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Thursday, June 19, 2014 12:01 am

Lesson of the city’s NAPA contract

For two years the Springfield city council worked hand in hand with Mayor Mike Houston and budget director William McCarty to consolidate four city maintenance garages – police, fire, public works and CWLP – into one.

But this cooperation started to break down on March 4, when the Houston administration filed a peculiar ordinance to give a lucrative no-bid exclusive $3.75 million contract to Genuine Auto Parts, a.k.a. “NAPA.” It included the following terms:

  • a 10 percent markup profit to NAPA on sales;
  • reimbursement to NAPA for all operational costs including labor for running the privatized parts shop within the city garage;
  • agreement to allow NAPA to immediately assign its lucrative contract to another entity – privately owned Motor Parts & Equipment Corp based in Rockford, which owns 28 NAPA affiliated retail stores, including two in Springfield.

Most significantly, the administration claimed the NAPA contract was exempt from competitive bidding. Our city code requires competitive bidding for all purchases of goods and services above $25,000, unless an exception applies. For NAPA, the administration was claiming an exception based on a joint purchasing agreement with the State of Minnesota that aldermen had never seen before and, as it turned out, was unauthorized.

Council members immediately started asking questions, the media became curious and city automotive parts suppliers began appearing at city council to protest.

The NAPA ordinance and contract contained several legal flaws. Specifically, our city code does not authorize joint purchasing with the State of Minnesota, as this ordinance did. Second, McCarty was rewriting the terms of the Minnesota NAPA joint purchasing contract. This is impermissible. If you start modifying the joint pricing and terms, the contract departs from the earlier competitive bidding agreement, and so no longer qualifies for exception.

On April 8, after several weeks of debate, city attorney Todd Greenburg admitted at the committee of the whole meeting that he had never closely reviewed the ordinance. A week later, on April 15 at the full council meeting, Greenburg conceded that our city code did not authorize the NAPA contract. But Greenburg also said that the city council had the authority to ignore its own code and pass the ordinance anyway on the theory that later ordinances overrule earlier ordinances. Mayor Houston then hastily terminated debate that same night. Under pressure, the council passed the NAPA ordinance. I voted “present” because of all the issues, and aldermen Tim Griffin and Gail Simpson voted “no.”

The next day I requested clarification from Greenburg regarding his legal opinions. After receiving Greenburg’s answers two weeks later, Alderman Frank Edwards started raising hell because of what he and others by then viewed as misleading premises and explanations prior to the vote. Meanwhile, a FOIA answer confirmed that even the State of Illinois did not have a joint purchasing agreement with Minnesota for NAPA parts. That prompted Mayor Houston to ask the council to reaffirm the NAPA contract ordinance with a vote. He wrote on May 13 that he would rebid the automotive parts deal if reaffirmation failed.

But on June 5, having failed to get reaffirmation from the council, Houston broke his word and said he was going forward with the NAPA deal regardless of the council.

So what is the lesson? Competition for government contracts generally yields reduced costs for taxpayers and promotes fairness when everyone gets a chance for city business. Although the Houston administration had a chance to promote competition in government procurement, it instead went the other way.
 
Joe McMenamin, alderman for Ward 7, is a tax attorney with more than 35 years of public and private law practice. He also served 30 years with the Illinois Army National Guard, advising senior commanders in Illinois, Afghanistan, Uzbekistan, Iceland and Italy.

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