McGreevey Seeks Renegotiation of
Parsons Contract and New Vendor, if Necessary
Governor supports recommended procurement reforms
(Trenton) - Governor James E. McGreevey announced today that he will take immediate steps to begin renegotiation of the Parsons contract to obtain substantial concessions and modifications for New Jersey. The Governor said the state also will begin the process of seeking new proposals to replace the vendor, should the state decide to cancel the Parsons contract.
Governor McGreevey said he also would take steps to implement the procurement reforms recommended by the management audit team.
The actions follow delivery of a management audit, requested by the Governor on January 24, and conducted by a team of legal experts. The audit examined the procurement and performance of the contract granted to Parsons Infrastructure and Technology Group to provide the vehicle emissions inspection system at state-operated inspection centers.
"I launched this review to better understand how the Parsons contract went so terribly wrong, what we can do to fix it, and how we will prevent it from ever happening again," said Governor McGreevey. "The recommendations set forth in this Report outline the actions the State must take to restore integrity and value to public contracting."
The management audit team's report provides key recommendations on how the State can prevent another debacle in the future while suggesting the best ways to fix the current contract.
The report concludes that the state would be best served by keeping the existing contract, but only if renegotiation results in significant concessions and modifications. The report recommends termination of the contract if the renegotiation fails to achieve those results. The report also recommends proceeding with the development of a Request for Information (RFI) and a Request for Proposal (RFP) to find another vendor, in the event that the renegotiation fails.
Governor McGreevey, however, said that he will go beyond the report's recommendations and will order that work begin immediately on the development of the RFI. McGreevey is asking his Administration to prepare a Request for Information to solicit interest from other vendors in running New Jersey's inspection program.
"I have directed my administration to immediately begin preparing to seek new bidders in the event that our renegotiations do not achieve the results we will demand for the New Jersey public," Governor McGreevey said. "We are fully prepared to take such action, if needed."
In addition, the report recommends the completion of two studies to determine the most effective means to conduct inspections - private or centralized. To prevent a reoccurrence of the Parsons debacle, the Report also recommends completely reforming the procurement, management and supervision of public contracts.
"I will seek substantial modifications and concessions from Parsons through renegotiations," said McGreevey. "Precipitously terminating the contract would likely further inconvenience motorists and should only be done as a last resort. I have authorized my counsel's office to lead these negotiations which should begin immediately. I am also asking Treasurer McCormac to work with my counsel's office to develop executive and legislative action to implement procurement reforms."
"This report represents a blueprint for new procedures and protocols that will ultimately restore the public's trust in contract procurement," said Treasurer McCormac. "Our reforms will encompass every phase of the contract process-from concept and bidding to contract award and compliance. In revisiting the wrongs and abuses of the past, the Team has issued clear recommendations on how to bring fairness and integrity back to the public contract award process."
Reflecting its work with the Team, DEP today announced a new rule proposal that provides cost savings to taxpayers and reinforces a commitment to avoid mistakes made in the past. DEP's new rule proposal lays the groundwork for a federal petition to modify the inspection cycle from two to four years for all new models.
The proposed rule also incorporates the latest technology for motor vehicle inspections known as On Board Diagnostics into the State's testing system. Given the high contribution of motor vehicle emissions to the State's air pollution problems, New Jersey is required under the federal Clean Air Act to install the new OBD testing system to achieve essential clean air benefits. DEP is establishing a more realistic start date for OBD, ensuring that the State is ready to transition to the new inspection process with minimal errors and inconvenience to New Jersey motorists.
"The work of this review team has been crucial to developing a new approach that will reduce cost to taxpayers and increase convenience for motorists while still ensuring cleaner air under the program," Commissioner Campbell said.
The Governor is also asking Commissioner Fox to lead a comprehensive study of New Jersey's hybrid vehicle inspection system.
"We will look at whether New Jersey's combination of private and centralized inspections best serve the State and the motoring public, and if not what changes are necessary," said Commissioner Fox. "One thing that was clear to me during this review was the injustice perpetuated on small business owners who face financial ruin because of the promises made by the previous administration."
On January 24th, the Governor announced that he was launching a 90-day management review of the State's $500 million auto emissions testing contract with Parsons so that his administration can prevent any further waste or mismanagement of taxpayer dollars that resulted from the procurement and implementation of the contract by the previous administration.
Over the course of the 90 days, the Team met with over 35 individuals, reviewed extensive documentary materials, received written statements and responses from interested parties and considered extensive evidence such as testimony and statements of witnesses from prior investigations into the Parsons contract.
The recommendations in the report released today are as follows:
The Parsons Audit Team was led by State Treasurer John McCormac, Environmental Protection Commissioner Bradley Campbell, Transportation Commissioner James Fox and Authorities Chief Paul Josephson. It included former Supreme Court Justice Alan B. Handler, procurement attorney Robert C. Epstein, Esq., management specialist G. Bruce Eveland, environmental attorneys Richard F. Ricci, Esq. and Stephanie M. Wauters, Esq., and Deputy State Treasurer Robert Smartt.
- Renegotiating the Contract, which will allow the State to obtain modifications and concessions from Parsons. To avoid any further disruption and inconvenience to the public, the Report strongly suggests renegotiating the current contract and requiring significant modifications and concessions from Parsons, i.e. monetary concessions or reducing the duration of the contract by one year to August 2004.
- Terminating the Contract, if renegotiation fails. The report recommends potential termination based on the way in which the procurement was conducted, the absence of competition, the presence of political patronage in the bidding process, excessive hidden costs to the State in the contract and the quality and sufficiency of the inspection system.
Governor McGreevey plans to immediately begin the process of seeking RFI's from potential vendors, rather than waiting until renegotiations conclude.
- Assessing the State's level of compliance with changing emissions standards, including obtaining an extension of the deadline for the implementation of the On Board Diagnostic testing. The Report finds that a contributing factor to Parsons's mismanagement was the State's failure to keep up with and address the EPA's changes to emissions standards. Therefore, an extension from the EPA will allow sufficient time for testing and will help to avoid further inconvenience to motorists.
- Ordering two expert studies. The first would evaluate the inspections system implemented by Parsons because currently, no comprehensive assessment exists as to the overall quality of the Parsons system.
The second study would analyze the potential complete overhaul of New Jersey's inspection program. New Jersey's inspection system is a hybrid of centralized and private inspection facilities, and the report recommends that a study be conducted to determine the possibility of using an entirely centralized system, an entirely private system, or another version of the current hybrid system.
- Adopting and implementing comprehensive reforms for the procurement, management and supervision of public contracts. The Report recommends the State redesign, from conception to closeout, the process for handling major procurements to ensure effective management and procedures are in place to avoid a repeat of the serious problems that plagued the Parsons procurement.