PANYNJ backs out of $81.9m toll system award to ETC - Orwell 'undecides' decision
By Peter Samuel
The nation's second biggest toll authority seems to be backing out of a decision May 25 by their Board of Commissioners construction committee to award a $81.9m contract to ETC Corp for replacing their toll system. A Port Authority of New York & New Jersey (PANYNJ) procurement official has said the procurement is still "very open" even though the Director Tunnels, Bridges and Terminals Cedrick Fulton said in a televised meeting of the Construction Committee of commissioners the ETC proposal "scored the highest among the firms (submitting) both technically and overall."
The award of the contract to ETC (Electronic Transaction Consultants, sometimes sporting a 'Corp' in the name, sometimes not) got unanimous approval by commissioners.
There was ecstasy at ETC those two Wednesdays back at the PANYNJ decision and amazement and anger at three competing companies. Today, by the ten (business) day deadline, three bidders - ACS, Telvent and TransCore - all appeared to have lodged formal protests against the award approved by the Commissioners committee.
History of low bids
ETC has won most of its toll systems contracts with aggressive pricing, but what has stirred a flurry of interest in this case is that the ETC price was considerably higher than at least two, and probably three, of the bidders.
Actual prices bid are still secret despite the commissioners discussion and the decision. The PANYNJ spokesman has said the prices can't be released or any questions answered until a contract is signed. And the companies say they aren't permitted to give their price numbers.
But we have it on good information that Telvent and ACS were substantially lower - around $40m compared to ETC's $62.9m for the design/build component, and that TransCore was competitive also in its pricing. On the maintenance and operations component one of the three, at least, was also less expensive than the ETC $19m for six years, we know. And at least one other competing bidder we hear was competitive on operations.
An engineer's estimate - Atkins, Jacobs, HNTB, TTI were mentioned as consulting for PANYNJ - was at $70m for the total package of design/build and ooperations. That was about midway between ETC Corp above and ACS and Telvent below.
Telvent was a strong contender because they have big toll systems contracts at MTA Bridges and Tunnels toll crossings in New York City. By one account Telvent was the low bidder at around $60m total at PANYNJ.
TransCore and ACS have a long history in toll systems work also. ACS derives its toll business arm from Lockheed Martin having bought that company's "IMS" division. Lockheed Martin IMS installed the present PANYNJ toll system in 1997 and ACS maintains the PANYNJ system to this day.
ACS have large back office systems for E-ZPass tolling at the New Jersey Turnpike, PANYNJ, MTAB&T and the state New York Thruway. Those back offices handle license plate images and other toll information generated at the 'front end' or roadside.
ACS' bid in the present procurement appears to have been close to Telvent's and below both the engineers estimate and ETC's.
ETC Corp "scored highest"
Director Cedrick Fulton described the evaluation to commissioners thus: "A total of seven firms were pre-qualified to receive proposals based on their responses. Those seven firms were sent a request for proposal in November 2010. Five of the seven firms responded with proposals. The five proposals were evaluated by a selection committee based on technical plan and work approach, maintenance plan and approach, and their management approach and firm experience. The top proposals were invited to provide oral presentations. Afterwards, the selection committee rescored the proposers on the technical, maintenance, and management criteria and locked in the scores. Calls for proposals were opened for review and added to the rankings. Electronic Transaction Consultants Corporations scored the highest among the firms both technically and overall."
PANYNJ would not reveal the names of the five firms they say submitted bids. We only know four: ACS, ETC, Telvent and TransCore.
"I propose we award..."
The transcript shows Fulton said at the end of his report: "Commissioners, it is my recommendation that we award the 2 contracts to Electronic Transaction Consultants Corporation at a total cost of $81. 9 million. The first is the Design/Build Contract to design and implement a replacement toll collection and audit system; the second to the maintenance contract to maintain that system once installed to protect an important Port Authority revenue source. The maintenance contract also provides for three 2-year renewal options. Including this authorization, we remain within our authorized budget..."
After discussion the transcript shows: "We were very pleased with the system that ETC proposed with regard to their ability to recognize and differentiate between the different vehicles as well as to capture license plates so that at the end, we will have a better accuracy of the vehicles that pass through our plaza, therefore collect all of the revenue, or as much revenue as we can."
Fulton appeared to making two different statements here: (1) that ETC's was the clearly the best at vehicle separation and license plate reads of those competing now in 2011, and (2) that the new 2011 system ETC provide will be a significant improvement on the 1997 Lockheed Martin IMS system still in use today.
(2) is probably uncontroversial, but all systems being proposed nowadays are likely to be an improvement on those of 14 years ago.
(1) is more controversial.
All the companies propose similar vehicle detection and classification equipment based on analysis of electromagnetic reads from loops in the pavement and supplied by Idris of Federal Signal or UTS the TransCore subsidiary. Those two are the only suppliers.
License plate imaging uses cameras from JAI, PIPS, Inex Zamir, Perceptics, VESystems, Raytheon, or CRS among others - an intensely competitive business with no company getting far ahead of any other for long.
The rest is plaza and host software and processors.
99.95% accuracy required by all proposals
All the proposers were required to certify 99.95% accuracy in the PANYNJ procurement which raised the question: "If ETC was perfect and got 100% accuracy, while the others got just the contract required 99.95% how much would the 0.05 percent point be worth in extra contract outlay."
By an estimate we have - less than a million dollars a year.
Yet the Bridges Tunnels and Terminals and the procurement people at PANYNJ proposed paying upwards of $20m more.
And that was after ETC Corp were bargained down from even pricier heights over their competing bidders.
An unexplained explanation
There were details provided to the commissioners on the bids that were not made available to the public. The transcript shows immediately before the pro-ETC vote Commissioner A Sartor saying: "I see that the (ETC Corp) number (as agreed) is significantly above the engineer's estimate ($81.9m vs $70m), but I understand from your explanation as to why that happened and I see that the BAFO saved us a lot of money..."
The "explanation" was not made public but "the BAFO saved us a lot of money" suggests that the ETC Corp bid as made was a "lot of money" higher than the BAFO (Best and Final Offer of $81.9m).
Commissioner Sartor continued addressing Director Fulton: "...so congratulations, to you and Procurement on that one."
"[Chair R. Pocino] Okay, Commissioners, do we have a motion to approve this?
[Comm. A. Sartor] So moved.
[Comm. J. Moerdler] Seconded.
[Chair R. Pocino] All in favor? Aye?
[affirmative] That concludes our agenda."
Commissioners voted to authorize... but wait
ETC and their competitors all assumed that meant the Commissioners had given the green light to staff to finalize the contract with ETC.
Right or wrong it was believed a formal choice had been made by the selection committee and approved by commissioners, and in accord with provisions of the RFP provisions strong protests have been made by several of the losers.
We understand those protests focus mainly on the much higher price PANYNJ proposes to pay for ETC, and the argument that there is no known way their claimed superior performance can justify paying a third or so more money for their system.
ETC is hardly blessed with clients singing their praises. Miami Dade Expressway has a cure order against them, and there are rumblings of unhappiness in Louisiana, Washington state, Illinois, and elsewhere. NTTA says they are waiting on an upgrade to their system. (In Washington state we thought the DOT trumpeted a big case to the local media against ETC out of rather little substance, but the point here is they aren't giving ETC great references.)
At least one procurement officer at PANYNJ stressed the Authority's openness to protests against the decision - that's the first suggestion of a back away from awarding the contract to ETC.
Orwell's Brave New World arrives on the Hudson
The second is that the just-released official Minutes (see image of relevant section at bottom) seek - in Orwellian fashion to "undecide" the decision clearly taken to award to ETC as described in the transcript above. The Minutes suggest no decision was made. That "motion to approve" never happened, nor the vote to approve unanimously, nor the notification of bidders... none of this ever happened, proles.
Here is the official Minutes version of events on page 85 under Report of Committee on Construction: "The Committee on Construction reported, for information, on matters discussed in public session at its meeting on May 25, 2011, which included discussion of matters involving a project... at Teterboro Airport, and a contract for the replacement of the existing toll collection system for the Port Authority's six bridge and tunnel crossings, and the report was received."
In the new cleansed version there was no decision to award to ETC Corp or anyone else, just a report "for information."
Just a mistake?
Transcript of formal recommendation, discussion and decisions
Now here is the complete unexpurgated, unedited transcript of the actual events with the PANYNJ commissioners hearing a recommendation to award a contract and then voting to award it:
[Chair R. Pocino] The next item we have is design, implementation and maintenance of a replacement toll collection and audit system. The award of the contract. Cedrick?
[C. Fulton, Director Bridges and Tunnels] Good morning, Commissioners. I'm here today to discuss with you an item on the May report of actions to discuss approval for the approval of two contracts for the design, implementation, and maintenance of a Replacement Toll Collections System and Audit System on Port Authority property. You will recall in February of 2010, the Board authorized a project for the new toll collection system at a total estimated cost of $175 million.
The Port Authority's toll facilities are comprised of 4 bridges at George Washington, Goethals, and Bayonne bridges and Outerbridge Crossing and 2 tunnels: the Lincoln and Holland tunnels. The George Washington Bridge has 3 toll plazas: one on the upper level, one on the lower level and one serving the Palisades Interstate Parkway. Each of the other facilities has 1 toll plaza to a total of 8 throughout the system. The 8 toll plazas include a total of 72 toll lanes, some of which accept only E-ZPass tags and some of which accept E-ZPass or cash.
In 2010, 242 million vehicles used the Port Authority's tunnels and bridges generating $960 million in revenue. The current Tolls System was installed in 1997 and is close to 14 years old.
Other agencies in our region have installed their system between 1995 and 2000 and have either upgraded or have entirely replaced their systems by now. Our system is past its useful life. Many components are obsolete and no longer available through the original manufacturers and our software can no longer be updated. As a result of this obsolecence, maintenance costs are increasing significantly. With the New Toll System, The Port Authority will benefit from the latest available technologies in toll collection.
The new system will provide The Authority with more audit capabilities to ensure this important revenue stream is protected. There will be an improvement in transaction reporting, ensuring that correct tolls are charged to the correct vehicles. Further, camera systems will more accurately capture violation images so the authority can pursue those who don't pay. The new system will also provide for lower maintenance costs than we currently pay. The new system components are expected to have a longer life cycle because there's swappable components. This will reduce the number and duration of unplanned closures. In addition, the system builds for the future has the capacity for All-Electronic Tolling operation - cashless operations when it is approved by the board without having to reinvest in the whole system itself.
Subsequent to February 2010, Board authorization request for Pre-Qualifications publicly advertised in March 2010 for design, implementation and maintenance of a new toll system. A total of seven firms were pre-qualified to receive proposals based on their responses. Those seven firms were sent a request for proposal in November 2010.
Five of the seven firms responded with proposals. The five proposals were evaluated by a selection committee based on technical plan and work approach, maintenance plan and approach, and their management approach and firm experience. The top proposals were invited to provide oral presentations.
Afterwards, the selection committee rescored the proposers on the technical, maintenance, and management criteria and locked in the scores.
Calls for proposals were opened for review and added to the rankings.
Electronic Transaction Consultants Corporations scored the highest among the firms both technically and overall. We have made a great deal of progress since project authorization.
Here you can see several key milestones moving forward. During the first year after award, the system infrastructure and software will be designed and tested. Once successful completion of the factory acceptance tests, the work in our toll lines will begin. That is scheduled to take place between the fourth quarter of 2012 through the first quarter of 2015. When the last lane is converted to the new system, all construction in field will be completed and a 30-day systems operational test will take place. With successful completion of the operational tests, close out of the design build contract will take place and the maintenance contract enters into effect.
Commissioners, it is my recommendation that we award the 2 contracts to Electronic Transaction Consultants Corporation at a total cost of $81.9 million. The first is the Design/Build Contract to design and implement a replacement toll collection and audit system; the second to the maintenance contract to maintain that system once installed to protect an important Port Authority revenue source. The maintenance contract also provides for three 2-year renewal options. Including this authorization, we remain within our authorized budget of $175 million for the project.
Commissioners, I request your concurrence on the award of these contracts.
[Chair R. Pocino] Cedrick, would this system be considered to be the most updated, modern technical system available to us?
[C. Fulton] Yes, sir. We were very pleased with the system that ETC proposed with regard to their ability to recognize and differentiate between the different vehicles as well as to capture license plates so that at the end, we will have a better accuracy of the vehicles that pass through our plaza, therefore collect all of the revenue, or as much revenue as we can.
[Chair R. Pocino] Commissioners? Jeff?
[Comm. J. Moerdler] A couple of questions. First, is--and I remember we had talked about this at one point but I don't recall the answer or if you knew at that point. Will this technology permit the acceptance of multiple systems so the Florida SunPass and the other technologies that aren't E-ZPass technology--will there be an ability to accept those technologies?
[C. Fulton] The issue with interoperability of really the back-office issue-- the equipment that is installed in the lane can recognize various types of RFI technology but it's really the interchange of money behind the scenes that provides for true interoperability.
[Comm. J. Moerdler] Okay, but this technology that we're installing in the plazas will have the ability, so if we can get the back office to work with it later on, we don't have to go and retrofit the lanes.
[C. Fulton] There are different types of components that can be installed to lanes that aren't necessarily compatible. One of the issues that we are working on right now amongst the various E-ZPass agencies is a replacement procurement to buy the lane equipment that will read tags amongst all of those various agencies. One of the other initiatives that we're working on, though, is to try to find compatibility outside of the E-ZPass, so I guess the direct answer to your question, sir, is with the lane controllers that we'll be putting in place, on day one, there may not be the ability to read a tag from a different agency, such as from Florida or from Texas or from California.
[Comm. J. Moerdler] Okay. Is the technology that we're going to be installing--can you just go back to that slide that showed the bar--yes, that one. Is this very new technology that it's a year's worth of system design before we even start deploying it? What is it that requires so much lead time?
[C. Fulton] The elements themselves--we liken it to building a PC in that you buy a power source, you buy a hard drive and you put it together. What takes time is the installation at each one of our various toll plazas, how they have to be set up, how they have to be tuned to take advantage of the different geometries coming into each one of the plazas. So that's really what's happening. You're having work sessions where the team members, which include Port Authority as well as the system designers are working together to understand all of the intricacies of each plaza and they're compiling that information.
[Comm. J. Moerdler] That's during that red phase in the system design that you're doing the actual physical layouts--okay. That's--I thought-.
[C. Fulton] A series of workshops where people are really understanding the environment in which they're going to be working.
[Comm. J. Moerdler] Okay. And the testing and operation doesn't occur until after you've deployed at all 8 plazas?
[C. Fulton] Each-
[Comm. J. Moerdler] In other words, it doesn't make sense to deploy one plaza if you do Lincoln Tunnel first, to turn that on and actually use it. You wait until you finish the process?
[C. Fulton] Well, no. The systems at the conclusion of each plaza-- at each plaza there will be a couple of lanes taken out at a time. Then, that plaza will be completed and then those lanes will be available for revenue service and it will proceed that way, from plaza to plaza to plaza. Then, at the conclusion at all plazas, then we would enter into what we consider that system acceptance period, where the entire system is now-
[Comm. J. Moerdler] Okay, so you're starting to turn it on as you segment.
[C. Fulton] We need to bring the lanes back because we need the lanes. [Comm. J. Moerdler] Right. Okay. And does the contract include--you talked about the cost of buying a maintenance contract. Are we getting a 1-year warranty with this system from final system acceptance or from each plaza going on? There's a manufacturer's warranty associated with all the elements that are being installed into the lane, and it's at the conclusion of the systems acceptance--period-- which will be the third quarter of 2015 where the actual maintenance comes in.
[Comm. J. Moerdler] That's when we start paying the maintenance contract.
[Comm. A. Sartor] What happens in year two, Cedrick, for the costs? I see you say the proposed costs for the first year are maintenance of the new system is $2.7 million. What about year two, and beyond?
[C. Fulton] It's pretty much the same. We just wanted to provide an example of the relative costs; our annual maintenance costs today are about $3.8 and we're saying that we'd save approximately $1 million when we move into the June maintenance contract.
[Comm. A. Sartor] I see that the number is significantly above the engineer's estimate, but I understand from your explanation as to why that happened and I see that the BAFO saved us a lot of money, so congratulations, to you and Procurement on that one.
[Chair R. Pocino] Okay, Commissioners, do we have a motion to approve this? [Comm. A. Sartor] So moved. [Comm. J. Moerdler] Seconded.
[Chair R. Pocino] All in favor? Aye? [affirmative] That concludes our agenda. Thank you very much for all of your input and assistance, and a motion to adjourn?
[Comm. A. Sartor] So moved.
[Comm. J. Moerdler] Seconded.
[Chair R. Pocino] Meeting adjourned. Thank you. [THE PORT AUTHORITY OF NEW YORK & NEW JERSEY]
our report of the commissions 'decision' May 25