Metro: E-Mails Show How Not To Negotiate To Buy Rail Cars
Frank Wilson, Metro's former president, might be considered old news, but the decisions he made, and more importantly the contracts he signed, continue to linger.
At a recent Metro meeting, board member Christof Speiler, referencing the Harrisburg overpass, said, "Metro should have had a much better public process three years ago. Metro kind of put itself in this position. We still have to live with things from three years ago."
Another one of those things that will affect Metro and taxpayers for a long time is Wilson's $118 million contract with CAF, a Spanish rail car vendor that is providing 29 new vehicles for the Main Street and East End lines. Metro is paying about $3.15 million per car.
The CAF contract also became the subject of the Federal Transit Administration's "Buy American" investigation, which could still jeopardize whether Metro receives the $900 million in federal funding that it desperately needs to complete two new light rail lines.
Houston Texans vs. Arizona Cardinals
TicketsSun., Nov. 19, 12:00pm
Rice Owls Football vs. North Texas
TicketsSat., Nov. 25, 12:00pm
Houston Texans vs. San Francisco 49ers
TicketsSun., Dec. 10, 12:00pm
Houston Texans vs. Pittsburgh Steelers
TicketsMon., Dec. 25, 3:30pm
Houston Open - Good Any One Day Grounds
TicketsSun., Apr. 1, 11:59pm
This week, Hair Balls obtained new documents and e-mails that provide some interesting, if not necessarily disturbing, details about how Metro negotiated and finalized that contract. Wilson may be gone, but other Metro executives that made decisions on the CAF deal are still there.
The whole thing started in 2008 when Metro accepted bids from rail car vendors, and, according to a Metro report sent to the FTA, the top two companies being considered were Siemens and CAF.
In November of 2008, Metro informed Siemens and three other vendors that it had decided on its top company -- CAF -- and wouldn't continue any negotiations with the others.
That caused quite a stir among the other companies, especially Siemens, considering it designed and built the cars for Metro's Main Street line. The vendors wanted an opportunity to present Metro a better offer (referred to as a BAFO, or best and final offer), because "due to a fundamentally new economic climate, things had changed."
Metro invited in the vendors to hear these better offers, and it would seem Metro was in a good position to negotiate a much better deal and save some money.
But according to an internal e-mail chain between Metro executives, Wilson gave specific orders on how the meeting should be conducted.
From a January 2009 e-mail from Navin Sagar, Metro's Director of Engineering:
Metro will greet the carbuilder, cite the purpose of the meeting, let the carbuilder make its presentation, thank and bid them good-by... Under any circumstances, Metro shall refrain from engaging in any kind of discussion, holding conversation, getting in to a question and answer session or exchange any contractual matters.
In response to Sagar's e-mail, John Sedlak, Metro's Executive Vice President, wrote this:
Navin, I take one exception to your e-mail. You state that after greeting the carbuilder, you will "cite the purpose of the meeting." My understanding is that we were to say nothing other than "hello, talk to us, and goodby." Please correct me if I am wrong on this, but Frank was very specific."
Dhiren Chakraborty, who had a $107-an-hour, no-bid consulting contract with Metro, simply offered this:
John, I do agree with you. Thanks.
So, with Metro in the perfect position to get a better deal, Wilson instructed his executives to say absolutely nothing during these meetings, except of course, hello and good bye.
In fact, Siemens did tell Metro it would provide the cars at a lower cost. In a letter to Metro, dated January 28, 2009, Siemens' Vice President wrote:
Siemens clearly and concisely stated that both price and delivery would be improved in a BAFO... Indeed, during the January 21 meeting, Siemens presented these areas of potential enhancement to our offer. It was disappointing that during the meeting, Metro refused to provide Siemens with any guidance, feedback or response whatsoever to the issues presented.
It's unclear why Wilson did not want his team to say anything during the meetings, but if Metro provides us with any answers, we'll be sure to post an update.
If things had been different, maybe Metro could have saved millions on the contract, or maybe not, but it is fairly clear that Wilson had decided on CAF long before negotiations with the other companies were complete.
After the contract was signed, Wilson flew to Spain with his alleged girlfriend -- his chief of staff -- to meet with executives from CAF, and the trip resulted in accusations that Wilson was improperly spending taxpayer money.
A Metro investigation later cleared Wilson of any wrongdoing.
Update: Hair Balls talked with John Sedlak, Metro's Executive Vice President, and agency spokesman George Smalley, and the pair told us that it's fairly common during the procurement process to have a meeting where one side doesn't speak but simply listens.
"There was nothing untoward about the way the meeting was conducted," Smalley said.
The reason Metro gave other companies the silent treatment, Sedlak said, was that the meetings weren't a proper forum for back-and-forth contract negotiation. Those talks had already taken place on multiple occasions.
In fact, Sedlak explained, since Metro had entered final negotiations with CAF, any further discussion with the other companies could have hurt those negotiations.
The only reason the meetings were even scheduled, Sedlak said, is because the other companies wanted a chance to present Metro with a better final offer. After the meetings where Metro execs didn't talk, however, and after follow-up surveys were completed by the other companies, CAF was still considered the best deal.
"We approached this looking for the best possible price, asking how we could save taxpayers money," Sedlak said. "That was our approach from the very beginning."
Get the ICYMI: Today's Top Stories Newsletter Our daily newsletter delivers quick clicks to keep you in the know
Catch up on the day's news and stay informed with our daily digest of the most popular news, music, food and arts stories in Houston, delivered to your inbox Monday through Friday.