New York scrutinizes bid controversy

Winning the bid to build the most expensive public-safety communications system in the U.S. could be a huge boon for M/A-COM, but myriad political, financial and technical hurdles still must be cleared before the largest deal in the company’s history is finalized.

In other words, the $1 billion or so the state of New York tentatively has agreed to pay M/A-COM is not yet money in the bank — literally or figuratively.

M/A-COM spokeswoman Victoria Dillon said her company anticipates discussions during the middle of the summer to negotiate the details but does not know when a deal might be approved and signed. Currently, the contract remains in limbo as an oversight committee for the New York State Assembly reviews the bids of M/A-COM and Motorola to determine what the state needs and can afford in a very tight and controversial budget year.

“This is the largest public-safety job in the U.S., so you’re going to get a lot of scrutiny,” Dillon said. “The state assembly wants to make sure it’s right for the people of New York. You can’t blame them for that.”

One key reason for the legislative oversight is that M/A-COM and Motorola offered widely disparate bids on the statewide wireless network (SWN) for public safety. The bids have not been made public, but Motorola confirmed it estimated the cost of the system would be more than $3 billion. Meanwhile, multiple published reports indicated the M/A-COM bid was slightly more than $1 billion — a figure M/A-COM officials did not dispute.

“There’s something wrong with this picture,” said John McFadden, Motorola’s vice president of sales for the northern division of its North America Group. “There shouldn’t be a massive gap in these prices.”

Indeed, M/A-COM and Motorola — the first vendors to deploy Project 25-compliant systems — often find themselves as bidding competitors, but their proposals typically are in the same price range, Motorola spokeswoman Pat Sturmon said.

“If we had lost by 10% or 15%, we would have packed our bags and moved on,” she said.

But that certainly has not been the case, as both Motorola and M/A-COM have made multiple trips to Albany to talk with state officials since the award to M/A-COM was announced this spring.

The reasons for the large discrepancy are unclear at the moment, in part because the bids have not been made public. McFadden said Motorola questioned many specifications contained in the state’s request for proposal (RFP) and was forced to “bid on a lot of things that didn’t make sense” that caused Motorola’s bid price to skyrocket.

In particular, McFadden said the specifications call for radio towers to be extremely sturdy due to homeland security concerns and to be accessible by large propane trucks to ensure power redundancy. McFadden said that meant most of the existing towers in the New York system would need to be reconstructed and new roads would need to be built to outlying towers.

“This was probably the prime cost driver, not the radio portion,” McFadden said. “These are construction requirements, not technology requirements.”

And they are requirements Motorola believes are virtually unavoidable, which is why so many of its officials are surprised that M/A-COM could claim to complete the project for about 70% less.

Representatives for both M/A-COM and Motorola described the specifications for the New York system as “stringent,” noting the requirements of at least 95% coverage throughout the state and 97% coverage on roadways. Because the bids are not yet public, the differences between the two proposals are not known. However, Motorola said M/A-COM acknowledged in testimony before legislators that its plan included only four new towers in the environmentally sensitive Adirondacks.

In contrast, McFadden said Motorola’s bid called for a tremendous amount of proposed expenditures in the mountainous region to meet the 95% coverage requirement.

“The best we could come up with is 62% [coverage] with the existing sites and four new towers,” McFadden said. “I don’t see how they could [meet the coverage specifications] — the laws of physics don’t change.”

Citing the state’s desire not to detail the contents of the bids, M/A-COM’s Dillon generally declined to speculate why her company’s bid was so much lower than its chief competitor, Motorola. However, Dillon offered one possible hint, noting that M/A-COM’s plan included several pole-mounted sites, which don’t incur the significant construction-intensive expenses of regular tower sites.

“I suspect we were looking at things in a different way,” she said. “We put together the best solution that we could, then we proceeded to price the solution.”

Despite significantly undercutting Motorola’s bid price, the roughly $1 billion price tag M/A-COM put on its solution is still more than double the amount of money state officials had budgeted for the project. Complicating matters even further is the fact that the source of the budgeted funds — as well as the entire New York state budget — is being contested.

Assemblyman David Koon said legislators were supposed to approve a budget two months ago, but controversies regarding educational spending and other items mean no such approval is imminent — in fact, “we don’t have anything scheduled” in terms of budget negotiations, he said.

Meanwhile, Koon said he opposes the funding source for the statewide wireless project. According to Koon, the bulk of the $400 million to $500 million currently earmarked for the system is money collected from commercial wireless consumers to fund upgrades to public-safety answering points (PSAPs) to bring them into compliance with the Federal Communications Commission’s wireless enhanced 911 requirements. Koon has vehemently opposed diverting these funds for uses other than E911 upgrades, especially a recent purchase of new uniforms for public-safety officers. Federal legislation has been proposed to prevent such uses of the wireless surcharge (see story on page 14).

Koon said a statewide wireless system for public safety is “a good idea,” but he does not want E911 upgrades sacrificed in the process.

“That’s been my problem with it all along,” he said. “I realize the need for public-safety people to be able to communicate across the state, but we need to be able to protect our citizens with 911.”

Koon said he and other state lawmakers are wary of M/A-COM, describing the IP-based vendor as “kind of an unproven company” that has been the subject of some criticism in Pennsylvania, where it won the contract for a statewide wireless system for public safety but has not completed the project as scheduled and has been accused of going over budget.

However, Pennsylvania state officials have said speculation claiming rampant cost overruns is erroneous and have attributed most of the delays to last summer’s bankruptcy filed by Rohn Industries, the contractor in charge of tower construction for the project. Otherwise, the project has been successful, Dillon said.

“The fact of the matter is, the system’s up, and it’s working,” Dillon said. “Where we have access to the sites, we have met the requirements.”

Even if all the financial and political hurdles are cleared, the New York system faces spectral challenges. The RFP places a great deal of emphasis on utilizing 700 MHz spectrum encumbered by broadcasters that are not required to abandon the airwaves until the transition to digital television is virtually complete. Despite recent progress by the FCC on this front, broadcasters are not expected to release the airwaves until at least 2009.

In the interim, the statewide system would use 800 MHz spectrum, but there are not enough frequencies available in that band to meet the state’s coverage requirements, according to McFadden.

“The state says they have lots of channels, but the channels aren’t where the people are,” McFadden said. “To have channels where there’s no population base doesn’t do much good.”

Channels licensed to New York state in the southern region potentially usable for SWN as of 5/14/04

Digital trunking frequencies by county