Most Nassau contracts like the one in Skelos probe don't go to lowest bidder, records show

Nassau County awards more than three-quarters of its specialty contracts -- the type central to the federal corruption case against state Sen. Dean Skelos and his son, Adam -- to companies that don't submit the lowest bids, records show.

Since the approval in July 2013 of a $12 million agreement with AbTech Industries -- which employed Adam Skelos as a consultant -- 36 of 45 comparable pacts did not represent Nassau's cheapest option for the work. The 36 accounted for $68 million of the $79 million total value of those contracts.

A committee of three public works department employees had judged Arizona-based AbTech, which makes sponge technology to sift pollutants from storm-water drainpipes, "the best value," even though it was not the lowest bidder.

A Newsday analysis of thousands of pages of documents shows the county routinely awards such contracts, known as personal service agreements, to companies that don't propose the lowest cost.

Personal service agreements are used for technical and professional projects requiring expertise the county lacks in-house. Because of the type of work involved, the contracts are exempt from the competitive, sealed bidding process that emphasizes price and is used for most county jobs, such as road paving, equipment buying and heavy construction.

Good-government advocates say the personal services system can make it easier to steer work to politically connected companies, because it relies more on subjective judgments of employees who in some cases are political appointees.

The county public works panel that chose AbTech over two other firms, one of which submitted a lower bid, consisted of an appointed supervisor and two union employees.

"A closed process -- with one or a small number of politically connected people in control -- is like a petri dish for corruption," said Susan Lerner, executive director of Common Cause New York, a nonprofit government watchdog group.

'Barrier' against corruption

The competitive bid system, in which contracts must go to the lowest "responsible" bidder, "is sort of your basic barrier against this type of public corruption," Lerner argued.

But Steven Schooner, co-director of George Washington University Law School's Government Procurement Law Program, said Nassau is following accepted practice for awarding personal service agreements.

"You're not going to choose your open heart surgeon based on low price," Schooner said.

The key to limiting corruption in specialized contracts is putting well-trained, well-compensated people in charge of awarding them, Schooner said.

"It would be terrible if an overreaction to a public corruption probe tied the hands of the state or a municipality, and arbitrarily drove them to a system that favored 'low price wins' for everything," he added.

Nassau spent $503 million on contracts last year, according to a legislative budget office report, with personal service agreements accounting for a relatively small portion.

200-plus pacts reviewed

Newsday reviewed all of the new personal service contracts approved since mid-2013, more than 200 in all. The analysis focused only on the 45 contracts for which multiple companies were considered, and for which each disclosed its precise cost.

Those 45 contracts averaged $1.7 million each. They ranged from an $82,000 agreement for drafting an emergency plan for Nassau to be eligible for state homeland security grants to a $13.8 million contract for oversight of electrical repairs at the large Bay Park Sewage Treatment Plant in East Rockaway.

The average difference between the bid of the winning firm and that of the cheapest was about $400,000, records show -- although it was more than $1 million in some cases.

Most of the contracts covered project design and construction management, and largely were spread among a pool of about a dozen engineering companies that submit proposals for personal service agreements. Many are frequent contributors to both Republican and Democratic candidates across Long Island, state campaign finance records show.

Aides to Nassau County Executive Edward Mangano, a Republican, have long said that campaign donations have no bearing on contract awards.

Nassau's long-standing system for giving personal service agreements works like this:

Companies that respond to the county's formal request for proposals, or RFP, detail how they would do the work, including the number of employees they will use and their roles.

A committee of no fewer than three county employees reviews the proposals and assigns an overall technical score to each. Criteria include the companies' personnel, ability and experience. The panel then considers cost, often negotiating with the winner to try to bring their price closer to or below that of lowest proposal.

All agreements worth more than $25,000 require the approval of the Nassau County Legislature's Rules Committee.

Suffolk County handles such contracts in a similar way, also using its employees to rank the qualifications of respondents.

Joseph Amato, chairman of the American Council of Engineering Companies of New York, said most municipalities follow the qualifications-based selection guidelines used by New York State and the federal government for specialized, technical service contracts.

Nonetheless, he said Nassau gives cost too much weight.

"Too much emphasis is put on the fee to determine the selected firm," said Amato, a senior partner at Cameron Engineering, of Woodbury, which has won county contracts without submitting the lowest price and lost others in which its proposal was the cheapest. "We believe the most qualified firm should be interviewed and the fee negotiated without [the] influence of fees of other firms."

Rob Walker, Mangano's chief deputy, said "engineering firms usually don't want you to look at their financial proposals. They think it should all be based on qualifications -- but we still want to consider cost."

Scrutiny followed probe

The scrutiny of Nassau's contract process, including a review by acting District Attorney Madeline Singas, started after disclosure of Skelos' involvement in the AbTech deal.

Federal prosecutors have charged Dean Skelos (R-Rockville Centre) and Adam Skelos with conspiracy, bribery and extortion, alleging that the senator pressured a developer to funnel more than $200,000 to his son through companies including AbTech, and influenced the awarding of the $12 million county contract. A federal indictment filed last Thursday against the men largely echoed the May 4 complaint.

Dean Skelos, who resigned as Senate majority leader after his arrest, has said that both he and his son are innocent.

After hiring Adam Skelos in late 2012, AbTech submitted an unsolicited proposal for its technology to Nassau. The county then issued an RFP for storm-water treatment. Federal prosecutors say Adam Skelos met several times with one of the three public works panelists who ranked responding firms.

Public works officials declined to provide a detailed breakdown of how the panel reached its overall technical rankings. None of the personal service pacts with the department that Newsday analyzed contained this information.

But a public works memo argued that AbTech had the "highest technical rating," proposed "a reasonable cost for the services" and represented "the best value to the county."

It said Newport Engineering of Oyster Bay, which submitted the lowest cost proposal -- for $1.45 million compared with AbTech's $1.91 million -- didn't fully respond to the RFP on issues including drainpipe technology, and that its installation ultimately would have been more expensive than AbTech's.

Though AbTech's deal was for $12 million, including installation of the technology, cost proposals were only for the project's design portion. After the Skelos charges, Nassau suspended the contract after paying AbTech only $150,000.

The county wasn't accused of wrongdoing in the Skelos case. Mangano spokesman Brian Nevin has said Nassau "has the most transparent process known to government."

Personal service agreements have been subject to approval by Rules Committee members for more than 15 years. Besides those Newsday analyzed, they can cover functions including outside legal counsel, concert bookings at parks, social services provided by nonprofits and veterinary care for police dogs.

By Paul LaRocco

paul.larocco@newsday.com@paullarocco

Paul LaRocco is a reporter on the investigations desk. Since starting at Newsday in late 2010, he has also covered Nassau and Suffolk county politics and government and the Town of Oyster Bay.