MFS gets $500m New Jersey e-toll job & loser Lockheed cries foul

MFS gets $500m NJ e-toll job & loser Lockheed attacks NJ

MFS Network Technologies has won what is probably the world's biggest electronic toll collection job, being selected for a $500 million multi-agency contract, covering conversion of 700 toll lanes on the New Jersey Turnpike, and the Garden State Parkway. The job involves 8-years of operation of a Customer Service Center for the two major NJ toll agencies and for the Port Authority of NY & NJ which runs toll tunnels and bridges between the two states and the South Jersey Transport Auth which runs the Atlantic City Expressway. Since the state of Delaware joined the NJ e-toll consortium it is likely the selection of MFS by NJ will provide it with more work on top of the $500m — on Delaware's bridges and toll stations. As we go to press none of this has not been officially announced but a NJ official told us that this is now merely a formality. $500m is an approximate value we were given on bakcground.

The selection of MFS was at the expense of the other contender for the job, Lockheed Martin IMS. It has repeatedly attacked the choice of its rival — in a formal protest letter, at a special heading, and in press interviews and releases. There was also a court case that the court refused to hear.

MFS is one of the nation's most experienced fiber-optic communications installers and has also won major e-toll jobs in California, Colorado and Massachusetts. A major part of the NJ job will involve installing fiber along the right-of-way of the NJ pikes. MFS under the contract will pull the cable needed to integrate tolling and provide communications capacity for surveillance and traveller information services on the toll roads but its contract will provide for it also to install large quantities of empty conduit for non-highway related communications. New Jersey and adjacent Staten Island NY are sites for the major 'cableheads' on the most heavily trafficked communications trunklines in the world — the undersea coax and fiber cables between Europe and North America. The NJ turnpikes expect to gain major revenues from leasing use of the statewide system of conduit that MFS will build.

An official told us: "The major cost of fiber in this kind of situation is trenching along and under roadway and restoring things after the pipe has gone in. The pipe itself costs nothing so once you have everything open it makes sense to put in a lot. This project will give us all the conduit we need for a dozen future systems and installing these ones will be just a matter of pulling cable and splicing."

Lockheed appears to have made a major mistake in not teaming with another company with expertise in fiber communciations. Lockheed has major expertise in running customer service operations but MFS matched that by teaming with the large Chase Manhattan bank which will run the NJ customer service centers for it.

"Managing customer services for toll tag accounts is basically a banking operation," said one official.

The Lockheed protest: In a 3 page protest letter dated Oct 21 Lockheed charged that the NJ Transportation Commissioner Frank J. Wilson "has been involved in career discussions with members of each bidding team ... but it appears that he did not recuse himself from participating in the process." Lockheed added: "Wilson's involvement under these circumstances clearly opens the entire evaluation and decision process to challenge" and "gives rise to significant questions about the validity of the (evaluation) process." Lockheed's letter also protested that the rules were changed midstream to the company's disadvantage. After a hearing lasting several days the state of New Jersey formally rejected the protest as "baseless" in blunt angry language. (see "Poor Lockheed — a public flogging" p2)

History: 34 firms registered interest and of these 13 entered prequalification bids late January 1996, of which four were selected to engage in confidential discussions in the spring — Lockheed and MFS, and two banks Chase and Valley. April saw the formal request for proposals. Valley dropped out and Chase became a subcontractor to MFS. The two formal bids were submitted by the mid June deadline. The state plan had been to select the contractor in about 10 weeks (by late August) but the process took 19 weeks.

For most of the period the evaluation was under the control of the NJ Turnpike, and its chief engineer Thomas Magro. The whole e-toll buy was set up with the NJ Turnpike as "designated lead agency." (NJDOT press release 4/15/96) About three-quarters of the way through Magro got an appointment to head up the San Francisco BART railway, and departed his Trenton NJ job. He handed over headship of the e-toll evaluation to David Mortimer, chief of staff to transport commissioner Frank Wilson. Mortimer was in charge for about the last 5 or 6 weeks of the process. This transfer of control from the Turnpike to Wilson's office provided grist for Lockheed's complaint of Wilson influence though oddly it doesn't seem to have been a major issue in the hearing.

Both bidders commented that the NJ acquisition process was unusual in the onus placed on bidders to devise the details of the package of goods and services offered and also in the number of rounds of negotiation and the amount of tweaking of each bid. After Best & Final Offers (BAFO), the two bidders were asked to offer Best & Revised Final Offers dubbed by the participants BARFOs — fortunately those involved apparently didn't know the word's meaning in Australian slang! In addition there were long lists of questions written to each and day-long conferences at which the bidders were asked to make 'clarifications' about aspects of their BARFO bids.

Wilson said he was not "part of the evaluation process" and indeed that he "stayed away from the evaluation and ranking of bids." Wilson said that around the middle of the year two involved firms had approached him to see if he would work for them — Booz Allen and AE Comm. Wilson said he reported the approaches to the state governor and promised to stay completely out of the evaluation. The two firms are minor partners to the NJ bidders, Booz Allen being a proposed Lockheed sub, and AE Comm being an MFS sub's sub. Lockheed complained that the evaluation shifted from an emphasis on expertise to price and to contract add-ons that would help generate extra revenue for the state.

MFS's win keeps the e-toll system integration business in the U.S. split pretty evenly three ways — SAIC/Syntonic being the other major player. They stayed out of the Jersey food fight, preferring to bet on a minor role as a Lockheed sub.

In July Lockheed beat MFS — in a contest for the job of converting the Port Authority bridge and tunnel tolling to electronics, a considerably smaller job than the NJ pikes, 6 plazas, 77 toll lanes and $22m. But it was prestigious. Lockheed said in a press release then that the Port Authority had "recognized there was no room to test unproven contractors or ETC systems," a cheap shot at MFS. The "unproven" rival now has the laugh on Lockheed, though it may not be the last laugh in this mercurial business! (Contacts: NJ Turnpike 908 247 0900 SJ Transportn Auth 609 561 6643 NJ Highway Auth 908 442 8600 Delaware River Joint Toll Bridge Auth 215 295 5061 Lockheed 201 996 7000 MFS 609 235 5252 Frank Wilson NJDOT 609 530 3536)