By Ryan Yousefi
By Chuck Strouse
By Terrence McCoy
By Terrence McCoy
By Terrence McCoy
By Michael E. Miller
By Kyle Munzenrieder
By Michael E. Miller
This past July County Manager Steve Shiver rejected the nearly unanimous recommendation of a special review committee and decided that an $8.8 million computer software contract should go to a company whose lobbyist is a long-time supporter of Miami-Dade Mayor Alex Penelas. The lobbyist, Rodney Barreto, also contributed to Shiver's political campaigns when he was mayor of Homestead and reportedly helped him secure the post of county manager.
Shiver's support for Oracle, the software giant represented by Barreto, also is coming under fire because of the method by which the manager sought commission approval for his selection. In a move that has angered several county commissioners, Shiver allegedly tried to hide the multimillion-dollar contract in a section of the July 24 commission agenda rarely scrutinized, since it typically contains a long list of bureaucratic housekeeping items voted on en masse without discussion.
The matter -- listed on the agenda as 6(N)3d Section 3, Item 3.6 -- included a memorandum from Shiver to the commission describing the item as a "contract modification." In effect the manager was asking commissioners for approval to modify Oracle's existing county contract by simply tacking on this new agreement.
The summary of the item, found on page two of the manager's memo, contained no mention of the amount of money involved. For that commissioners had to turn to page 26. And nowhere did the memo describe the true long-term value of the contract, which could be worth as much as $30 million.
New Times has learned that the manager and his staff were warned repeatedly by the county attorney's office that the contract could not be included in the commission agenda as a simple contract modification. It had to be presented to the commission as a bid waiver. The distinction is important. Contract modifications only require approval by a simple majority of the thirteen-member commission. Bid waivers are new contracts developed without competitive bidding. Because of past abuses and the potential for controversy, bid waivers frequently prompt questions from commissioners and require two-thirds approval for passage.
According to Randy Witt, the county's chief information officer, it was Shiver who personally overruled the recommendation of the review committee and selected Oracle. And it was Shiver who made the decision to place the item on the agenda as a contract modification, not a bid waiver. "The county attorney recommended that we do it as a separate contract and a bid waiver," explains Witt. "And we were marching along that line and then we took it up to the manager, and it was his decision to turn it into a contract modification." Witt, however, refuses to ascribe any sinister motive to the manager's action. Shiver himself did not return phone calls seeking comment.
New Times also has learned that the county attorney's office wasn't even aware the item was on the agenda until the morning of the July 24 commission meeting, the last before commissioners took their August recess and which traditionally includes one of the longest and most difficult agendas of the year. Assistant County Attorney Hugo Benitez was said to be furious when he discovered that his legal instructions had been ignored and the item wasn't presented as a bid waiver. "I know he was very upset," acknowledges Witt. "He thought somebody was trying to run a fast one on him." (Benitez declined comment.)
The attorney's anger only grew when he read the memo from the manager to the commission explaining why Shiver was recommending Oracle. Shiver noted that a committee had been formed "to research and recommend Enterprise Resource Planning (ERP) packages." The very next line of the memo stated, "The ERP selected was Oracle's Financial Software Suite."
Benitez knew that wasn't true. The review committee by a 9-1 vote had actually selected Oracle's rival, PeopleSoft. At best the manager's memo was misleading; at worst it was a deliberate attempt to deceive the commission. "The memo misrepresented the nature of what the manager was asking the commission to approve," says one senior county official. "And the question became: Are you trying to pull the wool over the commission's eyes to get the result you want?"
According to several knowledgeable sources, after Benitez read the manager's memo the morning of the commission meeting, he made a series of irate phone calls to county officials demanding an explanation. An emergency meeting was convened in Randy Witt's office on the eighteenth floor of county hall. The 11:00 a.m. meeting included Benitez, Witt, Shiver's executive assistant Tom David, Assistant County Manager George Burgess, and representatives from Witt's staff and the county's procurement department. Those who attended the meeting say Benitez continued his tirade and made it clear the item could not be presented to the commission in its current form.
A decision was made during that hastily called meeting to withdraw the item from the agenda and resubmit it later in the day as a bid waiver. As for the misleading nature of the manager's memo, Witt says he agreed to make an oral presentation to the commission and disclose the fact that the review committee had favored a different company.
It was nearly 9:00 p.m. when the new agenda item finally came up for discussion during the July 24 meeting. But by then the late addition of a bid waiver caused several commissioners to become suspicious. After 30 minutes of contentious debate, during which new questions were raised regarding possible violations of the state Sunshine Law, the item was deferred to the September 11 county commission meeting.
"I'm not comfortable right now," said commission chairwoman Gwen Margolis, who clearly was annoyed with the way the item was being handled. Her irritation, shared by several other commissioners, has further damaged Steve Shiver's already strained relations with the county commission. "This may be the deal that forces the commission to re-examine Shiver," says one commission aide. "It's clear the manager and his staff have been lying to us, and unfortunately this isn't the first time. I'm not sure what the commission is going to do."
The liabilities also are apparent for Mayor Alex Penelas. Since appointing the former Homestead mayor in January, Penelas has witnessed the new manager stumble into a series of controversies, including Shiver's decision to hire a long-time friend with a criminal record for a top county post, his failure to take a county-mandated drug test in a timely manner, and his firing of the well-regarded director of the county's communications department. More recently the mayor has had to sidestep inquiries regarding Shiver's role in the financial collapse of the City of Homestead.
Shiver's role in the Oracle contract, however, has the potential to create a far bigger problem for Penelas. It could resurrect concerns about the mayor's close ties to a handful of powerful lobbyists and allow his critics to credibly ask: Did Penelas hire Shiver so the manager could steer deals to the mayor's friends?
From an accounting standpoint, Miami-Dade County government has always been a mess. Each of the county's departments -- and there are more than 40 -- uses its own computer software to manage its finances. As a result there has never been a uniform way for the departments to share information.
Last year Merrett Stierheim, who was then county manager, decided it was critical to correct this problem. He wanted his staff to find an accounting-software system that could be used by all county departments. As the year came to a close and Stierheim was preparing to step down, he gave Randy Witt the task of determining which software would best accomplish the goal of integrated accounting.
A county employee for less than two years, Witt is a retired brigadier general with the U.S. Air Force. He was picked by Stierheim to become Miami-Dade County's first chief information officer (CIO), a senior position reporting directly to the manager.
Witt determined that the new accounting software, regardless of which system was selected, should initially be installed in two of the largest county departments: aviation and water and sewer. If it worked well there, its use could be expanded to the rest of the county bureaucracy. The first task, though, was to identify the appropriate software. Witt pulled together roughly a dozen representatives from various departments to study the issue. He included technical experts as well as the people who would actually be using the system.
From the outset Witt knew Oracle wanted the contract. The second-largest computer-software company in the world behind Microsoft, Oracle specializes in financial and accounting programs. Although it has been providing an array of services to Miami-Dade County for years, the company has its detractors. For example, some county departments now using Oracle complain that the firm isn't sufficiently responsive in fixing problems or providing training.
Witt and the members of his review committee decided to look beyond Oracle to other software companies and their products. One of the firms the committee heard good things about was PeopleSoft, based in the San Francisco Bay Area. Though not as large as Oracle, PeopleSoft was a serious player, as the committee knew. It boasts more than 8000 employees and 4500 customers worldwide. A publicly traded firm, PeopleSoft has been in operation since 1987 and last year recorded $1.7 billion in revenues.
In January, after eliminating other companies, the review committee asked PeopleSoft and Oracle to demonstrate their products. Over the course of several months, committee members met with representatives from both firms. PeopleSoft sent Michael Youngwirth, a regional sales manager who flew in from Tulsa, Oklahoma. Also appearing on behalf of PeopleSoft was Esteban Neely, president of eVerge Group, a consulting firm that provides training and technical assistance for PeopleSoft products. "It was a tremendous opportunity," recalls Neely. "We were very excited about presenting our product to the county."
Oracle, of course, deployed its own team, but the company didn't rely solely on salespeople. According to members of the review committee, Oracle's representatives repeatedly mentioned the name of their Miami lobbyist, Rodney Barreto. "They kept finding ways to work it into the conversation," recalls one expert who sat on the committee. "I thought it was idiotic. They were dealing with technical people on the committee. None of us cared about politics."
Neely and Youngwirth first heard Barreto's name from committee members, who warned them they could be in trouble. "We were hearing that Oracle had this big lobbyist," remembers Neely. "Committee members were saying that Oracle had hired this person, Rodney Barreto. I didn't really worry about it. Maybe I was naive, but I didn't think lobbyists were necessary. I've never had to work with them in the past whenever I made presentations to other groups around the country. Besides, the committee really seemed to like our product."
Neely was right about that. The review committee preferred PeopleSoft. From a technical standpoint, the members thought the company offered a better, more versatile product. PeopleSoft's software interacts with other computer programs more easily than Oracle's, and its overall package offered better training and customer service.
Next the committee solicited prices from the two companies. "This was difficult," Randy Witt admits. "It was hard getting an apples-to-apples comparison of the two products." Oracle, for instance, wanted to charge the county $2.8 million for the right to use its software system on 4000 computers. PeopleSoft was offering unlimited usage for $3.1 million. "We had to adjust all kinds of numbers," Witt says.
The committee faced another complicated issue. The county wanted any new accounting software to include a database application as well. Oracle's software system came with a database, but PeopleSoft's did not. PeopleSoft told the committee that several database programs, offered by a variety of companies, were compatible with its software. Eventually one could be selected to meet the county's needs. The cost for those databases varied widely, so PeopleSoft told the committee it didn't know what dollar figure to include in its pricing. Without consulting PeopleSoft, the committee decided to add to the company's proposal the cost of the most expensive database system on the market.
In comparing costs between PeopleSoft and Oracle, the county studied two sets of prices. The first limited the software system to just the aviation and the water and sewer departments. Under that arrangement the Oracle price was $5.5 million versus $6.3 million for PeopleSoft -- a difference of $800,000.
The second price comparison was based on the cost for the two departments plus the anticipated cost of extending the software system to all county departments. Under this scenario Oracle offered a price of $9.8 million. The committee estimated the PeopleSoft price to be $10.1 million -- a difference of $300,000.
In both comparisons the pricing was a "worst-case scenario" for PeopleSoft because the committee had tagged on the highest possible price for a database. Nevertheless in May the committee recommended PeopleSoft by a 9-1 vote.
During these deliberations PeopleSoft had no idea what was going on in Miami. After making their presentations and submitting their cost estimates, the company's representatives -- Michael Youngwirth and Esteban Neely -- returned home. They weren't informed that the committee had voted to recommend them, and they didn't know their figures had been altered to include a worst-case cost for a database program.
Witt presented the committee's findings to Steve Shiver, who had taken over as county manager on February 14. By June Shiver had made his decision. He was going with Oracle, citing price as the main factor. "I was mystified," says Neely. "I could not believe that after all we went through, and listening to the committee [during our presentation], that they would have selected Oracle."
Despite being bewildered, PeopleSoft had no intention of challenging the manager's decision. Instead Youngwirth and Neely asked for a chance to meet with the review committee in order to learn what things the group liked about their presentation and system and what things might be improved. Witt agreed, and the two men returned to Miami in early July.
Neely says the meeting was very strange. Although most of the committee members were there, Witt did all the talking. "You represented yourself well, and we like your product," Witt said, according to Neely. "But this just came down to price."
Youngwirth and Neely didn't argue. They thanked the committee members for their time and, as they prepared to leave, asked for any documents relating to the selection. Witt said they needed to submit a public-records request. Youngwirth wrote it out by hand, gave it to Witt, and then he and Neely left town. "As far as we were concerned, that was it," Neely recounts.
On July 17 Youngwirth received a fax at his Tulsa office. In response to the public-records request, Witt sent him an eleven-page document that included the committee's report on the review process. On the last page it stated, "CIO Financial Systems Working Group recommends PeopleSoft on functional and technical merit."
More confused than ever, Youngwirth and Neely began looking closely at the numbers. Their price had been miscalculated. The cost of the database, added by the committee without their knowledge, had increased their figure by nearly $1.3 million in each scenario. Had the committee added the cost of a less expensive database, PeopleSoft's overall price easily would have beaten Oracle's. "I was dumbstruck," Neely says. "How could the manager have just passed us over?"
Now they began to wonder if they had lost because of the one thing they didn't have -- a lobbyist. "I don't have anything against lobbyists," says Neely. "But as a company we have sales professionals. We know what we are doing. We were invited to compete, we presented our product, and we thought that would be good enough. But like I said before, I guess I'm naive."
Youngwirth and Neely learned the Oracle deal was going to be heard by the county commission on July 24. They had a decision to make: They could either accept the manager's recommendation or fight it. Neither hesitated. They were returning to Miami.
Rodney Barreto doesn't understand what all the fuss is about. "We were a million dollars cheaper than PeopleSoft," he says, exaggerating the figure by at least $200,000. "The manager made the right decision for the taxpayers of the county. Everything is price-driven in this town."
Barreto's lobbying firm includes two high-profile and influential partners: Brian May, former chief of staff for Alex Penelas, and Courtney Cunningham, a member of the Florida Elections Commission. Unlike other powerful lobbyists, though, Barreto works hard to remain out of sight. For example it is rare for him to speak publicly during county commission meetings. He prefers to have his discussions behind closed doors.
His career as a political operative began two decades ago, when he was working for Monty Trainer, the one-time political powerhouse who went to federal prison in 1989 on tax-evasion charges. Barreto made a small fortune in the Nineties on a half-dozen parking lots he operated near the Miami Arena, several of which were being run illegally and without the proper permits.
Capitalizing on his close friendship with Miami-Dade Mayor Steve Clark, Barreto expanded into lobbying and built that career with the help of fellow lobbyist Chris Korge and developer Sergio Pino. Miami Mayor Joe Carollo used to mockingly refer to Barreto, Korge, and Pino as "the three amigos." Barreto's fortunes skyrocketed, however, after he aligned himself with Alex Penelas. He became one of Penelas's biggest fundraisers and helped to bankroll his campaigns for county commission and then county mayor. Today Barreto represents a long list of clients at county hall, including AT&T Broadband, solid-waste behemoth BFI, AMEC Construction Management, and the county's airport advisor, Dade Aviation Consultants.
In recent years Barreto has expanded his influence. He helped raise money for Steve Shiver when Shiver ran for re-election as mayor of Homestead in 1999. Earlier this year the Miami Herald reported that many county hall insiders believed Barreto was partly responsible for Penelas appointing Shiver as county manager. Both Penelas and Barreto denied it, but the speculation was fueled when Shiver and Barreto were spotted together in a luxury suite during the Orange Bowl football game just a few days before Penelas announced Shiver as his choice. And New Times has learned that Barreto was part of a small team assembled by Penelas to privately lobby certain county commissioners on Shiver's behalf.
Barreto refuses to discuss his friendship with Shiver. "My relationship with Steve Shiver had nothing to do with him making the right decision," he says in reference to the software contract.
How many times has he spoken to Shiver about the Oracle contract? "I have no comment on that," he replies.
How many times has he spoken to Shiver's executive assistant Tom David? "I have no comment on that," he repeats.
And how many times has he spoken to Mayor Penelas? "I have no comment on that," he recites.
Owing to lax county procedures, there is no way to discover the answers to such questions, at least not with any certainty. Visitors to the 29th floor -- where the mayor, the manager, and their staffs all have offices -- are supposed to sign in and state who they are visiting and for what reason. In the six months since Shiver became county manager, Barreto has signed in a total of four times, according to records provided by the county. None of the visits was listed as being on behalf of Oracle.
The notion that Barreto has been on the 29th floor only four times in the past six months evokes laughter from several people who work there. "It seems to me I've seen him more than that," one county employee deadpans. It is not uncommon, according to these sources, for Barreto to be on the 29th floor several times in a week.
There also is no way of knowing how many times Barreto may have spoken to Shiver or the mayor by telephone, or met with them somewhere other than county hall.
Barreto will not disclose how much money he is being paid by Oracle or if any part of his fee is dependent upon the company winning the software contract. Indeed Barreto refuses to describe in any manner what actions he has taken on behalf of Oracle. But according to senior county officials involved in the contract process, Barreto's lobbying efforts for Oracle have been intense.
The accounting-software contract isn't the first instance in which Shiver may have favored a company represented by Barreto. Earlier this year Barreto represented AMEC Construction Management (formerly Morse Diesel) in its bid to oversee construction of Miami International Airport's south terminal. In an interview with an engineering trade magazine this past March, Shiver was quoted as saying he had decided to recommend AMEC for the contract even though the company's $50 million price tag was the highest offered. Shiver's statement caught many people by surprise, since the selection process had not formally been completed and there were concerns that AMEC had misrepresented itself as a local company.
Shiver subsequently denied making the statement and denied even speaking to the reporter. Both the reporter and the publication stood by their story. The airport's new aviation director, Angela Gittens, eventually assumed responsibility for the selection process and recommended to the commission that a different firm (which was asking just $24 million) be awarded the contract.
Michael Youngwirth and Esteban Neely knew so little about how the county commission operates that on July 24, the day the Oracle contract was to be heard, they arrived at the commission chambers at 8:00 a.m., more than an hour before the meeting would actually start. They weren't sure what to expect, so they sat and waited. And waited. And waited.
They were unaware of the heated discussions taking place that morning, the result of Assistant County Attorney Hugo Benitez having discovered the Oracle deal mysteriously on the agenda as a "contract modification." They couldn't even find the item on the agenda.
After waiting more than thirteen hours, Youngwirth and Neely finally saw the software contract come up for discussion. As expected Randy Witt explained to commissioners that the item was now a bid waiver, not a contract modification. In his presentation, however, Witt never told commissioners that his review committee had recommended PeopleSoft, despite his earlier agreement to do so. "The working group was very impressed with the PeopleSoft product," Witt said. "Not to say that we weren't impressed with Oracle as well." At one point he allowed that the committee "favored PeopleSoft," but he was never completely candid.
Witt's hedging may be understandable. According to several people close to him, he is under tremendous pressure from the manager's office and believes his job may be in jeopardy. Two weeks before the county commission meeting, Witt was informed he will no longer report directly to the county manager but instead will answer to the manager's assistant, Tom David. In addition the manager removed from Witt's responsibility a county department that previously had reported to him. Was the manager sending him a message? "The manager wanted to reorganize," Witt answers sheepishly.
At the commission meeting Commissioner Katy Sorenson, who had just discovered that the review committee actually recommended PeopleSoft, asked Witt why he favored Oracle if PeopleSoft had a better product. She wondered why Witt hadn't continued negotiating with PeopleSoft to see if they could match or beat Oracle's price.
Apparently unhappy with the direction Sorenson was taking the discussion, Shiver interrupted. He attempted to dismiss the notion that PeopleSoft was the committee's clear favorite. "The technical folks that looked at that," he said, "some of them were divided." But neither Witt nor Shiver disclosed that the actual vote for PeopleSoft was 9-1.
When Sorenson began asking questions about price, Shiver once again intervened. "Randy and I had several conversations about not being able to compare apples to apples with different scales and different pricing methods for the different companies," he explained. But neither Shiver nor Witt revealed to commissioners that PeopleSoft's price had been artificially inflated as a worst-case scenario.
The manager was hiding something else. On July 20 he had received a letter from PeopleSoft saying it was ready to reduce its price. The company noted that under the plan to install software in all county departments, Oracle was supposedly $300,000 cheaper than PeopleSoft. Since the county had great interest in that expanded plan, PeopleSoft offered to drop its price by $350,000, thereby beating Oracle's price.
One county official involved in the discussions says he grew concerned when he discovered that the manager was withholding the PeopleSoft letter from commissioners. "He just kept that to himself," says the official. "He kept that a secret. At the very least he should have disclosed it to the commission and let them decide if they wanted to keep the negotiations going."
Sorenson wasn't the only commissioner expressing skepticism. Barbara Carey-Shuler and Gwen Margolis both said the process appeared to be seriously flawed. The commission decided to postpone the item until their next meeting, September 11. "I don't think you were ready to bring this here today," Carey-Shuler chided Shiver.
Watching the commission meeting, Esteban Neely says, was an amazing experience. He did have a chance to make a few brief remarks to commissioners during the debate, but most seemed to ignore him.
With the protracted meeting finally over and the contract debate postponed, Youngwirth and Neely concluded they would need help to fight back effectively. And it wasn't just a matter of grabbing the attention of commissioners on the dais. Much earlier in the review process, for example, they had requested a meeting with the county manager but were rebuffed and told Shiver wouldn't see them. On the other hand, the manager did sit down with Oracle representatives in a meeting arranged and attended by Rodney Barreto.
"We decided to hire our own lobbyists," Neely explains. They aren't taking any chances this time. He says they plan to assemble a high-powered team that will include Armando Gutierrez, Eston "Dusty" Melton, former county manager Sergio Pereira, and Esther Monzon-Aguirre. "I want this deal," says Neely, "and I don't want to see all the effort put in by my company and PeopleSoft just go by the wayside. We won this contract on the merits. We should be awarded this contract."
Shiver seems unfazed by the controversy. On August 17 a meeting was held in his office to discuss how to proceed. Among those attending were Shiver, Tom David, Randy Witt, and Ted Lucas, head of the procurement department. Both Witt and Lucas told Shiver they believed the process should start over and the search for a software vendor should be open to all companies expressing interest. Shiver rejected that idea.
He was sticking with Oracle, he declared.
Shiver's insistence puzzles some observers. "I'm surprised," says Gwen Margolis, the commission chairwoman. "I don't know what he is thinking." Margolis concedes she is still trying to sort through all the problems associated with the review process. She also concedes she had no idea the review committee had recommended PeopleSoft over Oracle. "I've never seen their memo," she says. "It wasn't included in any of the material we were given."
She didn't realize the county attorney's office had been blindsided by the inclusion of the Oracle agreement as a contract modification rather than a bid waiver. Nor was she aware that PeopleSoft had offered to drop its price below Oracle's. "It's incredible," she adds. "Nobody has said anything to me about any of this."
Margolis also is concerned that the negotiations over price may have violated state Sunshine Laws as well as county rules that require such sessions be tape-recorded. "It all should have been in the Sunshine," she admonishes. She has asked the county attorney's office to issue a report on the matter. "I was in shock as all of this came out," she says, recalling her reaction at the July 24 commission meeting. "I couldn't believe what I was listening to."
Despite being troubled by Steve Shiver's conduct, Margolis declines to comment on whether the software controversy has shaken her confidence in the manager. "I'd rather not discuss it," she says.