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Bidder files legal action challenging District procurement practices

The District is accused of ignoring its own procedures, as well as state and local bidding requirements.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

In a dispute over a lucrative contract for principal coaching, a bidder has accused the District of ignoring its procurement procedures, as well as state and local bidding requirements.

The company has filed a complaint in the Pennsylvania Court of Common Pleas demanding the District and school board agree to follow their own contracting procedure in the future to avoid undermining public confidence in the integrity of the process.

In response, according to an email sent by Deputy General Counsel Miles Shore to the attorney for the complainant, the District is preparing to argue that it has no obligation to follow state law or enter into competitive bidding when it awards contracts for professional services, despite promising to do so in its procedures sent to bidders.

The bidder, Joseph Merlino and his 21st Century Partnership for STEM Education, has also formally requested that the U.S. Department of Education investigate the matter, alleging that the District is out of compliance with federal bidding regulations that apply to contracts paid for with federal money. The contract in question was paid for, in part, by Title II funds – federal grants for teacher and principal development.

Merlino is a longtime fixture on the Philadelphia education scene, specializing in math and science education consulting. This would have been his firm’s first foray into principal coaching.

Although the District does not comment on pending litigation, spokesman Lee Whack did say that “the School District of Philadelphia has a fair and compliant procurement process.”

An attorney who is an expert in public contracting said that although state law gives government agencies leeway in bidding out contracts for professional services, the District’s response represents outdated practices.

“It’s really a throwback to the dark ages of public competitive bidding practices,” said Mark Zecca, who spent 20 years in the city’s law department, including work on contracting practices. He said that the trend nationwide is toward transparent competitive bids on contracts for professional services.

Clash of philosophies

Underlying this dispute is a concern over long-term outsourcing of this type of work, as well as a clash of philosophies over the best way to train teachers and principals in leadership. This clash pits those favoring more traditional means against others promoting a more “disruptive” approach that has been advocated by major national education players, including the Gates and Walton foundations, and the groups they fund, such as the New Teacher Project, which was awarded the contract.

Opponents of the disruptive approach found more evidence for their position this month, when a RAND Corp. report found that the Gates Foundation’s partnerships for teacher coaching had no effect on students’ academic outcomes over six years, compared to districts that used more traditional approaches. The total cost of the Gates initiatives was $575 million, with well over half of those costs borne by the school districts: Pittsburgh, Memphis, and Hillsborough, Florida.

The New Teacher Project and Teach for America were two of the three companies contracted to do this work in Memphis. Tequilla Banks was employed by the Memphis school district early in that initiative to study and evaluate how best to spend the Gates money. Banks is now an executive vice president at the New Teacher Project.

In a complaint sent to the District as a prelude to his court action, Merlino noted that the District’s deputy in the department that selected the New Teacher Project, out of nine who submitted bids, was on a two-year fellowship with School Systems Leaders, part of an informal network of organizations that grew out of Teach for America and includes the New Teacher Project. School Systems Leaders seeks to place Teach for America alumni in high-level administrative positions within public school districts.

The three-year contract with the New Teacher Project was first brought before the SRC on Feb. 15 for $4 million, but it was withdrawn and resubmitted on March 15 as a one-year contract.

Former Commissioner Chris McGinley was behind the reduction of the contract to one year. The New Teacher Project had done the work already for several years prior.

“I had concerns about the District’s overuse of a vendor to do this work,” said McGinley, a former principal in the District and superintendent in Cheltenham and Lower Merion. He said he didn’t want to make a “long-term commitment, rather than trying to build internal capacity” for the coaching.

He said he supported the one-year contract because Superintendent William Hite “said he would work in this upcoming year to build local supports.”

Commissioners voted unanimously to award the one-year contract to the New Teacher Project. Merlino’s firm had submitted a bid for the original three-year contract that was $1.3 million lower than the one submitted by the New Teacher Project, and his staff has significantly more experience, although this would have been their first contract for training principals.

“There is no justification for the [Office of Procurement] hiding from the SRC and the public that there was at least one other responsive bidder who bid substantially lower than TNTP, precisely because [we] charged less for the same or superior services and used local, rather than higher priced out-of-state talent,” Merlino stated in the complaint. “If the School District of Philadelphia is to earn the trust of its citizens to initiate contracts and carry out programs with the utmost in fairness, integrity, impartiality and competence, then its leadership will have to do much better.”

According to an email to Merlino from Biko Taylor, the District’s executive director of procurement services, all the winners of the competitive bidding process will be “determined in the District’s sole discretion.”

“The School District is not required by law to use any competitive process to award a contract for professional services,” Taylor said, even though it states that it will use a competitive process in materials distributed to bidders. The email noted that the District alerts bidders to this practice by inserting the “sole discretion” clause into the Requests for Proposals.

Procurement irregularities have loomed large in the District’s recent history. Former Superintendent Arlene Ackerman stepped down shortly after being embroiled in a scandal when she overruled her staff and awarded a contract for surveillance cameras in schools to a company she wanted rather than one that had already started work.

In his email, Deputy General Counsel Shore describes the procurement manual as only giving “guidance.” By arguing that the District has a right to ignore its publicly stated procedures, Merlino contends, it creates a perception among local bidders like him that the whole RFP process is only there for appearances’ sake.

Zecca, the former city attorney with experience in contract procedures, made clear that there are plenty of factual differences between the Ackerman case and this one. But he added that there is a “fundamental issue that links the two.”

“Bidders were operating under one set of assumptions presented by the government and then it was changed,” Zecca said, referring to the District’s written contracting procedures that were not consistently followed. “The government can’t act whimsically.”

In the email to Merlino, Taylor acknowledged that all unsuccessful bidders were not notified of the outcome, as required by his office’s written policy distributed to all bidders. The office is also required to rank the criteria for evaluation that it distributes for bidders to use as a rubric, but did not do so.

And the District still has not released those rubrics to bidders as its policy requires, although they have been revealed through legal discovery as part of the lawsuit. That discovery has also revealed that the real rubric used by evaluators contained scoring categories not listed on the public rubric distributed to bidders. This is another departure from both state contracting law and the District’s own policy.

Shore stated in the email to Merlino’s attorneys that the District is not bound by state contracting law, that the public school code does not require competitive bidding on contracts for professional services, and the District’s own manual describing the competitive bidding process – that it distributes to all bidders – does not technically count as a regulation because the SRC never voted on it after it was drafted.

Zecca said the last point “is disingenuous in the extreme.” Merlino called Shore’s argument “remarkable.”

“All students deserve good teachers and principals, but especially the most vulnerable and neediest youth,” Merlino said. “But taxpayers also deserve the ideals of procurement, such as the lowest responsive bidder, be enacted without fear of favoritism, in the light and not in obscurity.”

Zecca said that during his time with the city, then-Councilman and future Mayor Michael Nutter successfully sponsored legislation that required all city agencies to solicit competitive bids on such professional services contracts as a way to show that the city was being transparent and fair.

“Professional services contracting was not [regulated], and this was widely criticized for what people called ‘pinstripe patronage’ – campaign donations corrupting the contracting process,” Zecca said. “So the city made major changes. Now there’s a website where bids are posted. In order to be exempted from this process, the contract has to be an emergency.”

Shore’s argument that the RFP document describing the process does not need to be followed is the “frailest reed” in the District’s case, Zecca said. “This is a formal manual issued to the public, and this manual explicitly says that it applies to contracts for professional services.”

In testimony before the SRC on April 26, Merlino outlined his concerns: “Making it impossible for a proposer to know what is most valued, the existence of these defects indicates at best incompetence and at worst corruption.”

Merlino said a company could gain an advantage by having someone on the inside leak the full evaluation criteria to one bidder but not others.

“There’s no transparency as to how the process works,” Merlino said. “Their mission statement on every RFP talks in glowing terms about how much integrity they have in using the highest standards of procurement, which they now say they can ignore at their sole discretion. So you could make it look like it’s competitive, even if it’s not.”

In his complaint, Merlino noted that the contract was awarded when Katie Schlesinger was a deputy in the office of Leadership Development & Evaluation, which managed the bidding process. At the time, she also had a fellowship through School Systems Leaders.

School Systems Leaders and the New Teachers Project are both spinoffs of TFA, and both function by staffing rank-and-file positions with TFA corps members or alumni. And they both receive funding from the same venture capitalist firm – the NewSchools Venture Fund.

“This is a relatively small contract for us. I’ve already written it off,” Merlino said. That’s why he dropped the initial goal that the court force the District to re-do the bidding process to instead seek “long-term structural reform” in the contracting process.

Merlino said the irregularities scare away bidders and undermine support for the District when it seeks additional funds.

“I can’t bid on anything or do anything in Philly if this is how the system works,” Merlino said. “Everybody I’ve talked to says it’s wrong, but they’re not surprised. Then the District calls for more money while everyone knows there’s an insider group making all this money and wasting it.”

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