GRTA awarded no-bid contracts to McKinsey

By Maria Saporta and Dave Williams
Friday, August 28, 2009

The Georgia Regional Transportation Authority’s (GRTA) decision to award two contracts worth up to $4.5 million without competitive bidding is being questioned by several people in both the public and private sector.

The two sole-sourced contracts have been awarded to McKinsey & Co., a consulting firm, to advance Gov. Sonny Perdue’s IT3 initiative, which stands for Investing in Tomorrow’s Transportation Today.

The first contract for $2.5 million was awarded last year with McKinsey doing an in-depth analysis that would build a “business case” for transportation investments that would have the biggest economic impact. But McKinsey did not present a final report as part of that contract.

A few weeks ago, GRTA followed up that contract with another one of up to $2 million for McKinsey. The purpose of the second contract is to continue its analysis and help the state develop a statewide transportation plan by the end of the year.

Several close observers, however, question the process for awarding those two contracts.

“It’s very unusual to go for a $2.5 million sole-sourced planning study and then have that be followed by another $2 million sole-sourced planning study,” said Michael Meyer, director of the Georgia Transportation Institute and a Georgia Tech professor.

Before coming to Georgia, Meyer served as Massachusetts director of transportation planning for five years. If he had awarded $4.5 million for planning studies without a competitive bid, it “would raise eyebrows,” he said.

Catherine Ross, GRTA’s first director, said the process is different from what she practiced.

“When I was at GRTA, my staff worked very hard to develop RFPs for competitive bids,” she said. “You do better when the door is open for many to respond to requests for proposals.”

Several others also questioned the McKinsey contracts but were unwilling to talk on the record because their companies or agencies want to maintain good relations with GRTA and other state leaders.

But current GRTA Director Dick Anderson defended the McKinsey contracts. It made sense to award the second contract to McKinsey so it could complete the work of IT3 and take its analysis to a deeper level, Anderson said.

The real issue was when the first contract was awarded, he said.

“We certainly thought through whether it would be to our advantage to competitively bid out the contract,” he said. “We came to the conclusion that this was so unique and different an approach to apply business planning principles to transportation investment that having McKinsey and its world-class capabilities was to our advantage, and we chose not to bid it out to all the traditional transportation planning firms.”

The sole-sourced award also did not violate GRTA’s policies, Anderson added.

“Our policy allows for competitive bidding as well as sole-sourced arrangements,” Anderson said, adding that the contracts were endorsed by his board.

McKinsey’s readiness to begin work immediately after the GRTA board approved the first contract in June 2008 also was cited as a reason for the sole-sourced arrangement. Going through competitive bidding would have reduced the time to finish the work contemplated in the first contract by two to three months, Anderson wrote in a memo the following month.

John Sibley, former president of the Georgia Conservancy who has served on GRTA’s board since its inception, heralded McKinsey’s work.

“I thought the McKinsey IT3 study moved the analysis of the relationship between development patterns and transportation investments to a new level,” he said. “Personally, I’m happy to see them advance this analysis to the next step.”

Sibley said he voted for both contracts and that he can’t recall anybody on the board who shared serious concern about the process. As someone who has been involved in transportation, development and the environment for more than two decades, Sibley felt McKinsey brought a new perspective.

“McKinsey came at it from a different point of view by demonstrating the relationship between transportation and development patterns in a more compelling way than I had seen before,” he said.

Although McKinsey is better known for management and policy consulting rather than transportation planning, it was the pro-bono consultant for the Metro Atlanta Transportation Initiative more than a decade ago.

The Transportation Initiative’s recommendations included establishing GRTA, an idea that was implemented by former Gov. Roy Barnes.

But awarding two contracts worth a total of up to $4.5 million did raise concern about whether the state had gotten its money’s worth.

“It’s highly unusual to spend $2.5 million and not have a final report,” Meyer said. “Certainly in a normal process, they would do a competitive bid and say: ‘We want to get the best and the brightest for the most cost-effective price.’ ”

“Until I see the business case that they’ve developed, I’m not sure I understand why they deserve a [second] no-bid contract for the actual plan,” added Neill Herring, a lobbyist for the Georgia chapter of the Sierra Club.

But Anderson said that McKinsey’s work will lead to the state making the most sound investments in transportation.

“I strongly believe that having a bulletproof business case is what we can bring to the debate and what we need before we invest $90 billion to $145 billion over the next 20 years,” he said. “It is what every citizen should expect we would have if this was our own money.”

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

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