Motorola’s no-bid grip on Charlotte radio contracts raises questions
08/09/2014 12:00 AM
08/10/2014 9:44 AM
Motorola has thrived virtually without competition as Charlotte’s emergency radio company, scoring more than $60 million in no-bid contracts over the past decade.
The latest contract, approved by the Charlotte City Council last October, will cost the region’s taxpayers up to $32 million for system maintenance and upgrades through mid-2020. It’s the largest noncompetitive contract the city has awarded in more than three years.
The government bidding process is designed largely to save tax dollars. The idea: Competition usually prods companies to lower their prices.
But only one of the more than 20 contracts awarded to Motorola over the past decade involved competitive bidding.
“The taxpayers of our region are getting burned,” said Steve Koman, a former emergency communications consultant who assisted the city from late 2011 to early this year.
Koman contends the city failed to exercise due diligence by awarding the recent Motorola contract without soliciting competition – and without asking independent experts whether it was the most cost-effective option. By May, he’d grown so concerned that he notified the FBI.
Another sign of Motorola’s supremacy: The company supplied all of the roughly 5,000 radios bought by city and county agencies over the past decade.
City officials insist they’ve acted in the best interests of taxpayers and public safety agencies. They say shifting to a new company would be expensive and potentially risky, and that the city has received discounts by signing the recent multi-year contract with Motorola.
But cost, they say, is not the only concern. Motorola’s two-way radios are widely considered the gold standard for public safety use. In the Charlotte area, police, firefighters and medics have come to trust the company’s equipment, city officials say.
What has happened in the Charlotte region is by no means unique. A recent investigation by McClatchy, the company that owns the Observer, detailed an array of tactics used by Motorola to elbow out competitors and continue its decades-long dominance.
The stories described how the company has used close relationships with contracting officials, police, fire chiefs and county sheriffs, as well as numerous marketing strategies, to lock in business in all but a smattering of public safety agencies in the nation’s 20 largest cities.
In response to those stories, three senior House Democrats have asked the Department of Homeland Security’s internal watchdog to investigate whether Motorola’s contracting tactics have led state and local governments to spend too many federal grant dollars on their radio systems.
Illinois-based Motorola, known as Motorola Solutions Inc. since 2011, when its parent split, said it has a “robust compliance practice to ensure it follows all applicable laws and regulations.” The company said it competes fairly for its customers’ business by offering them “superior products and solutions.”
In Charlotte, as in many other cities, Motorola has found ways to cultivate brand loyalty.
During the 2012 Democratic National Convention, Motorola loaned the city about 3,000 radios for use free of charge by law enforcement agents.
Company officials have also made smaller gestures. For instance, they periodically spring for pizza for those who work in the radio room, according to Danny Lovett, who leads the city’s public safety communications team.
City officials say those deeds never influenced contract decisions.
While Motorola has a reputation for building reliable equipment, its radios tend to be more expensive than those of competitors. In Charlotte and many other cities, the lack of competition has kept prices high, experts say.
Public safety agencies in Mecklenburg have paid up to $5,000 apiece for some Motorola radios. Other companies sell radios meeting the same specifications for as little as $1,700.
Chuck Robinson, a former Charlotte official who played a key role in recommending radio contracts, said law enforcement agencies have a “love-hate relationship” with Motorola.
“They really love the product,” said Robinson, the city’s shared services director until he retired in December. “But they really wish they had some other options.”
Big money, no bids
At their meeting on October 28, 2013, city council members took a big step with no public discussion: They approved the city’s largest noncompetitive contract in years.
Under the agreement, Motorola will receive up to $32 million over the next seven to nine years to maintain, upgrade and expand the city’s public safety radio network, which serves law enforcement and emergency workers in Mecklenburg and surrounding counties.
Experts say cities can often save millions by requesting competitive bids on projects that large. Other major companies say they could do much of the work and likely would have bid on it if they’d had the chance.
The Harris Corporation is among them. Based in Florida, the multibillion-dollar company is the leading supplier of tactical radios to the U.S. military, and has built statewide public safety radio systems in Florida, Maine and Pennsylvania.
Harris spokeswoman Victoria Dillon said she can’t guarantee that her company could have done the Charlotte work for less money than Motorola. But she said the city likely could have reduced the cost to taxpayers by opening the project up for competition – even if Motorola won the bid.
“A competitive process tends to drive companies to the lowest price and the highest value,” she said.
Kyle Connor, director of business development for Airbus DS Communications, another Motorola competitor, said he has seen many cities save money on radio systems by putting the projects out to bid.
One example: In 2011, Motorola asked officials in Shawnee County, Kan., for $19.2 million to build a digital radio system. The city chose to open the project up for bids instead. Motorola reduced its prices and won the contract. County taxpayers won too, saving $6 million.
Elsewhere in Kansas, Sedgwick County severed its long relationship with Motorola in 2011 – and saved as much as $11 million in the process. The county awarded a contract to Cassidian Communications, a subsidiary of France-based aerospace and electronics giant Airbus Group. (Cassidian recently changed its name to Airbus DS Communications.)
Motorola helps craft plan
Charlotte officials contend it made sense to stick with Motorola.
The contract took shape after the city’s public safety communications team – led by Lovett, chief information officer Jeff Stovall and assistant CIO Barry Robbins – began to create a strategic plan for the radio network. The team asked for help from Motorola, which for years had been in charge of maintaining the network.
Motorola presented a multi-year plan to maintain the network, support its growth and help prepare for the transition to newer technologies.
City spokeswoman Sabrina Colon said “consulting with current vendors is pretty normal” when city officials are planning the future direction of a program.
But Koman, the former city consultant, said the contract that Motorola helped craft will allow it to embed more patented equipment in the system, which in turn could prolong the city’s dependence on the company.
Those who worked on the contract consulted with local public safety agencies. And they talked with officials from other cities that had entered into similar agreements with Motorola.
Former Charlotte Mayor Patrick Cannon, who in June pleaded guilty to a federal corruption charge, played no role in the contract discussions, city officials say.
Robinson made the final recommendation to the city manager’s office.
“It was a tough decision to make,” said Robinson, whose 250-employee shared services department drew up contracts for acquiring the equipment and services needed by multiple government agencies. “I like nothing more than to compete.”
He noted that the city awarded a $12.7 million contract to Alcatel-Lucent rather than Motorola in 2011 to create a high-speed broadband network for public safety agencies – a project that was later scrapped. Many expected Motorola to win that contract, Robinson said. “When they didn’t, it was a shocker,” he said.
But several factors, he said, made it hard to open the recent Motorola project up for competition.
Most of the equipment in the city’s radio network is proprietary to Motorola. That, Robinson said, meant that only Motorola or one of its licensed partners could maintain it.
Experts say that for $32 million, the city could have pursued alternatives, such as asking another company to build and maintain its own system.
Robinson said that while it’s possible that would have saved tax dollars over the long run, it likely would have proved costly in the short term. And switching to a new system, he said, would raise the risk of technical problems that could put the lives of public safety officials in jeopardy during emergencies.
Connor, the Airbus DS Communications official, said that public safety agencies “switch vendors smoothly on a regular basis” and that ensuring problem-free transitions is a key focus of any new installation.
The technical challenges faced when an agency shifts to a new radio company are no more severe than those encountered when agencies keep the same company but switch to a new technology, he said.
Charlotte had previously signed annual maintenance contracts with Motorola, but city officials said they’ve gotten a better deal with the new contract.
In exchange for signing the recent long-term agreement, the city will receive a 9 percent discount on existing prices for maintenance and infrastructure. The contract also allows the city to modify or cancel any of the scheduled projects or maintenance without penalty.
City councilman Michael Barnes said he’d like the city to seek competing bids whenever possible. But because Motorola has provided most of the system’s components, he said, “it makes sense for them to maintain and upgrade it.” He said he was comfortable with the staff’s recommendation not to open the contract up to competition.
“You’ve got good experiences from other cities with this particular vendor,” he said. “Good savings.”
A visit to the FBI
Koman, the former city consultant, argues that city officials missed a chance to save tax dollars. The emergency communications marketplace has become increasingly standardized, he said, so there’s little justification for failing to get bids.
“With rare exceptions, lack of competition means higher prices,” said Koman, whose job responsibilities for the city of Charlotte included making sure that tax dollars were well spent. “Especially when lack of competition is sustained over a long period of time as it has (been) for the Charlotte region ”
An expert in wireless communication systems, Koman has helped government agencies with emergency communications projects across the Carolinas, Georgia and Nevada. From 2006 to 2008, he worked as a contractor for Motorola; he said he ended his work there on good terms.
Koman said he became concerned last year because the city didn’t seem to be following its own processes for soliciting competition on big projects.
He said his suspicions grew in March, when Cannon was accused of accepting tens of thousands of dollars in bribes.
So in May, he brought his concerns and information to an FBI agent.
The FBI declined to comment on whether it is investigating. Colon, the city spokeswoman, said Charlotte officials complied with the law and aren’t aware of any FBI investigation.
N.C. contracting statutes generally require formal bidding on the purchase of supplies, materials and equipment estimated to cost more than $90,000.
But service contracts aren’t subject to state bidding requirements. For that reason, Colon said, bidding wasn’t required on the $32 million contract.
Firm retains dominance
City officials say they’ve tried to open things up to other radio vendors. In 2011, the city and county qualified Motorola and three other companies to supply radios that can operate on a new digital system. But three years later, the only radios bought by local public safety agencies have been from Motorola.
Robinson said he understands the loyalty to Motorola. “It’s tried and true and trusted. If you’re going to buy a device your life depends on, are you going to try something new?”
Many of the pricier Motorola radios are equipped with important features, city officials say. A GPS function, for instance, allows dispatchers to track the locations of firefighters and police.
A problem, though, is that many of Motorola’s products aren’t fully compatible with equipment made by other companies. The McClatchy series detailed how Motorola embedded proprietary features in its products, a practice that blocked interaction between its radios and competitors’ models.
Critics contend that violates the spirit of voluntary standards that are designed to ensure that all radio brands can interact. Those standards, put in place almost a decade ago, have led to increased competition and lower radio prices.
In 2012, the inspector general for Palm Beach County, Fla., faulted the county for the noncompetitive purchase of a new Motorola “master controller” – a switch that ties together equipment purchased as far back as 1998 with the company’s newer systems. Buying the switch “will likely provide a continued sole-source justification for future equipment” that can connect with proprietary Motorola hardware, the report by Inspector General Sheryl Steckler said.
Steckler chided county officials for signing the deal before conducting a comprehensive study of all replacement strategies, and for plowing $41 million into the current system without exploring “whether a compatible and less expensive system could have been acquired.”
Like Palm Beach, Charlotte did no such study before awarding the $32 million contract.
Motorola said many of its current products allow different agencies – and different brands – to interact.
Charlotte officials say they would gladly break away from Motorola if they thought they could get a better deal elsewhere. In the meantime, they wish they could get a better deal from Motorola.
Said Barry Robbins, the assistant CIO: “Wishing ain’t getting, as my momma used to say.”
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