UNC Greensboro Caught Violating State Bidding Procedures

Associate Vice Chancellor for Facilities violated bidding procedures to award the contract to a preferred vendor

July 15, 2007

GUILFORD COUNTY NC NEWS -- North Carolina's very own untouchables, the Office of the State Auditor, received a complaint concerning the process for contractor selection for the guaranteed energy savings performance contract at the University of North Carolina at Greensboro. After thorough investigation, the State Auditor contends that the Associate Vice Chancellor for Facilities, Davis B. Lumpkin, B.S.E.E., corrupted the contractor selection process through personal association and violation of the contract's "request for proposals" conditions. Even more disturbing are the University Evaluation Committee's actions in regards to the Associate Vice Chancellor requests which clouded the transparency of the committee's purpose. UNC Greensboro is a State governmental unit. Therefore, it is bound by North Carolina's rules of Open Government and to maintain transparency in its day to day operations.

As part of North Carolina General Statues Chapter 143-64.17A, "Solicitation of guaranteed energy savings contracts." A governmental unit shall issue a "request for proposals" before entering into the contract. Guaranteed energy savings performance contracts provide energy savings through building renovations and upgrades with the costs of the project being recovered through energy cost savings. The Project for energy-related capital improvements is financed at no net cost to the initiating agency, in this case UNC Greensboro. The initiating agency contracts with an energy service company, called an "ESCO" which guarantees savings will be achieved to cover all project costs by a future date.

On October 13, 2004, in compliance with North Carolina General Statute 143-64.17A(a), the University posted a request for proposal and accepted bids from fourteen ESCOs that are pre-certified by the State Energy Office.

On December 9, 2004, The University had received a sealed "Preliminary Technical and Cost Proposal" from eight interested companies. UNC Greensboro formed a committee including employees from the Facilities Department and representatives from each of the four buildings to be upgraded. The committee evaluated the proposals and performed reference checks on the bidding companies. Representatives from the State Energy Office and the University of North Carolina General Administration both attended evaluation team meetings to observe and provide advice.

On January 27, 2005, the evaluation committee selected three companies to move forward to the oral interview process as stipulated by Section I-6(5) of the request for proposals posted by UNC Greensboro. The Section I-6(5) is stated below:

"select (shortlist) up to three (3) of the ESCO's on the basis of rankings of the written proposal and the client references."

Six of the seven committee members voted for their top three companies with the Associate Vice Chancellor Lumpkin abstaining. The following companies received the most votes to continue in the selection process.

• Noresco five votes
• Ameresco, Inc. four votes
• Sempra Energy Solutions three votes.

The following day the primary contact for the contract, the University's Energy Engineer, notified all eight companies in writing of the three companies selected for oral interviews.

Up until this point, the committee selection process had adhered to the North Carolina General Statues Chapter 143-64.17A, "Solicitation of guaranteed energy savings contracts" as well as maintained transparency in government. Unfortunately, on January 31, 2005, the Associate Vice Chancellor contacted the Energy Engineer by telephone and left a voice-mail message requesting that Trane Comfort Solutions, Inc. be added to the shortlist for oral interviews "for very obvious reasons."

During a meeting the next day, the Associate Vice Chancellor told the Energy Engineer to increase the shortlist to five companies by adding Trane and Alliant Energy/Cogenex because each received two votes from the committee. Complying, the Energy Engineer sent a letter to the five companies on February 4, 2005, informing them of the expanded shortlist at the request of Associate Vice Chancellor Lumpkin.

Now, according to North Carolina General Statues Chapter 143-64.17A, the minium number of proposals must be two for a guaranteed energy savings contract to be awarded, that the University had. But, UNC Greensboro had stipulated in the original request for proposals to accept up to three, not five companies. Furthermore, these actions were transpiring after the committee had voted to accept three of the eight companies during the public opening. Therefore, not only did the committee violating section I-6(5) of the request for proposal, but also was evading the transparency of the government unit's contractor selections process.

As part of North Carolina General Statues Chapter 143-64.17A, the Statue clearly states in section c -1:

" In the case of a State governmental unit, proposals received pursuant to this section shall be opened by a member or an employee of the State governmental unit at a public opening and the contents of the proposals shall be announced at this opening."

This requirement in the State Statue is obviously included to ensure transparency of the selection process. Furthermore, in section (d) of the statue states that governmental unit will maintain "Substantial conformity with the specifications and other conditions set forth in the request for proposals," which the Committee did not when adding the two other companies to the shortlist.

Noresco, Ameresco, Inc., and Sempra Energy Solutions questioned the additions. Quoting directly from the UNC Greenboro State Audit:

[The three ESCO's originally selected responded with letters questioning this expansion, the fairness of the evaluation process, and the potential violation of the RFP. While acknowledging the RFP condition allowing "up to three" finalists, the University's legal counsel concluded "we do not believe the addition of two other companies to be interviewed constitutes a material deviation sufficient to bring the process into question." The legal counsel disputed the additions provided any company an "unfair advantage."]

Associate Vice Chancellor Lumpkin said he wanted Trane added to the shortlist because he believed they presented one of the best proposals, and he questioned the ability of the building representatives on the committee to evaluate the technical proposals. Interestingly, the State Auditor's review indicates the only two committee members that selected Trane for addition to the shortlist were building representatives.

By March 3, 2005, the evaluation committee had expanded to eight representatives, the two additional members were Facilities Department personnel. The five remaining companies gave their oral presentations. Afterwards, the committee discussed the results, and by secret ballot, selected Noresco over Trane by two votes. An action item was sent to the University's Board of Trustees for approval on April 7, 2005. The action item requested Noresco be presented the contract for UNC Greensboro energy savings building renovations and upgrades.

Meanwhile, the Associate Vice Chancellor Lumpkin unsatisfied with the voting result, requested another evaluation meeting to reverse the committee's decision. According to an e-mail from the Physical Plant Director, the Associate Vice Chancellor called the meeting "to try to convince us to use Trane." On April 4, 2005, the committee reconvened. According to the State Auditor, "The Associate Vice Chancellor told the committee he contacted the North Carolina Department of Administration, State Construction Office who recommended the North Carolina Office of State Budget and Management (State Budget) review the proposals from a financial perspective." Furthermore, the Auditor writes, "The Associate Vice Chancellor said State Budget recommended Trane and that the University's Chancellor supported that recommendation."

The evaluation committee accepted the word of the Associate Vice Chancellor, that the Office of State Budget and Management had recommended Trane. The committee changed its recommendation to use Trane. On May 12, 2005, the University's Board of Trustees presented Trane as the winning bidder to the University of North Carolina's Board of Governors for final approval. Who approved Trane as the ESCO contractor for the guaranteed energy savings performance contract at the University of North Carolina at Greensboro.

When questioned by the Auditors, the State Budget Office representative said he did not recommend selection of any company and his analysis was based only on financial aspects without considering the technical abilities of the companies. The recommendation to use Trane was not voted upon by the evaluation committee, and in Auditors interviews, all committee members indicated financial information was only one factor of many considered. Moreover, some committee members said the Associate Vice Chancellor told them he was only attending meetings to observe and was not a voting member.

The Office of the State Auditor found the Associate Vice Chancellor for Facilities, Davis B. Lumpkin, is a personal friend of the owner of the local Trane Comfort Solutions, the authorized company winner of the guaranteed energy savings performance contract vendor. Several committee members admitted they were aware of the friendship and expressed the relationship as a potential reason for the change of the final selection from Noresco to Trane.

The Auditor notes: "The University adopted a conflict of interest policy in November 1993. The policy notes that a conflict of interest may arise when "personal considerations may compromise, or have the appearance of compromising, an employee's professional objectivity in meeting University duties or responsibilities." Further, the policy requires "employees must avoid conflicts of interest that have the potential&to compromise objectivity in carrying out University responsibilities." However, the University's policy does not directly address potential conflicts based on personal friendship; rather, only immediate family relationships are specified in the policy."

Therefore, the State Auditor rejects the University's legal counsel conclusion with the following statement: [The RFP for this contract clearly indicated the shortlist should only include "up to three" companies. The Associate Vice Chancellor for Facilities circumvented this requirement by adding two companies to the shortlist thereby violating the terms and conditions of the RFP and undermining the integrity of the selection process.] In addition, " In view of the violation of the RFP terms and conditions to add Trane (along with another company) to the shortlist and the personal friendship between the Associate Vice Chancellor and the local Trane owner, we believe overriding the evaluation committee's recommendations for the ESCO to perform the project created, at a minimum, the appearance of a conflict of interest."

In conclusion, companies need to fully understand the meaning of "Open Government" and transparency when competing for government contracts. The relationship between the Associate Vice Chancellor and the local Trane owner clearly undermined the integrity of the selection process for the guaranteed energy savings performance contract at UNC Greensboro in my mind. Tragically, a division of a good corporation, American Standards Companies, the Trane Company's reputation will be tarnished due to the negligence of just one of its sales office.

References for this Article:

University of North Carolina at Greensboro Investigative Report

NC GENERAL STATUE § 143-64.17A. Solicitation of guaranteed energy savings contracts