashi
Advertiser Staff Writer
The chairwoman of the City Council budget committee plans to hold a special meeting next month to review whether the company that handled the smart-card program for TheBus complied with the city contract.
The city has paid Royal Contracting Co. $1.1 million for the program, which was to allow bus riders to pay their fare with a debit-like card, but the contract was canceled last week because of what city officials have said were problems with the equipment and the company not meeting deadlines, although they stress the primary reason is that there is no money to continue the program.
Ann Kobayashi, head of the budget committee, said she wants to determine whether there might be grounds to recover any of the $1.1 million that the city paid to Royal Contracting.
"I'd like to know whether the product that was asked for in the contract was delivered," she said.
But Kobayashi cautioned that depending on what is learned, it might not be worth the money spent on lawyers to seek legal action.
Officials for the city administration and Royal Contracting said they are willing to cooperate with the committee, but indicated that the company has been paid in accordance with the contract.
"I don't see anything at this point in time that would cause us to try to recover costs from Royal Contracting for the simple fact that they were paid no more for what they performed," said Ed Hirata, city Transportation Services director.
Leonard Leong, vice president of Royal Contracting, said the company was surprised and disappointed with the cancellation, and had complied with the contract.
"We feel we could answer (Kobayashi's) concerns," he said.
Royal Contracting was awarded a $2.2 million contract for the smart-card program in 2003. Card-reading equipment has been installed on the fleet of more than 500 buses and a trial program with city employees and 18 companies began in December.
The city canceled the contract on May 16.
Hirata said the company was not meeting target dates for the full implementation of the program in July.
But he said the primary reason for the cancellation was that the city did not have enough money.
Royal Contracting, a major construction company that does city and state work, was selected under former Mayor Jeremy Harris' administration. It was one of three companies to submit bids.
One company, ERG Transit System Inc. of Canada, also submitted a bid of $2.2 million, but was disqualified after it failed to submit a bond, according to city records. Another bid was by Cubic Transportation Systems Inc. of San Diego, but its bid was $4.3 million.
The city's contract evaluation team noted that Royal Contracting lacked experience in this area and that Cubic Transportation was "more than capable" of providing the smart-card system.
But the panel also said the city's budget could not afford the cost of Cubic Transportation's bid, according to city records.
Leong had defended Royal Contracting's bid, saying that the company's Australian subcontractor VFJ Technology had expertise with smart-cards. He said yesterday that Royal Contracting had also hired a local company, Rising Tide, with expertise in that area.
Royal Contracting earned about $60 million in revenues from private, state and city work last year, Leong said.
The company received the contract at the same time Leong was under investigation by the state Campaign Spending Commission for illegal donations to the Harris campaign. Leong was also a Harris appointee on the Honolulu Police Commission.
Leong admitted he made illegal campaign contributions to Harris and pleaded no contest to a misdemeanor charge of giving money to others so they could donate the money to the former mayor's campaign. Leong was ordered to pay $1,000, but given a chance to have the case dropped if he abided by conditions similar to probation for a year.
Leong later resigned from the police commission.
Also in 2003, the city prosecutor's office and the state Campaign Spending Commission were also investigating allegations that Royal Contracting donated curbstones for improvements to the home of then-city Managing Director Ben Lee.
At the time, Lee said through a city spokesman that Royal Contracting officials told him the rocks had no value, but he paid the company "several hundred dollars" to unload the stones at his home. Lee's lawyer said the stones were not used on Lee's property and were returned to Royal Contracting.
Leong yesterday said he was never questioned by investigators about whether there was any link between Royal Contracting getting the smart-card contract and the illegal donations. He said the contract was awarded through the bidding process and denied that there was any connection.
Hirata said Leong's illegal donation case was not a factor in the contract cancellation.
Still to be determined is what will happen to the equipment installed on the buses. Hirata said the equipment will have to be removed and the city will try to sell them to companies using similar systems as spare parts, but he did not know how much could be recovered.
Kobayashi said the special budget committee meeting will also review other city expenditures and what she called questionable accounts under the Harris administration, such as an account for an environmental fund and another for "Friends of Honolulu Hale."
Reach Ken Kobayashi at 525-8030 or firstname.lastname@example.org