City Council Puts 30 Locals Out of Work - The Shocking Truth

After seeing Representative Byrd's ardent denial that anything had been done wrong in the stripping of a contract from a local vendor with 20 months left on the deal and giving it to an out town firm, I decided to follow up leads and do some homework.  What I have found is sad, shocking and possibly afoul of the law.  At a minimum Representative Byrd is giving bad information on the subject and it's unclear who fed it to her.

The contract at issue here is the one dealing with collecting money from people who receive ambulance rides.  As you will see, the money involved with this service is a significant sum. 

Fire Chief Otto Drozd apparently wasn't happy with the vendor currently under contract to collect the Ambulance fees. That vendor is the locally owned and operated Currey Adkins.   I sat down with them yesterday and they shared their side of the story, which made it easier for me to tell you the whole story.

The new bidding process was done through a hybrid Request For Proposal (RFB from here on out) and lump sum bid.  Interested parties were to provide numbers as to how much of the money they intended to collect and what percentage they would take of the money collected.  The RFP part of the solicitation focused on subjective factors like financial stability and technological capabilities. 

Here's how the bidding went down - the pure numbers.  All of these numbers can be found HERE in the "backup" offered to council by city staff.

The lump sum bid was broken down into two parts that required interested parties to submit actual numbers in reference to "Commission" and "Guaranteed Collection." 

Commission percentage = How much the company takes from each dollar they recover for the city.

Guaranteed Collection percentage = How much they think they can recover.  Can be read as how hard working or efficient each company plans on being. 

Results:

Advanced Data Processing Inc.

Commission % = 10.90%

Guaranteed Collection % (Five Year Average) = 27.33%

Wittman Enterprise LLC

Commission % = 13.50%

Guaranteed Collection % (Five Year Average) = 60%

Let's do the math here assuming that the city is owed $100 in ambulance fees. (Note that representatives of Currey Adkins would not share with me any information about how much they collect for the city. They told me that I would have to go through the open records process to get the numbers and that they are not at liberty to share any information of that nature relating to their client - the City of El Paso.  However, an ankle biter friend of mine sent me a number a few months back during the budget review period and they said the number is around $20 million a year. I have not confirmed that as of yet.)

Advanced Data Processing Inc. says it would collect 27.33 percent of what is owed. Out of the $100 owed to the city they would collect $27.33.  After they take their 10.90 percent of what they collected ($27.33) that leaves the city with $24.36.

Wittman Enterprise LLC says it would collect 60 percent of what is owed.  Out of the $100 owed to the city they would collect $60.  After they take their  13.50 percent of what they collected ($60) that leaves the city with $51.90.

The company returning the most revenue to the city (by a factor of two) would be Wittman Enterprise LLC.  Basically Advanced Data Processing has indicated that they'd work half as hard for roughly three quarters of the cost.  

Now let's look at what deal the city had with their current vendor Currey Adkins.  Remember, Rep. Byrd said this in the comments section of this blog:

"Now instead of paying an average of 20% of fees collected, we will be paying 10.9%. And the new bidder estimates that they will be able to bring in substantially more revenue."

So what is Currey Adkins' deal?  Are they charging the city 20 percent on fees collected and bringing in less than 27.33 percent of the revenue?

Currey Adkins showed me their contract. The very same contract you can get from city through an open records request.  The same contract Rep. Byrd can see anytime she'd like.

Currey Adkins' contract says that they must currently collect 55 percent of the ambulance fees and can take 14.5 percent of everything collected.  Uh oh.  Where does Rep. Byrd get te 20 percent number and how does she not know that Currey Adkins must collect twice the amount Advanced Data Processing Inc. collect?  Also in Currey Adkins' contract is a clause that says they must pay the difference to the city if they fail to collect the 55 percent required in their contract. It should be noted that Currey Adkins' has dropped their percentage take on the collections from 16 percent to 14.5 percent. So the accusation that they would not come down on their price is a lie - it happened. 

Let's apply the same math to Currey Adkins' current deal that we applied to the bidders of the new RFP.

Currey Adkins says it would collect 55 percent of what is owed.  Out of the $100 owed to the city they would collect $55.  After they take their 14.50 percent of what they collected ($55) that leaves the city with $47.03.

If you're ranking the best deal it goes like this:

1. Wittman = $51.90

2. Currey Adkins = $47.03

3. Advanced Data Processing Inc. = $24.36

As you can see, Advanced Data Processing Inc. is not the best deal either in the new bid or considering the current company that has the contract.  To claim that Advanced Data Processing Inc. is a better deal, is flat out wrong. 

This really comes down to whether the Chief was instructed to reduce costs or generate revenue.  I would assume that recovering badly needed revenue is a top priority.  By picking Advanced Data Processing Inc. they chose to collect less money at a cheaper price.  In other words - they're not doing much, but they're not doing much for less.  Another solution to cutting costs would be to not hire anyone to collect the debts.  Granted you would retrieve zero revenue, but it would be free.  

I can't stress enough that the city picked the vendor that is only willing to collect a little over a quarter of what is rightfully owed to the city. It's a huge step back in revenue for the city.  That small percentage (27.33) represents those users of the ambulance service who have insurance and are very easy to collect from.  The remaining 70 percent of the population using the ambulance service will not be required to pay and will not be solicited to pay if I read their bid correctly.  How's that a better deal than what we have now?

The other part of the bid is the subjective categories that each company was graded on.  I will go through them here and present some of my concerns. 

Proposed Technical Solutions (30 points max) - This means nothing if the firm that wins doesn't intend on collecting a majority of the debts owed.

References (15 points max) - This means nothing if the firm that wins doesn't intend on collecting a majority of the debts owed.

Capability/Qualifications (15 points max) - This means nothing if the firm that wins doesn't intend on collecting a majority of the debts owed.

Financial Strength and Stability (5 points max) - This means nothing if the firm that wins doesn't intend on collecting a majority of the debts owed.

I hate to be redundant, but the real measure of each company is what they propose to collect.  Remember, they have to pay the difference of what they don't collect in relation to their project.  So what does it matter if they use stone tablets and horse drawn chariots, or NASA's best engineers?  The city gets their share either way.

The subjective part of the bid in this case was used to increase Advanced Data Processing Inc.'s scores so that they could get the contract.  You can see this by clicking the link above that goes to the "backup."

So why was so much effort put into scoring  Advanced Data Processing Inc.'s RFP so high?  We'll get to that in a moment.  First let's examine where the idea to switch vendors came from.  Remember, Representative Byrd said on this blog:

"When Chief Drozd was applying for the position of chief, he reviewed the budget in preparation for the interview. One of the things that stood out for him was the charges for medical billing which were at least twice what the industry standard was. He also felt like the contract was not bringing in enough revenue. When he was hired he started working on the issue, talking with the current vendor about improving their service. He also started reviewing what was happening in the industry to see if we could get a better deal. The Fire Departmennt talked to vendors and other cities to see how they operated medical billing, how much revenue was coming in and how much was charged for the service. They discovered that indeed local taxpayers were paying more than twice the industry standard. One of the reasons that Chief Drozd was hired is that he identified many significant ways that we could provide better service at lower costs. Medical billing was one of those areas."

We know that at least one part of this statement is untrue - Currey Adkins was not charging twice the industry standard.  So when did the chief know he was going to make a change and how did he really come to that decision?

Currey Adkins provided me with an email (and many others I will discuss shortly) they received after submitting an open records request.  You can read the email  by clicking - Download DOC122110.

It appears that shortly after Cheif Drozd took employment with the City of El Paso, a vendor he had a prior relationship with, and seems to have discussed El Paso's medical billing future with, contacted him.  The person that contacted him just happens to work for the company that was chosen to service the EMS billing contract currently held by Currey Adkins. 

While nothing illegal was done in the email, it does raise a question about the veracity of claims that the Chief spotted, all by himself, a need to change vendors.  It also brings into question why the chief and the purchasing department would recommend hiring a firm that pledges to reduce revenue being collected from EMS billing.  If the chief was truly looking for a better deal, wouldn't he have gone with Wittman Enterprises LLC.?  His claims and his actions to rectify those claims do not match.

When I sat down with the folks at Currey Adkins they showed me a pile of emails that showed continued contact with Chief Drozd and employees of the city's purchasing department.  The emails show a consistent and obvious effort by individuals from Advanced Data Processing Inc. to "help" guide them in an effort to put together an RFP to re-bid the EMS billing service.  In one email the Advance Data Processing Inc. rep offers examples of RFPs to city staff.  This is simply appalling. 

The fact that the winning bidder for this RFP, Advanced Data Processing Inc., offered up the very RFP they would be responding to is in the least improper and may be much worse than that if the proper authorities get a hold of all the information.

This brings us to why Currey Adkins didn't respond to the RFP/Bid.  And for that matter, why only five out of 68 firms responded.  Do note that out of 19 local El Paso firms that were asked to bid - zero offered a bid.  So why?

Looking at the RFP that was put out by the city's purchasing department, it became clear that it was different than any previous RFP put out.  So confusing and convoluted was the RFP that 234 questions were submitted by potential bidders seeking clarifications and definitions.  I have a tremendous amount experience with all things RFP from the federal level to the local level.  Never have I ever seen a local RFP/Bid receive that many questions.  The norm is about 10 to 20.  And that's on highly complicated designs for lengthy stretches of road encompassing utilities of all makes.  Any questions in excess of that usually draw major addendums to the RFP/Bid.

Once I was showed the questions and then shown the corresponding requirements within the RFP, I realized that it appeared that it was written in a way to scare bidders off, not attract them.  Undefined costs like the provision that the city be able to add their own materials to the mail going to those they seek payment from made the RFP a huge risk (among other things).  When the question was asked of the city about what size brochure would be included in the mail and how often, they refused to give the answer.  Currey Adkins indicated to me that 100,000 pieces of mail going out at Currey Adkins' cost is not uncommon each year.  To add weight to the mail correspondence is to add postage - with 100,000 letters going out, that could mean your entire profit margin!  And the oddities and lack of answers to clarify them only grew from there.  Again, 234 questions were asked and nobody seemed to care. 

Currey Adkins told me that the risk of bidding something like this was too great.  The means for which a company could fail due to the requirements of the proposal were a major detterent.  Proving this theory was the fact that 63 out of 68 invited bidders decided not to respond.  Oddly, one bidder, Advanced Data Processing Inc. was so confident in their ability to perform the contract, they submitted two bids!  I wonder why they were so comfortable with something 63 other firms weren't?  Also, of the five bidders who did respond, three didn't provide a complete set of bid numbers.  That leaves only two firms out of 68 that responded with full confidence.

As I read over the proposal more I realized that the only way to be successful in making a profit from this contract is to have some kind of knowledge that none of the quirks in the proposal would ever be required of you.  It seemed to me that the better relationship you have with those overseeing the contract, the better chance you had at profiting.  Of those firms bidding I could only point to one that was familiar with Chief Drozd - Advanced Data Processing Inc.  Maybe they know how he runs things?  They do know him well enough to golf with him it seems.

Every line leads back Advanced Data Processing Inc. It's undeniable. 

So here's what we're left with...

The city terminated a contract with a firm that is currently out-performing the proposed firm they're being replaced by.  The new firm only seeks to collect 27.33 percent of what the city is rightfully owed while the old firm is currently collecting 55 percent of what the city is rightfully owed.  An unsuccessful bidder under the new contract has offered a better deal than both of the firms I've already mentioned (Wittman Enterprises LLC.).

The result of the city's action on this is 30 El Pasoans losing their jobs at Christmas time.  And the process was never questioned.  A city council representative presented a case for stripping Currey Adkins of their contract 20 months early, but her case has been refuted point by point here.  So what's the net gain for the city?  Nothing - they lose revenue and they put 30 people out of work. (Do note that I don't think Rep. Byrd is making up her claims - I'm sure she is only relating what she has been told be the staff.)

On top of all that, there's serious evidence that the winning bidder may have guided the RFP process they end up winning through a prior relationship with the contract manager.  What are the chances of you winning an RFP when you help create it?  Pretty damn good from what I see.

Oh yeah - I almost forgot.  Mr. Currey has been asking the city for the contract that Advanced Data Processing Inc. is getting from the city and has been told they don't have it.  Huh?  They can't provide a contract under an open records request?  You can get Currey Adkins' contract under an open records request, but this new one isn't available?  Very weird and very wrong.  What is being hidden here?

And after checking this out - city council approved this contract without even seeing it.  None of them can say they saw the contract they instructed the City Manager to sign before they voted on it.  That shouldn't happen.  That puts them in a bad spot along with the taxpayers. 

Here's what I need you to do - click on this link http://www.elpasotexas.gov/government.asp and tell your city rep and the mayor to read this post.  They need to stop this contract award and get the facts straight here.  You could save 30 El Pasoans' jobs before the holidays if you act now. 

Comments

[Carl Starr]

Thanks for the info, your becoming more a activist than a GOP etc Pundit but lobbying the lege wont work as good as the courts because lobby is based influence but courts are not based on status, power or influence but rights [at least thats the great hope etc eg law knows no top or no bottom]. And while you mentioned something illegal may be going on, I didn't see it, unless it is re maybe 'terminate contract that out-performs issue'...i'll plug it in.

[Tim Collins]

David
Nice work here. I have been the primary author of many responses to RFPs over the last 5 or so years. The conditions you describe are not unheard of (unfortunately), but wrong none the less.

You are exactly correct regarding the value to a bidder of being able to "guide" or "shape" the RFP or RFQ. I have seen a few in my day where I knew what was going on and chose not to bid.

[Ken]

Great job David!! Makes me want to ask the question, just how many similar situations are out there with our benevolent City Council?

[Tony]

David,
Good analysis and I would urge my rep to read your blog, but, unfortunately, my rep is Ann Lilly and you know she would be unable to follow your logic. Much less have the cojones to do anything about the situation.

[Carl Starr]

Here is some near case law...and going by other case law and the close nexus of city emergency services re narrow exception...I am not sure this contract has to be held to full Commerence Clause and competive bid tests, maybe but as far as courting interests re biz and gov, I think a certain amount of wine and dine is expected and allowed re seeking biz with gov...bribes no, I am not sure there is anything illegal here, and I am kinda surprised David as a unfettered Capitalist finds alleged facts here alarming, it seems rather commonplace and while it may smell, its exactly why i try to be less of a capitalist personally. If the contract had to be competitive and one can prove a mistake eg that cost is actually more than terminated contract then maybe there is a case...[See Nationwide case below] but from reading David K story it seems there may be a debate re if the new contract will actually cost more...ive seen some creative accounting and numbers for taxes and loans in past re numbers games...again capitalism to be expected and David is alarmed?

In Mariano and Assocs. v. Sublette Cty. Com'rs., 737 P.2d 323. An accounting firm contracted to perform auditing services for Sublette County, for two fiscal years ending June 30. In March, 1985, one of the members of the firm left and approached county officials about obtaining the 1985 auditing contract for himself at a lower cost to the county. The county accepted the offer and terminated the first contract. In finding that the first contract was voidable, the Supreme Court summarized the rule.

Nationwide Roofing & Sheet Metal Co. v. United States, No. 187-87C, UNITED
STATES CLAIMS COURT, 14 Cl. Ct. 733; 1988 U.S. Cl. Ct. LEXIS 83; 34 Cont. Cas.
Fed. (CCH) P75,491, May 13, 1988 The doctrine of termination for convenience
enables the government, under certain circumstances, to terminate a contract
that is no longer in the government's interest. See, e.g., United States v.
Corliss Steam-Engine Co., 91 U.S. (1 Otto) 321, 23 L. Ed. 397 (1876); see also
Moss & Gantt, A Steam Engine and Contract Termination Settlement Procedure, 8
Pub. Cont. L.J. 188 (1976). In the instant case, the language giving the
Government the right to terminate is brief and very broad: The Government may
terminate performance of work under this contract in whole [**5] or, from time
to time, in part if the Contracting Officer determines that a termination is in
the Government's interest. 48 C.F.R. 52.249-2 (1984). While this language is
broad, the courts have consistently recognized limitations on the government's
right to invoke this extraordinary doctrine. In Torncello v. United States, 231
Ct. Cl. 20, 681 F.2d756 (1982), HN2the Court of Claims limited the application
of the termination for convenience clause to those instances involving "changed
circumstances." Torncello involved a requirements contract in which the
termination for convenience clause was used to take advantage of another firm's
lower price, which the government had known about when awarding the contract to
the contractor. The court held for the contractor and went on to state that "the
government may not use the standard termination for convenience clause to
dishonor, with impunity, its contractual obligations." Id. at 47, 681 F.2dat
772. The court continued: "We cannot condone termination based on knowledge of a
lower cost when that knowledge preceded award of the contract." Id. at 49, 681
F.2dat 772. The gravamen of the court's reasoning was that without [**6]
requiring changed circumstances, the government's use of the clause was so
exculpatory that its contract would fail for lack of consideration. Id. at 44,
681 F.2dat 770. In setting forth the limits on the use of the termination for
convenience clause, the court in Torncello cites with approval a line of cases
illustrating the requirement for a change in circumstances or expectations of
the parties. Id. at 36-37, 681 F.2dat 766. Among the cases cited are several in
which contracting officials believed that [*736] as a result of a protest
subsequent to award of the contract, the award had been improper. Accordingly,
the contracting officials took corrective action that the court held entitled
the terminated awardee to recover damages based on a termination for
convenience.

[chuck]

just a question dave. with all the government jobs we have in el paso(city,county,state, border, homeland security, hell all the fed agencies and the school districts(episd is the largest employer in el paso))and im assuming that is over 50 percent of the jobs in el paso that most of these employees would have good insurance coverage. now including those gov people with the private sector who have insurance, if their insurance pays the ambulance fee, then shouldn't it be reasonable to think that 50 percent of the bills could be collected quite easily? i can understand the thomason fees being tough to collect, but not the rest. hell, even make the drug lords being brought over from juarez pay 10 times the amount along with the mothers trying to get their anchor babies delivered at thomason due to emergency in the line coming across. oh yeah, almost forgot, c.o.d..

i just asking wouldnt you think 50 percent collection would be easy ?
the new company only guarantees 27 percent ? are they pocketing the ones who pay cash ?

almost forgot, never should a fire chief be put in charge of something that deals with business or accounting. i doubt drozd knows what a general ledger is or a debit or a credit.

[Eric]

Chuck,

As a person fighting those fees I can tell you it probably is not easy to collect those fees. This is what happened to me.

The city is charging my family $680.00 for a non-emergency ambulance ride from loretto academy to sierra on medical center. (Note that first we called one of those non-emergency ambulance companies cuz they are way cheaper, but their dispatcher said that all ambulance calls must be made through 911 and then those dispatchers patch them through to them. So the city can still get their cut). Blue Cross Blue Shield informed us that they will not be paying this bill because it is an outrageous fee and suggested to us not to pay it either, so we're not.

So they probably have a lot of collections they need to pick up because of this.

David,

Great article!

[your friend]

What's up with the "cut and paste guy"? Can't you just post a link? Why should I have to scroll through crap that nobody ends up reading?

[Gossip Girl]

If what you have uncovered is true, and I don't doubt it, then it is just another example of how out of control the City Council is. Not from a standpoint of radical activism on behalf of a constituency that doesn't desire it, but from a standpoint of pure incompetence. A previous post has it correct, if these bozos can be hoodwinked by the staff on this, what else in the past has Joyce Wilson and her merry band of manipulaters put past the City Council. Can you say Strom Water Utility?

OK, El Paso Times, El Paso Inc, Texas Tribune, Eliot Shapliegh, KVIA, KTSM, KFOX, and all the talking heads over at KHRO....apply the heat on behalf of the taxpayers. Here is a clear example of getting the rotten government we deserve. Let's change it.

Are you listening FBI? Is bid rigging illegal?

And, one more thing, the Fire Department Chief at the very least should be handed his walking papers right now!

[blog reader]

eric, all medical(whether it be doctors,sierra medical, imaging or whomever) all try to overcharge if they can get away with it. its the nature of the medical business due to medicare(which doesnt pay chit) and the indigent(which doesnt pay chit). its called cost averaging. see what blue cross recommends and then offer that in cash and then see if you can get a refund from blue cross. its done everyday.

[Carl Starr]

your friend,

case law usually does not have a link, comes from a database.

[chuck]

eric, i wonder if anyone ever thought of making the ambulance service have a ppo agreement with most of the insurances and hospitals ?
nah. that would take too much common sense from our council.

[lisat]

Once Mr. Johnson left Purchasing went downhill. I called yesterday on an item that they were spending nearly $300,000 on and asked for the details. They had no details and was informed I would have to wait till council met. Thirty minutes later with legal involved I got a straight answer.

[Kevin]

The problem with private insurance companies is that the city would have to negotiate a contract with each and every insurance company. When a provider contracts with an insurance company they reduce the billable amount to the contracted amount. The insurance will then pay a portion of that "allowable" amount leaving a balance for the patient or seconday insurance.

All healthcare providers charge more than what Medicare allows because it's really the only way that Medicare or other companies will increase how much they pay out. The ones that get hurt in this process are the uninsured.

If you think the costs of the Ambulance ride are too hide note that the prices were recently approved for a price increase by City Council starting in September.

[Peggy]

Great job on tracking down the details on this. I really wish this were unusual, but there's a darned good reason we don't bid on City, County or School District jobs. Every job we've been invited to bid on, already has a winner before the RFP is issued. We learned long ago that we were wasting valuable company time trying to get "government work". Government agencies are welcome to purchase services from us based on our published rate cards (which the do). I'd rather spend my time making good deals for our private clients who are more interested in quality work completed on time and on budget than dealing with the insanity of our local bureaucracy.

[blog reader]

kevin. thats not that many insurance companies. with the largest employers in el paso being government you dont have that many. aetna runs the city,psb, and epwu. im not sure about the school districts but all of these would be easy to find out. blue cross would definitely be another.

[Ken]

I agree wholeheartedly with Peggy. We don't bid on Government work because at the end of the day they don't concern themselves with a quality product. They are only concerned about the lowest bidder and getting the contract to their pre-ordained "winner".

[Christy]

I am glad that you wrote this and created an awareness of this legal corruption. I am outraged and have calleb my city rep.

[Lupe]

I would like to invite the people in this blog to attend a tribute to Mr. Ray Gilbert.

January 19, 2011
7:00 p.m.
Northeast Regional Command center
(Northeast Police Station)
9600 Dyer
El Paso, Texas 79924