Protest Threat Clouds Florida Deal

By William Welsh, Staff WriterFlorida has selected Andersen Consulting to build an ambitious online registration and licensing system for the state's businesses, but a threatened protest by a disappointed competitor could delay the project just as contract negotiations begin.The Florida Department of Business and Professional Regulation announced Oct. 23 that Andersen was the highest ranked bidder for a project that will bring online the filing for business and professional registration and licenses. Andersen has proposed building and operating a transaction-based payment system that would put in its pocket $80 million over seven years, including $62 million from transaction fees and $18 million from cost savings shared with the state, according to contract documents filed with the agency. Meanwhile, Maximus Inc. of McLean, Va., one of the four finalists for the contract, filed an intent to protest the pending award to Andersen. The intent to protest was filed Oct. 26, and Maximus has 10 days to decide whether to pursue its protest, said state officials. At press time, Maximus was debating whether to continue the protest, said Christopher Bryant, an attorney with Oertel, Hoffman, Fernandez & Cole of Tallahassee, Fla., which filed the protest on behalf of Maximus. "We feel we've got a good protest if the client wants to pursue it," he said.But Bryant also said that arguing a successful protest would be a challenging undertaking, because the state is using an invitation to negotiate, for which there is a lack of statutory guidance, rather than a more formal invitation to bid.In the meantime, Florida officials are moving ahead to negotiate with Andersen regarding the specific cost and parameters of the project. Although the state has no specific deadline, it expects contract negotiations to be completed in weeks rather than months, said Roy Cales, Florida's chief information officer.The project was viewed as a key battleground among companies that provide e-government solutions, which helped to draw some of the major players in the market, said Chuck Hansen, president and chief executive officer of Hansen Information Technologies Inc., a Sacramento, Calif., company teamed with Andersen on the proposed contract.Following top-ranked Andersen, in the order in which their proposals were rated, were finalists IBM Corp. of Armonk, N.Y., Unisys Corp. of Blue Bell, Pa., and Maximus. These four finalists were chosen from among 11 companies that responded to the initial invitation to negotiate in July. The potential size of the contract, and the fact that Florida ? one of the 10 largest states in the nation ? is asking for a transaction-based system that will be built at no cost to the state, also makes it a much prized contract, said Rishi Sood, principal analyst with Gartner Dataquest, Stamford, Conn. "The vendor that wins this contract and provides successful implementation will certainly have a leg up on the rest of the competition in securing new opportunities around the country," Sood said.Andersen also is eyeing further opportunities in the state if this project is successful. In its proposal to the Department of Business and Professional Regulation, the company suggested it could provide additional licensing, permitting and case management to other Florida departments and agencies as well, including the departments of Health, Highway Safety and Motor Vehicles, and Environmental Protection. Andersen has other significant electronic government projects in Delaware, North Carolina, the District of Columbia, Ohio and Texas, said company officials.In its invitation to negotiate, the Florida Department of Business and Professional Regulation said it was seeking a contractor to implement a licensing software system that would be funded entirely by transaction fees. The system was to be provided at no cost to the state, and the contractor would be paid a portion of the license or renewal fees over the life of the contract. The department stated in the invitation that it would consider alternative solutions and approaches to the project. The agency wants the project finished in 28 months.Online licensing will be one of several key services that will be available through myflorida.com. Florida Gov. Jeb Bush has ordered state officials to integrate all agency Web sites into myflorida.com by Dec. 31, said Cales.Andersen proposed during the preliminary negotiations transaction fees from an "account fee" model and a "subscription fee" model, and estimated that by the third year of the contract there would be 894,000 accounts, according to documents filed with the state. Andersen planned to charge these accounts $1 per month during the first five years of the contract, and 75 cents during the next two. Further, Andersen proposed that it split 50-50 the savings through the fifth year of the contract. All four finalists for the award proposed some type of sharing of savings, according to contract documents. The Andersen/Hansen licensing system included licensing, case management, online services, document management, biometrics and technical architecture and support. Andersen also noted there would be certain recurring hardware and software maintenance charges as well as recurring operations costs, such as telecommunications and hosting charges.The state will negotiate with Andersen over price as well as the various categories of the complex project, said state officials. The main categories are business process re-engineering, licensing system, call center, outsourcing and pricing payment. If the state is unable to negotiate a satisfactory contract with Andersen, then it will undertake discussions with the other vendors in the order of their ranking, said state officials. Maximus originally filed an intent to protest Aug. 25 when the state announced the scores of the bidders. In a 15-page protest document filed Sept. 5, Maximus attacked the proposal scorings, asserted that Andersen was ineligible to compete for the contract and argued that its proposal was better than Andersen's. The state dismissed the Maximus protest Sept. 14 because Maximus, though ranked behind Andersen, was still one of four finalists and had not been excluded from negotiations at that time, said state officials.Nevertheless, the protest document provides insight into the likely grounds of the Maximus complaint if the company now decides to file a protest.Maximus alleged that Andersen Consulting should not have been allowed to compete for the contract because it conducted a call center study and information technology strategic plan that became part of the department's invitation to negotiate. According to Maximus, these documents were later incorporated into a feasibility study of the project conducted by New York-based KPMG. But Rob Berton, Andersen's managing partner for its East State Government Client Group, countered that government agencies often have the authority to decide whether preliminary work will have an effect on a company's right to compete for future work on the same project."Many states that proceed with business partners want someone who understands their situation from the beginning," said Berton. "They view this as a strong positive in working with them."