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SMG: A study in no-bid contracts

With all the hoopla being raised over Mayor Peyton’s efforts to convince City Council members to waive City ordinances and award a 35-year $750 million contract to Waste Management Inc to operate the city’s landfill, I thought it might be interesting to look at one of the city’s other vendors.  As I mentioned the other day in my post about the dire state of the city’s finances,  SMG manages all of the city’s major venues—the Arena, the Stadium, the Baseball Park, the Performing Arts Center, the Convention Center and the Equestrian Center.  As the Council Auditor’s most recent review of the city’s finances noted, these venues aren’t exactly prospering.  In fact, the report expressed grave concerns over the abilities of these individual venues to meet their current obligations.  

So, why are these venues struggling?  Are they managed properly?  Did SMG bring the strongest bid to the table when they were awarded the contract and are they the best entity to manage these facilities?

These are questions we may never know.

The SMG contract was awarded as if it were a sole source contract.  

That’s right, we’ll never know if they city got the best deal possible to manage the city’s venues, because the contract was never put out to bid.  The city negotiated with SMG without accepting any other bids and the city council voted to waive the law to approve the negotiated contract.  

Are you starting to get the picture here?  This contract was negotiated and never bid out.  (Sound familiar?)

Perhaps even more interesting; however, was a provision that was tucked in last year’s budget.  That provision is as follows:

WAIVING PROVISIONS OF CHAPTER 126 AS TO SMG MANAGEMENT INC. AND THE CONTRACT WITH THE CITY OF JACKSONVILLE AND REQUIRING THAT SMG MANAGEMENT INC. COMPLY WITH SMG MANAGEMENT INTERNAL PROCUREMENT POLICIES; AMENDING SECTION 106.304 (MAYORS TRANSFER POWER) TO ALLOW SMG TO TRANSFER FUNDS BETWEEN SUBFUNDS UP TO $500,000 ANNUALLY WITHOUT FURTHER COUNCIL ACTION

Let’s break that provision down into simple English.  SMG Management Inc is allowed to transfer up to $500,000 annually between the sub-funds (Arena, Equestrian Center, Stadium, etc) without even obtaining Council approval.  Bear in mind that the Council is cracking down on the independent authorities and not allowing them to transfer more than $50,000 without Council approval, yet they are willing to give a private company the authority to transfer up to half a million dollars without oversight.  What this does is camouflage underperformance at one (or more) of the venues they manage.  The Equestrian Center isn’t performing and can’t meet its debt payments?  No problem.  Just transfer from The Times-Union Center For the Performing Arts.  The Performing Arts Center can’t make it now?  No problem.  Just transfer from Jacksonville Municipal Stadium.  

In reality, we’ll never know if SMG was the best company to manage the city’s venues, simply because the contract was never bid.  (Of course, we may never know if a particular venue is profitable because SMG is free to move money around at will, up to $500,000.)

No-bid contracts should be viewed with suspicion.  If a company is so sure of its ability to deliver the best deal possible, what would they have to fear from an open bidding process?  And, we should clarify—an open bidding process is what is mandated by law, with only a few exceptions set forth in the ordinance code.  Many of the times that a no-bid contract is awarded, the Council has to waive city law.  That should tell us something, shouldn’t it?

Of course, no-bid contracts seem to travel in packs in Jacksonville.  Besides their efforts to secure a no-bid contract with the City, SMG shares two other common elements with Waste Management.  They were both originally tucked into the City’s lengthy and complex budget bill and both have the same lobbyist.  

This brings us to the crux of this entire article.  Looking to secure a no-bid contract with the City of Jacksonville that requires a waiver of the ordinance code?  Hire the right lobbyist.

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Filed under: Jacksonville, Jacksonville City Council, Mayor of Jacksonville, , , , , , ,

2 Responses - Comments are closed.

  1. Jack says:

    Anyone remember when Mayor Peyton said he would run the government like a business? If this were a business, it would be broken and he would be tarred, feathered and run out of town on a rail. He has no business skills and less character than any mayor I can remember. Bring back Mousa, bring back Delaney, at least they had character. All Peyton has are cronies in his pockets, all thanks to no-bid contracts.

  2. comeon says:

    SMG is represented by Harden, what else needs to be discussed.

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