$15 Million Hawaii Government Deal, Spends 25% Over MSRP On Avigilon
The State of Hawaii paid ~25% over MSRP on Avigilon products in a security upgrade to 31 state sites, which is using $15 million in federal emergency COVID funding.
In this report, IPVM examines the background, plans, and cost breakdowns for the $15 million project, as well as issues raised in the documents we obtained for risks of overspending and hidden details in the bid documentation.
The contractor, Security Resources Pacific, declined to comment on the record about this.
Security Upgrades
The Hawaii state government decided to enhance security at government offices in late 2019/early 2020. The initiative included replacing old cameras and other security measures.
During the pandemic, the state claimed that increasing vandalism on state property and rising public aggression toward government agencies due to COVID increased the threat of public violence against state employees and state facilities, necessitating more upgraded security.
The newly expanded $15 million security project was divided into two proposals: one for $8 million was submitted in September 2021, and the second for $7 million was put forth in May 2022. According to a news report video, the security upgrades entailed 225 surveillance cameras:
31 state offices are now also getting the technology [security upgrades], the Labor Department, the Health Department, and Attorney General's office included. All 225 cameras will tap into the same system.
However, IPVM expects that more than 225 surveillance cameras will need to be installed across 31 buildings to provide adequate coverage. According to contracts obtained by IPVM, the full installation is scheduled to be completed by February 2023.
Security Resources Pacific Selected as Integrator
Security Resources Pacific, a small integrator incorporated in 2001 and based in Hawaii, was selected to complete the project. Its CEO is Patrick O'Brien.
The company has under 20 employees, per its 2020 and 2021 PPP loan disclosures, obtaining ~$500,000 total:
The proposal stated that the company was selected because they were the:
current security company that the State purchased security and monitoring equipment for the State Capitol, Washington Place, and Judiciary building.
The state also cited the company's familiarity working with the State government:
The principals are very familiar with the State's security needs and have intimate knowledge and established working protocols with PSD [Department of Public Safety].
Project Proposals Overview
Security Resources submitted 2 proposals for the 31 sites - an 11-page proposal and a 21-page proposal.
While the average project / site is ~$500,000, Security Resources submitted only a single page for each site, for example shown below:
Lack Of Detailed Specs/Descriptions Atypical
The lack of detailed part numbers and descriptions on these proposals is uncommon for a contract of this size. Installations of this size typically require significant detail so that purchasing entities and the public may properly check costs to ensure fair pricing. The only line item which contains a reference to specific products mentions "ACC Enterprise Smart Plan", which refers to a software upgrade plan for Avigilon Control Center Enterprise.
Further, labor costs are not broken out, with only a "Sub-Total Labor" lump sum line (though redacted) at the bottom of the proposal.
~25% Over MSRP
IPVM reviewed the itemized costs breakdowns from the Hawaii Department of Accounting and General Services and verified that the cameras purchased are Avigilon based on the footage of the news report video and product descriptions matching Avigilon's products, such as the H4 Multi-Sensor shown here:
Based on IPVM's analysis of the available product descriptions and unit costs, we estimate that the Hawaii state government purchased surveillance equipment for ~25% over MSRP, which is extraordinary as purchases are generally made and often significantly below MSRP, especially for projects of this size.
For example, one of Security Resources' proposals shows a quote for a 4MP dome with analytics at $1,457.33. The 4.0C-H5A-DO1 Avigilon model, which has an MSRP of $1,136.28 according to Avigilon's February 2022 price list, matches the description, making the unit cost of the camera in the contract about 28% above the MSRP.
When looking at the 3x8MP multisensor that frequently appears in the invoices, the unit cost charged to Hawaii is listed at $2,679 while the MSRP is $2,184.84.
Cost Breakdowns
IPVM requested itemized cost breakdowns of the emergency procurements to better understand the sudden increase in costs. Initially, Scott Ojiri of the Hawaii Department of Accounting and General Services (DAGS) Public Works Division provided the two summaries below:
Ojiri stated that more information could not be provided, claiming a security risk:
We are reluctant to provide the more detailed breakdown because it may reveal too much about the security system at each site, which may create a security risk to the occupants.
Redacted Public Records
Following Ojiri's refusal, IPVM filed a formal public records request for itemized cost breakdowns. IPVM received redacted versions of the itemized invoices, with the quotation number, project name, quantity of each item, total costs of each line item, sub-total material costs, sub-total labor costs, shipping and handling, tax, and total costs blacked out.
When IPVM asked for an unredacted version of the proposals, the DAGS office refused to provide them, citing security risks:
“information which, if publicly disclosed, would jeopardize the security of the facility has been segregated pursuant to section 92F-13(3), Hawaii Revised Statutes.”
Public Records Appeal
IPVM appealed the decision with the Office of Information Practices (OIP), per the Hawaii public records appeal process.
Once IPVM filed the appeal, the DAGS office is required to respond to an appeal within ten business days with its justification and submit an unredacted copy of the records in question to the OIP. In this case, the DAGS filed an extension of time to respond and now has until October 28 to submit unredacted invoices to the OIP. Once the OIP receives them from the agency, they can make a decision on the appeal with no deadline necessary. The OIP told IPVM that they are unable to issue a ruling on IPVM's appeal for at least a year, saying:
We have a significant backlog of cases, due in part to the pandemic and prior staff shortages. The cases are handled on a “first in, first out” basis, and it may be at least a year before your case is resolved.
Due to these administrative obstacles, IPVM did its cost analysis with redacted versions of the project proposals. When IPVM is notified of a decision on the appeal, we will update this report accordingly.
Emergency Procurement Office
Cost markups often occur in government procurement processes, especially in a state like Hawaii where options for contractors and integrators are limited.
In this case, the nature of the emergency procurement process allowed the state to bypass steps such as competitive bidding that would encourage more competitive prices.
According to a 2014 manual by the State Procurement Office, competition shall be "obtained as practicable" in order to meet the short deadline. "HCE (Hawaii Compliance Express) compliance documentation is not required" at the time services are rendered. In order to expedite the procurement process, deadlines are prioritized over following fair and ethical practices.
Hawaii, Motorola Responses
Avigilon parent Motorola Solutions responded that it has no comment at this time.
The Hawaii Department of Accounting and General Services has not responded to IPVM's three requests for comment.
Security Resources Pacific, the contractor on the project, would not speak to IPVM on the record.
Outlook
Minimally, we expect this is a highly profitable project, especially for such a small company. However, the windfall raises questions about wasting public funds and government obstacles to accountability.