Schneider Airport Surveillance Contract Cancelled, 2 Year Ban

By Carlton Purvis, Published Mar 21, 2014, 12:00am EDT (Info+)

Schneider Electric had its contract rescinded and was banned from bidding on projects after the South Jersey Transit Authority Board of Commissioners voted to kill the deal March 19th. In the note, we share our findings from talking to officials and look at why.

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Comments (29)

Airports are always interesting. I worked on an airport project access control and CCTV upgrade many years ago as a sub-contractor and the actual cost of installation and materials would have been about $200,000.00. There was a requirement for insurance if the feeds to the tower were interrupted due to cutting and trenching (old airport didn't have knowledge of feed paths to tower). 1 million dollars per day of disruption, unlimited days. A self insured prime took on the project and was awarded the $465,000.00 contract. That difference was the bonding, insurance and project management costs.

They didn't have the proper insurance.

And they lost the bid.

And they got banned from bidding on any project for two years.

Uh huh.

And then a local company comes along and gets the job instead of the big national company.

I see.

I know you can't see this, because internet, but you know that face you make when you smell a big stinky pile of bovine feces? That's the face I'm making now.

Oh, southern New Jersey. You're always so gleefully corrupt! I don't know why I moved away!

Maybe someone at Schneider refused to donate to a particular reelection campaign?

Here's my guess:

The contract with Schneider was cancelled after the company requested modifications to the bid specifications after the contract award and “failure to adhere to the General Conditions of the Bid Specifications.”

Schneider tried to play the 'change order' game - or they used ambiguity in the spec language to knowingly lower the cost of their proposal.

As soon as they actually are expected to perform the job, they knew it wouldn't work as initially bid, so they pushed to change things so it would. These changes would undoubtedly (knowingly) add new cost to the project and make up for razor-thin margins accepted in winning the job.

The airport saw this, (maybe someone internally knew this was the start of a colossal 'goat rope') and decided to stop the problem cold. They cancelled the contract, and donked Schnieder with the ole banhammer so they wouldn't try to use the strategy on other opportunities. (Schnieder does far more than security work, IIRC.)

Schneider tried to play the 'change order' game - or they used ambiguity in the spec language to knowingly lower the cost of their proposal.

Says the agency who won't release any details about the bid citing "security concerns".

Yeah, this is true. However, it isn't without precedent. There are a bunch of end-users that don't release public details about their surveillance systems (even when money comes from public sources), especially in the 'critical infrastructure', 'public transportation', and energy industries.

They typically claim releasing these details would divulge 'blind spots' or maybe even 'backdoors'. The folks they invite to bid are typically current vendors or big national suppliers that have the perception of being low-risk.

In a way, I understand this. It would be similar to me handing out duplicate house keys to random alarm installers. I mean, what is to keep them from handing the key over to their juggalo / carinval worker buddies on lunchbreak and getting a few copies made?

I'm not saying there's never a legit reason to withhold the bid details, I'm saying that lots of things about this make me a little suspicious. Sniff test failure.

I can’t speak to what Schneider did or didn’t do, but it is very curious that the airport’s engineering estimate was exactly – to the dollar, as the bid that ultimately won the project. This has the fragrance of some unethical bidding practices. The fact that the airport didn’t even bother to round their estimate to the nearest dollar. When was the last 6 figure estimate you saw, that had accuracy to the last 69 cents? This shows either arrogance or incompetence, not sure which

...airport’s engineering estimate was exactly – to the dollar, as the bid that ultimately won the project.

Actually give or take $9.31. (More incompetence! Every bid-rigger knows thats way too close an 'estimate')

Every bid-rigger knows thats way too close an 'estimate'.

Indeed, not only is it numerically too close, visually the resemblence of the numerals are too close to be anything but chance! (Or as you joke, gross mob incompetence.)

Which is not to say its not rigged... Pure speculation after looking the bids sheet only suggests a rigging strategy which does not rely inside information, but rather depends on one entity appearing as multiple entities, each with their own bid. Maybe a extremely low one, a mid one and a high one. Then after you win the bid, if one of your other 'entities' has the second lowest bid you just get the low bidding entity disqualified for failure to adhere to terms, and then presto!, you get selected as second lowest. Similar to a collusive fraud known as 'bid rotation' Perhaps the Gov. will take a look a this one.

In related news, apparently the economic downturn has affected all industries: Just last week the Mafia said they would have to layoff up to ten judges... ;)

one entity appearing as multiple entities, each with their own bid.

Nah, the contract went to Chammings, up in Vineland. They've done plenty of work in Atlantic County already.

Sorry, what I meant was that the number was too close to NOT be chance, and therefore that if it WAS rigged it was more likely to be a case of ghost bidding than an inside job.

I wasn't implying that was likely to have been rigged in the first place, though, just relying on everyones (yours included) superior olfactory faculties. No offense to Chammings.

Your intial soliloquy seems to suggest some particular method of fraud, with its sarcastic "Uh huh" and its smug 'I see.' Did you have a possible scenario in mind, or just expressing general incredulity with the appearances of the bid process?

Here in Florida we hand deliver our bids at the last minute when we saw contracts that included price lists that were consistently beating the next lowest bidders by just just a few dollars down the line. Either an inside job at the clerk's office receiving the bids, or someone who's compromised in the competitor's organization.

A competent and polished "bid-rigger". Now there's a job description to savor.

I suspect more likely the change-order strategy to win then switch backfired but that's merely my suspicion. If that's what's required to win, I'd rather be in the waste hauling business. No - wait:

I've lost business this way also. In my case the purchasing agency or property manager asking for liability that far exceeds the work. For example a one time Fire Alarm inspection for $2,500.00 and they ask for something silly like a million dollars per incident if the building is evacuated or language that makes you responsible for the building replacement costs if the panel doesn't operate properly. In this case it wouldn't surprise me that the larger company has better lawyers that wouldn't put the company at risk for the relatively small $200k contract. Basically the bigger company has more to lose then the smaller company. OR politics as suggeste above wouldn't surprise me either.

There is Schneider again, coming in with a low bid. Once we lost one or two of these, as Pelco dealers (and also using APC UPS), we have made a company decision to not purchase or support any more Schneider products. Is their competition in the local marketplaces as an integrator worth this to the company? Last one we lost, they went in with DVTel??

I am not disagreeing with anything previously said, but I work for a multinational in Australia and one of the biggest issues is insurances and liability, unlimited, non capped, consequential etc! Our legal eagles won't let us sign up to them as you cannot get insurance to cover these terms! We find some operators will sign them either they don't care or do not understand the requirement, it is an issue for us, but Schniieder should have highlighted any issues they had with the contract in the submission, but the tender should also ask if the tenderer has any contract issues with the draft contract supplied at time of tendering!

Do security/surveillance RFPs for government orgs generally not include a requirement to submit proof of insurance coverage documents/policy #s when responding to the RFP?

I know a concrete contractor that has to submit these documents whenever he submits responses to any govt entity RFPs for sidewalk/curb work.

Every sizable job I ever responded to required this. And frequently a bid bond to boot.

No surprises there! SE recently had a contract pulled for a large oil & gas project after 18 months. I suspect due to non compliance. That will have some serious impact to their branch figures!

Limitation of Liability , especially uncapped and Consequential Damages are major show stoppers in big Govt projects. I know of some extremely critical projects that have been scrapped not once, twice but five times in a row because of such clauses in the tender. MNC understand the serious implications and disengage. Local small time players sign the dotted line but then default and lose their Security Deposit.

Ravi, what does "MNC" mean in this instance?

Pertaining to the "[Update Monday: March 24, 2013]" of this article:

So what happened here? Was Schneider not provided all the details on conditions they needed to make an informed decision when submitting their proposal? Did someone at Schneider fail to read all the details? If there was a key provision not included in the RFP by SJTA, then I guess Schneider could argue they should not be banned.


MNC Multi National Cprporations

i like your insightful comments.

Thank you and thank you.

These are from the Sections of the SJTA General Conditions that are referenced in Carlton's link above. They came from a different bid/project, but one would expect them to be more or less static since they are GC's. Emphasis added.

29. EXECUTION AND APPROVAL OF CONTRACT The Contract shall be signed by the successful Bidder and returned, together with the Performance Bond and Payment Bond, within ten calendar days of the date of receipt of the contract by the successful Bidder from the Authority. If the Contract is not executed by the Authority within 90 calendar days following receipt from the Bidder of the signed Contract and Performance Bond and Payment Bond, the Bidder shall have the right to withdraw his bid without penalty. The Contract is not effective until it has been fully executed.

30. PERFORMANCE BOND AND PAYMENT BOND Within ten calendar days of the date of Award or Conditional Award, the Bidder to whom the Contract has been awarded shall complete and deliver a Performance Bond and a Payment Bond in accordance with the requirements of the Authority. Each bond shall be the sum of not less than the Total Contract Price and shall be maintained by the Contractor until Acceptance. In the event of the insolvency of the surety or if the Performance Bond and Payment Bond have not been properly authorized or issued by the Surety company, the Contractor shall furnish and maintain, as above provided, other surety satisfactory to the Authority. All alterations, extensions of Contract Time, extra and additional work, and other changes authorized by the Contract Documents may be made without securing the consent of the surety or sureties of the bonds. The surety corporation bonds shall be furnished by only those sureties listed in the US Treasury Department Circular 570 and authorized to do business in the State of New Jersey. The bonds shall be accompanied by a certification as to authorization of the attorney-in-fact to commit the surety company and a true and correct statement of the financial condition of said surety company.

31. FAILURE TO EXECUTE CONTRACT Failure on the part of the Bidder to whom the Contract has been awarded to execute and deliver the Contract as provided in GENERAL CONDITIONS Article “EXECUTION AND APPROVAL OF CONTRACT”, and the bonds as provided in Article “PERFORMANCE BOND AND PAYMENT BOND”, in the manner and within the time provided, is just cause for annulment of the Award or Conditional Award and for the exclusion of the Bidder from bidding on subsequent projects for such period as the Authority may deem appropriate. If the Award is annulled for the above reasons, the Proposal Bond, as described in GENERAL CONDITIONS Article “PROPOSAL BOND”, shall become forfeited and the Authority may proceed to recover under the terms and provisions of the Proposal Bond. Award may then be made to the next lowest responsible Bidder, or the Work may be readvertised and constructed under contract, or otherwise, as the Authority may decide. The successful Bidder may file with the Authority a written notice, signed by the Bidder or the Bidder's authorized representative, specifying that the Bidder refuses to execute the Contract. The filing of such notice has the same force and effect as the failure of the Bidder to execute the Contract and furnish a Performance Bond and Payment Bond within the time herein before prescribed.

From Paragraph 31:

"The successful Bidder may file with the Authority a written notice, signed by the Bidder or the Bidder's authorized representative, specifying that the Bidder refuses to execute the Contract."

If the statement from Schneider in the update is correct, then that seems to be what happened. I wonder what the required Proposal Bond was. Whatever was wrong with the contract terms, Schneider felt strongly enough about it to voluntarily forfeit their Proposal Bond.

The update definitely changes the outlook.

If Schneider never signed the contract then the contract was never fully executed and it would be null and void. If that's the case, then it is not accurate to say that the contract was cancelled. You can't cancel something that doesn't exist.

If the contract was never executed, then the ban is just SJTA being vindictive.

If the contract was never executed, then the ban is just SJTA being vindictive.

It's because the contract was never executed by Schneider for the penalty, and agreed it is vindictive, but that's the point, I believe.

Is it necessary to enumerate the negative consequences that would follow if there was no penalty for refusing to sign awarded contracts?

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