A track record of success
State bought $24 million in routers with contract typically used for routine purchases
By Eric Eyre, The Charleston Gazette
CHARLESTON, W.Va. -- West Virginia bought more than 1,000 Internet routers for $24 million under a contract that state agencies typically use for routine and repetitive purchases.
The $24 million router purchase was 480 times higher than the average transaction on the 2007 statewide contract, and 60 times larger than the next highest purchase, according to a state Auditor's report generated at the Gazette's request.
West Virginia state agencies used the "Internet Voice Protocol Communications" contract to buy a combined $26.6 million in equipment -- and $24 million of that total went for a single purchase of 1,064 Cisco routers, according to invoices submitted to the Auditor's office.
West Virginia law specifies that state agencies use such contracts for "commodities that are needed on a repetitive basis...."
The U.S. Department of Commerce's Inspector General and West Virginia Legislative Auditor's Office are reviewing the state's router purchase.
Gale Given, West Virginia's chief technology officer, said last week that the state's decision to use the contract for the $24 million purchase was appropriate. Given also disputed the Auditor's report, saying it was incomplete.
West Virginia tapped federal stimulus funds to buy the devices two years ago. A team of former and current state officials authorized the router purchase, and the state Office of Technology signed off on the transaction.
State Homeland Security Director Jimmy Gianato also has defended the router purchase, saying the state followed "normal procedures for procuring such equipment," according to a letter sent to the Legislative Auditor last week.
In 2010, West Virginia received a $126.3 million federal stimulus grant to bring high-speed fiber-optic cable to 1,064 "community anchor institutions" -- schools, libraries, state agencies, 911 centers, county courthouses, health-care clinics and other public facilities. The state used $24 million from the grant to purchase the routers.
Given said state officials disclosed their plans to use existing state contracts for the project in the state's federal grant application. The application stated, "This project is 'shovel-ready' ... utilizing ratified contractual documents...."
A state "broadband implementation team" -- made up of high-ranking state officials -- is overseeing the $126.3 million broadband expansion project.
"It was clear in the application that the team planned to utilize existing state contracts," Given said in an email. "The purchase fell within state guidelines."
Formal bid process bypassed
The state executed the statewide contract in 2007, after issuing a "request for quotation," which invited select vendors to bid on the right to sell communications equipment to the state.
By using that contract, state officials bypassed the state's formal and comprehensive bidding process.
Instead, the state Office of Technology used a "secondary bid process," soliciting router bids on the agency's online "bulletin board." The request was never publicly advertised, and the state Purchasing Division and Department of Administration never reviewed the bids.
Given said the secondary bid process doesn't require approval from those agencies. "There was no need to get any special permission," she said.
The 2007 communications equipment contract doesn't specify a maximum-dollar purchase limit, but the contract doesn't appear to be designed for multimillion-dollar transactions.
Under the 2007 contract, state agencies spent $53,600 per purchase on average during the past five years -- excluding the $24 million router transaction, according to state Auditor's records.
The next highest invoice totaled $436,327 -- for Cisco telephone equipment distributed to 23 state agencies. The smallest purchase on the 2007 contract was for $1,500.
Last week, the state Auditor's Office ran a "vendor report" of state agency spending under the communications equipment contract in response to the Gazette's request. The Office of Technology, which approved the $24 million router purchase, rejected the newspaper's request for the information.
On Friday, Given asserted that the Auditor's report was incomplete, and that the average purchase amount was likely higher than $53,000.
Given said she had found two transactions under the contract that exceeded $436,327 -- Department of Health and Human Resources equipment purchases of $528,605 million and $1.08 million. The Auditor's report did not include those purchases.
Over the weekend, Given provided the Gazette with copies of bid documents and purchase orders for the transactions.
"I know the project was completed," Given said.
With those two transactions included, the state's $24 million router purchase would have been 345 times higher than the average purchase and 22 times higher than the next largest transaction under the 2007 contract.
Last year, a similar statewide communications equipment contract replaced the 2007 contract. The Auditor's report provided to the Gazette did not include purchases made on the latest contract.
Verizon got 98 percent of state's business
In July 2010, only two vendors -- Verizon Network Integration and Hebron, Ky.-based Pomeroy -- bid on the routers under the statewide contract. Verizon was the low bidder and sold the Cisco routers to the state.
The state paid Verizon $24 million for the routers in 10 installments, records show.
Verizon also won an overwhelming amount of the state's business under the 2007 contract -- 46 of 59 total purchases, or all but about $300,000 of the $26.6 million spent, according to invoices in the Auditor's report. Pomeroy followed with 11 successful bids ($286,038), while Alpha Technologies of Scott Depot won two bids for equipment ($8,312) during the past five years.
"An award is made to the lowest responsible bidder meeting specifications, pursuant to the West Virginia purchasing division's handbook," Given said.
The Cisco 3945 series routers were designed to serve a minimum of 500 users, and up to tens of thousands of users. But the state has installed the devices in some public facilities with only a few Internet connections. Seventy percent of the routers wound up in schools and libraries.
The state went ahead with the purchase, even though state technology office director John Dunlap warned the devices "may be grossly oversized" for some facilities, according to an email obtained by the Gazette.
Internet routers funnel data, such as email and websites, from one computer network to another.
Gianato has said that the Cisco routers are the appropriate size for all public facilities that have received the devices.
Auditors from the federal inspector general's office spent last week in Charleston, sifting through records and inspecting routers at various sites in Kanawha County.