PUBLIC CONTRACTING

first published in BeyondChron.org, July 27, 2010

WHY BOTHER BIDDING? by Matt Gonzalez

How Fred Bekele won a parking garage contract in San Francisco, only to have it taken away

In the summer of 2007, the San Francisco Municipal Transportation Agency (MTA) hired consultant Barbara Chance to address multiple issues concerning the city’s management and award of public contracts for city-owned parking facilities. The MTA was concerned that, among other things, the city was not maximizing the revenues it could derive from parking facilities, and that locally owned businesses were being denied entry into the competitive world of public parking contracts.

Also, concerns that parking garage contracts were being awarded amid charges of influence peddling were prevalent.

On June 19, 2007, Ms. Chance, a nationally recognized expert in parking, transportation and access management, presented her recommendations, which included a plan for revising the process for contract bidding to enable a more open and competitive process.

In response to this, in early 2008, the MTA developed a new process for the awarding of parking garage contracts, in accordance with the Chance report and with input from both the Human Rights Commission and Small Business Commission, both of whom had received complaints about the existing process.

Among the primary recommendations adopted was encouraging smaller locally owned business to partner with established companies so they could gain a foothold in the industry. Chance also made recommendations already being used in other jurisdictions to encourage bid competition, which would keep the city from overpaying for parking management services.

It was in this political environment of enhanced public participation that Fred Bekele sought to win one of the city’s parking garage contracts. Bekele had emigrated from Ethiopia, via Germany, and had studied business at U.C. Davis. He learned the parking garage business while supporting himself through school, and after graduating, continued to work in this field during the recession of the early 1990s when other work was scarce.

Eventually, he helped bring his extended family to the U.S. and has proudly called San Francisco his home for the past 20 years. In 2008, at the time of the bid on the contract, Bekele was operating three different garages, as Convenient Parking, a Local Business Enterprise (LBE), but his business growth had stalled because the bigger companies always managed to win the best contracts.

After securing a $250,000 loan for working capital requirements, Bekele partnered with Imperial Parking (known as Impark). They have operated garages in San Francisco for a number of years, and are one of the bigger companies that have routinely won contracts in the area. Impark saw that the MTA would favor a joint venture that would allow a locally owned business an entry into the management of these lucrative parking garage contracts. Impark has wide experience handling such jobs and does work throughout the U.S. and Canada including managing the parking for some well-known sports venues like the San Francisco Giants’ nearly 5,000 capacity parking garage at AT&T Park. Bekele knew he could learn from Impark’s experience, which would then quell any claim he couldn’t operate larger parking venues. Together Bekele’s Convenient Parking and Imperial Parking forged a joint venture called IMCO, representing, precisely what the Chance consultant report had envisioned.

Twenty-nine individuals representing 23 companies came to the pre-bid meeting assuring there was plenty of input in the formulating of the Request For Proposal (RFP) before it was issued seeking formal bid proposals.

On September 21, 2009, Bekele was informed that his joint venture IMCO had won the portion of the contract designated as Group A, which included the favored parking garage locations. He was understandably elated to get this chance to expand his business.

Seven days later, the time period to formally object to the bid expired and none were made. Neither of the parking companies that won smaller portions of the contract, Pacific Park Management (PPM) and Five Star Parking, had any basis to complain.

Then, as Bekele waited to sign a contract with the MTA, Steven Kay, a lawyer and registered lobbyist who works with former Mayor Willie Brown, and who represented Pacific Park Management, complained in an October 26, 2009 confidential letter to MTA Director Nathaniel Ford, that Bekele shouldn’t be awarded the contract. None of the objections raised were legitimate or timely. Kay complained that PPM was going to lose much of its business and ironically argued that the three parking garage groups should have been more equally weighted rather than Group A being larger than Groups B & C. Unbeknownst to Kay, his clients had repudiated this very suggestion before they knew they were not the winner of the preferred Group A list of garages and before they were looking for a basis to complain.

Kay also suggested that neither IMCO nor Five Star Parking were headquartered in San Francisco, and therefore were not in fact local businesses — an allegation PPM never made before the winners of the contract were announced. That’s because the contract granted LBE (Locally Owned Enterprise) points if 40 percent of a joint venture qualified, which Bekele and IMCO met. (Incidentally, PPM had graduated from the LBE program, having benefited from it for years; they are now prohibited from asserting that advantage.)

Thereafter, in a private meeting at the law offices of Steven Kay, with representatives of PPM (winner of Group C) and Five Star Parking (winner of Group B) Bekele was told he would not get the contract unless he ceded a number of parking garages he had won to the other winning parties. He was told this was the way it would be because these people had “juice” and could stall the contract award process or get the contract rejected entirely.

Fred Bekele and IMCO did not acquiesce. But as explained more fully below, the threats Bekele and IMCO received during the meeting at Kay’s offices proved real.

It is worth noting that both Pacific Park Management and Five Star Parking have a checkered history. In an April 21, 2010, story in the San Francisco Weekly, Matt Smith wrote: “Five Star has had a troubled history in San Francisco. In 2007, investigators from the city attorney’s office said they had uncovered evidence that the company and its employees had skimmed garage revenues and submitted inflated expense reports. Five Star agreed to pay a $4.6 million settlement.” Additionally, in August 2007, the City of San Jose’s Elections Commission twice fined Pacific Park Management for violating local regulations and making excessive political campaign contributions to local politicians. The Elections Commission’s vote passed unanimously in both cases.

When Bekele returned to have his contract signed, as was recommended by the MTA staff, the threats materialized. Representatives of PPM and Five Star Parking heavily lobbied the MTA Board, a group of individuals appointed solely by the mayor, in private. The contract, which was to begin by February 1, 2010, was now openly being delayed as the Board sought more information before moving forward.

What followed was a series of public meetings whereby the MTA pretended to grapple with issues associated with the process, all the while Director Ford planned a new bid process, solely because Fred Bekele wasn’t “connected” enough to protect his victory.

The MTA staff handling the contract, including longtime MTA staffer Deputy Director Bond Yee, continued to recommend the contract be awarded to Bekele and IMCO.

Nevertheless, on March 2, 2010, only two MTA Board members, Chairman Rev. James McCray and Shirley Breyer Black, who saw no legitimate reason for further delay, voted to execute Bekele’s contract. Three members, Jerry Lee, Cameron Beach, and Bruce Oka, voted against it. Curiously, Malcolm Heinicke who had been critical of the delay now recused himself from voting without stating a reason. And board member Tom Nolan was absent.

Although the 3-2 vote, had been to delay a decision until further information could be obtained (this was Board member Oka’s stated reason for voting “no”), one month later, MTA Director Ford used it to announce that the MTA was going to rebid the contract. He proffered the excuse that not enough bidders had participated in the original bid (yet, when the second RFP was put out to bid, they ended up having even fewer pre-qualified bidders). Board member Oka has since publicly asked Director Ford to recalendar the matter so he can approve the original contract.

It gets worse. The MTA has instead issued a new RFP, which appears solely designed to favor the previous under-bidders and to disadvantage Bekele and IMCO. They’ve actually increased the working capital necessary to bid, so Bekele can’t bid as a prime contractor like he did on one part of the original contract. In addition, the RFP changes the management fees in the original RFP assuring the city actually pays more to the winning bidder to operate the garages (whereas the original RFP had built-in milestones that had to be met before certain compensation was given in accordance with recommendations from Barbara Chance’s consulting report).

In other words, the new contract costs the city more money to operate the very same garages and delays awarding these contracts until 2011, which also results in unnecessary costs to the City.

Neither MTA Board members Rev. McCray or Breyer Black are on the MTA Board now. Their terms expired and Mayor Newsom reappointed neither.

All of this occurs with an ironic backdrop.

First, the costly delays in awarding the contract (not to mention the wasted $75,000 spent on a consultant report whose cost-savings recommendations are being ignored) occur in the midst of one of the worse budget crisis the city has faced.

Secondly, our mayor seeks statewide office at a time when he cannot even root out shamelessly corrupt practices in his own city.

What is Fred Bekele to do? Should he and others similarly situated simply give up? Must they wait until those who have power decide it’s okay for them to share it?

Our City Attorney Dennis Herrera, who himself has mayoral ambitions, and who presents himself as being in the vanguard of fighting corruption in the city, is vested with the obligation and authority to intervene to prevent this kind of Tammany Hall politics from thriving in our city. But thus far, he hasn’t stopped what’s happening.

At the end of the day, this corruption doesn’t just lead to higher costs to the taxpayer; it discourages honest participants from even trying this time-wasting exercise. Why would you invest any effort to present a bid if you know you can’t win it, no matter how good your proposal is?

Will San Francisco ever escape such flagrant influence peddling?


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2 comments

  1. Typical American politics and they say we are no so corrupt, true but in comparison to what? Sorry folks it pains me too much I have become an eternal pessimist.

  2. Pingback: PAPER TRAILS « CitiReport

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