N.Y. nixes statewide contract
A strained relationship between the state of New York and Tyco Electronics Wireless Systems (formerly M/A-COM) reached a breaking point last month. The state terminated its contract with the vendor, which quickly expressed its intent to pursue litigation to resolve the dispute regarding the $2 billion statewide wireless network (SWN) contract.
Such an outcome was not a surprise to most industry observers, as the relationship between Tyco and the New York Office for Technology (OFT) had been deteriorating for months. Less than a year ago, state officials applauded the voice-quality figures registered on the initial buildout phase of the project — covering Erie and Chautauqua counties — but the state declared the system “unacceptable for public-safety use” when it terminated the contract on Jan. 15.
Over 10 months, Tyco three times declared the initial buildout phase as being ready for testing, but the network failed state testing each time. Results of the last tests conducted in November revealed that only four of the 19 deficiencies noted in the state’s August letter of default to Tyco had been remedied.
“Per the terms of the contract, we have given M/A-COM every opportunity to remediate existing deficiencies,” New York CIO Melodie Mayberry-Stewart said in a statement. “However, the state’s testing concluded M/A-COM is unable to deliver a system that meets the needs of New York State’s first responders as stated in the contract.”
In addition to nixing the contract, the state of New York demanded that it be paid from Tyco’s $50 million letter of credit — one that must be replenished, up to $100 million — to cover the costs the state had incurred while pursuing the vendor’s SWN design. Although the state has not paid any money to Tyco, it had spent more than $54 million through 2008 on internal costs associated with the network deployment, New York OFT spokeswoman Angela Liotta said.
On Jan. 16, Tyco submitted a notice of its intent to file legal action against the state, claiming the deficiencies cited by the state “were not, in fact, deficiencies at all” and would not have been grounds for terminating the contract, if they were true. In its notice, Tyco attorneys noted that any alleged deficiencies did not endanger users and did “not threaten the ongoing operations” of the network because the network was not operational.
In its notice, Tyco claims that the New York OFT “repeatedly hindered” the vendor’s performance and that the “pretextual purpose” in issuing the August letter of default was to terminate the $2 billion contract and to get money out of Tyco’s letter of credit at a time when the state faces massive budget deficits.
In a separate document sent to the state on Jan. 9 — six days before the contract was terminated — Tyco attorneys detailed that the company made 295 comments regarding alleged flaws in the state’s draft procedures to be used for the November testing. These comments were “ignored substantially” in the final procedures, according to Tyco’s notice.
But Tyco only was able to make this assessment after a company official had signed an acknowledgement of “receipt and approval” of the final procedures. This “ultimatum” forced the company to choose between approving the procedures without seeing them or not seeing the procedures prior to the start of testing the following business day, according to the notice.
Later, the state informed Tyco that its representatives could not be on site during the November testing — a decision that “was not only contrary to standard industry practice but was also detrimental to the success of the tests and the transparency of the process.”
Mobile wireless consultant Andrew Seybold — who counts Tyco as a client, although he had not done any work on the New York project — said it is normal for large systems to have glitches in the early stages of deployment, but the vendor and agency typically work together to resolve them. However, the relationship had become decidedly adversarial in recent months, he said.
“When you have a bid like this, in my mind, it really becomes a partnership between the vendor and the contracting agency,” Seybold said. “And it’s obvious to me that there is no partnership in this deal.”
Charles Brennan, deputy secretary of Pennsylvania’s public-safety radio service, which is a longtime customer of Tyco, echoed this sentiment.
“If you ever get to the point where you have to go back to the contract and say, ‘This line says you have to do this,’ then you’re in real trouble,” Brennan said.
Brennan noted that his state has been building a statewide radio system using Tyco’s OpenSky technology — the same platform that was being used in the state of New York — since 2001 and that the vendor has done “endless favors” for the state as the scope of the project has changed and that the system is performing well in Pennsylvania.
While Pennsylvania’s relationship with Tyco generally has been cooperative, Brennan said his discussions with New York officials indicated that the state viewed issues such as site acquisition as solely a problem for the vendor, not the vendor and the state.
Under the contract, New York did not have to start paying Tyco until it accepted the initial buildout. Many sources close to the situation claim this arrangement meant the state was never invested in the project, so it was easier for officials to see a way to back out of it.
Given the state of the economy and the financial issues facing LMR stalwarts like Tyco and Motorola, many industry observers question whether vendors will be in a position to finance large projects in the future. If not, that could be problematic for cash-strapped agencies needing upgraded communications, said Tom Sorley, chairman of the National Public-Safety Telecommunications Council (NPSTC) technology committee.
“I think it could be an issue, because I think some agencies are dependent on being able to absorb the cost of building their systems as an operational expense rather than as a capital expense, especially in today’s economy,” Sorley said.
