Saturday, December 18, 2010

Transcript: BikeLink discussion, 11/18/10

The following transcript is from one of three video files on the BART Web site, from the November 18, 2010 meeting. This segment begins at time point 1:14:30, during a public comment period.

BART Director James Fang: Our next item…we have a couple of people here speaking this morning. The first is Steve Grover, bike locker procurement contract.

Steven Grover: Hi my name is Steven Grover. My Berkeley-based company is interested in bidding on an upcoming procurement contract for electronic bike lockers, but we’re finding that we probably will not be able to do so, because the terms are becoming increasingly arbitrary, with each contract addendum, over the past five months. For example, Addendum Number 9 establishes a trust so that proprietary materials a company uses to produce its products will be accessible to BART should the company go under or fail to fulfill its obligations. This protects BART, and this makes sense. However, it goes on to say that if the contract is terminated for any reason, the [BART] District can compel release of these materials anyway, and of course BART can terminate any contract just for convenience. So, why go to the cost and trouble of creating a trust to ostensibly protect the very basis of a small technology company like my own, if it can just be cracked open at any time? Here’s another section which talks about protecting the company’s rights to things it developed outside the contract. It distinguishes between things that are developed under the contract and things that were developed before or outside the contract. Things developed under the contract, BART will own, of course. But then there’s this big exception for something called procurement licenses, which effectively gives the District the right to force the supplier to license all of its technology for manufacture by others, even if the supplier is fully in compliance with its obligations under the contract. Those others can then presumably start selling the product to anyone else beside BART, and they don’t have to factor in development costs. There are many other similar examples of things that just don’t make sense if you read very, very, very carefully. But just taking these two, what does this mean for a company like my own, trying to figure out how to bid on this contract? Well, under the contract, the District is obligated to only buy 54 units. So a company that’s developing a product specifically for this contract, they’re going to have to do software, electronics, interfaces, mechanical systems, prototyping, refining, debugging. They’re going to spend a million bucks easily. And if they’re paying attention, they’re going to need to amortize that million bucks over the first 54 units. So instead of a $3 million bid, they’re going to be in for like $8 million. So, despite all of its intense specificity, the contract proposed has gotten so convoluted and arbitrary that bidders cannot determine what kind of a business model to adopt when they’re developing their pricing and developing their bid. Is this an equipment procurement contract or is this a business acquisition contract? Why am I here? Perhaps the Board can help by requesting some simplicity. Three things. One, get rid of the loopholes. They’re not helping anybody in the long run. Two, make this about purchasing a competitive product that fulfills important functions for BART patrons. Period. And three, establish strong protections for BART in the event that the bidder fails to fulfill its obligations or goes bankrupt, but then, stop there. Use an escrow or a trust for proprietary materials, but don’t allow BART to just take possession willy-nilly of the materials in the trust whenever BART wants to. Thank you very much.

BART Director Lynette Sweet (at 1:23:18): I think I’ll address the bicycle gentleman first, because I was real curious. He brought up some very interesting contractual issues that do deserve some kind of comment, and my hope is we heard what he said. Would it be possible for you guys, I’m sorry, would it be possible for the General Manager to provide some kind of feedback on what he spoke about, because it sounded as if, and if he was reading it correctly, it sounded as if we were actually buying out his business, and that’s not what we were looking for in this.

BART General Manager Dorothy Dugger: I’d be happy to provide the Board some feedback. This has been a particularly complex procurement, so rather than do it ad hoc, if I could respond to the board offline.

Director Sweet: Well are there other bidders on this contract that are also experiencing the same type of, I don’t know, just confusion over what we’re looking for?

GM Dugger (speaking to someone off-camera): Do you know who the bidders were?

Director Fang: Well if I might jump in just briefly, Director Sweet, we’ve got to be very careful when we have these kind of situations. I totally empathize with that gentleman about the complexity of the BART contracts. Clearly, that’s something we’ve talked about with multimillion-dollar contracts, a lot of the ones that are just getting disqualified because they didn’t fill out the right paperwork. But I’m a little bit hesitant from a BART perspective to have one gentleman come and say, here’s a problem, here’s my problem, the way the contract is being set up is really not good. I’m hesitant to jump in and say, very compelling argument.

Director Sweet: I just want to know.

GM Dugger: I’d be happy to give the Board feedback, but would prefer to do so outside of this meeting.

Director Fang: Excellent.