Telmate Response GTL Appeal

STATE OF GEORGIA

DEPARTMENT OF ADMINISTRATIVE SERVICES

In the Matter of:

GLOBAL TEL*LINK CORPORATION,

Protestor, v.

DEPARTMENT OF ADMINISTRATIVE

SERVICES,

Agency.

DOAS FILE NO.

RFP No. 46700-GDC0000609

TELMATE, LLC’S RESPONSE IN OPPOSITION TO

GLOBAL TEL*LINK CORPORATION’S REQUEST FOR REVIEW

Telmate, LLC (“Telmate”) responds to Global Tel*Link Corporation’s (“GTL”) Request for Review, as follows:

I. INTRODUCTION

GTL placed third under the Georgia Department of Corrections’s (“GDC”) scoring of the submissions but nevertheless makes the extraordinary claim that it is entitled to be awarded the inmate telephone services contract rather than either of the two vendors who submitted more favorable bids.

For twelve years, GTL has been GDC’s incumbent provider of inmate telephone communications under an exclusive contract that allows GTL to retain 40% of the revenues generated by inmate calls. GTL has every incentive to postpone the termination of that contract. Even under GTL’s financial proposal (which was not the highest ranked proposal), its share of the revenues will be cut from 40% to 23%. The strategy, therefore, is to malign Telmate (and even Securus) with specious attacks on its experience and qualifications in an effort to hang on to its diminishing market share.1 All of GTL’s arguments, however, call for DOAS to substitute its own judgment (or, more accurately, 1 According to Standard & Poor’s ratings, GTL and Securus – the two largest providers of correctional phone services – control approximately 80% of the total market. See Telmate’s Response to GTL’s Protest (“Telmate Response”), p 1, n.1. Telmate is the third-largest and fastest-growing provider of those services, and poses a threat to its competitors because of its innovative practices and technology. Id.

Thus, it is unsurprising that GTL and Securus have filed similar protests in an effort to retain their lion’s share of the market.

GTL’s judgment) for that of GDC. GDC is, of course, in the best position to judge the proposals because it has managed the inmate telephone service contract for many years, it developed the RFP requirements in this case, and it evaluated the proposals received.

GTL’s appeal should be rejected.

II. RESPONSE TO SUBSTANTIVE GROUNDS FOR APPEAL

A. REGULATORY UNCERTAINTY DID NOT PREVENT A TRUE COMPARISON.

GTL’s lead argument is that GDC should not have gone forward with the procurement in light of the “uncertain regulatory environment” occasioned by the FCC’s passage of a September 26, 2013 order regarding inmate calling rates. See GTL Appeal,

p. 3. GTL’s speculates that the alleged uncertainty surrounding the FCC Order would place GDC in a compromised bargaining position if it was required to renegotiate the Inmate Telephone Service (“ITS”) contract. Id.

As an initial matter, GTL misstates the record by claiming that the Deputy

Commissioner “completely ignored” its argument concerning the FCC Order. She thoroughly addressed that argument in Section 7 (“Claims Related to the FCC Order”) of the Protest Decision. See Protest Decision, p. 8. There, she noted that GDC made the conscious decision to move forward after reviewing the order and providing its interpretation of the order to the bidders, and that it was not DOAS’s place to question GDC’s decision in this regard. See Protest Decision, p. 8. As the Deputy Commissioner noted, GDC is far better equipped to appreciate the implications of the FCC Order will have, though the Deputy Commissioner did note that to the extent the order injected uncertainty into the process, that uncertainty affected all of the bidders equally. Id. at pp. 8-9.

This is the law. Great deference should be given to GDC’s policy decision because executive agencies provide a “high level of expertise and an opportunity for specialization unavailable in the judicial or legislative branches” that enables such agencies to “make rules and enforce them in fashioning solutions to very complex problems.” Bentley v. Chastain, 242 Ga. 348, 350-351, 249 S.E.2d 38 (1978). See also Int’l Bus. Machines Corp. v. Evans, 265 Ga. 215, 217, 453 S.E.2d 706 (1995) (“The burden on the party seeking to challenge a decision of the state or one of its officials is a heavy one”), overruled on other grounds by Georgia Dep’t of Natural Res. v. Ctr. for a Sustainable Coast, Inc., 294 Ga. 593, 755 S.E.2d 184 (2014).

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B. TELMATE’S BID WAS RESPONSIVE AND THE BEST VALUE FOR THE

STATE.

1. The Deputy Commissioner properly deferred to GDC’s judgment regarding Telmate’s qualifications.

GDC, having managed the ITS contract for several years and having developed the specifications for the RFP, is in a much better position than DOAS to judge and compare the proposals. This is why Georgia law imposes an abuse of discretion standard of review upon agency decisions. See, e.g., Bentley, 242 Ga. at 350-351.

While GTL pays lip service to this bedrock rule of administrative law, see GTL

Appeal, p. 7, it defiles the rule by asking the Commissioner to improperly substitute his own judgment for that of GDC. Specifically, GTL urges the Commissioner to find that the “quality” of Telmate’s references is “extremely inadequate” and that GDC should have discounted Telmate’s past experience because Telmate’s other contracts “are smaller by an order of magnitude than GDC.” Id. at pp. 7-8.

As an initial matter, the initial RFP required bidders to identify customers for whom they provided services comparable “in size and scope,” but GDC later dropped the word “size” from that provision. See Telmate Response, p. 2, Ex. D (Transcript of Bidders’ Conference). This shows that GDC was interested in the scope of the services provided but not necessarily in the size of the customer. Id.

More importantly, whether Telmate provided services of comparable “scope” to that of GDC is precisely the type of question that is committed to GDC’s sound discretion. As Telmate explained below, its innovative technology renders facility headcount largely irrelevant to Telmate’s delivery of services. Because Telmate handles all its customers’ calls through a unified voice over internet protocol (“VOIP”) technology, the size of any individual facility is less important than the total volume of calls. See Telmate Response, pp. 2-3. GDC’s 187,887 monthly call average represents only a small percentage of Telmate’s April 2014 call volume and is certainly not cause for concern in light of the fact that Telmate’s infrastructure is only 15% allocated at the present time. Id.

Finally, GTL’s paternalistic charge that GDC will be “lock[ing] itself into a long-term contract with an unqualified partner,” see GTL Appeal, p. 8, implies that GDC is simply too unsophisticated to be trusted with a decision of this magnitude. GDC has successfully managed the ITS contract for years. But even if Telmate failed to live up to GDC’s expectations, the citizens of the State of Georgia are more than protected by the contractual protections demanded by GDC including, without limitation, provisions for late fees, liquidated damages, termination with and without cause, and indemnity.

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The Deputy Commissioner did not err in upholding the GDC’s finding that Telmate is qualified to perform the subject contract.

2. Telmate did not attempt to “hide” fees.

GTL’s claim that Telmate should have been disqualified for allegedly charging “hidden fees” that were prohibited by the RFP is groundless. These fees were not hidden, Telmate disclosed them in its proposal and GDC requested clarification about them. See Telmate Response, p. 7, Ex. I (Telmate response to Request for Clarification No. 3). In providing that clarification, Telmate unequivocally agreed to remove all “fees, charges, penalties, etc. that were not specified as allowable in the RFP.” Id. Telmate also certified that removal of those fees would not affect its cost proposal. Id.

GTL insists that GDC should have disqualified Telmate as nonresponsive instead of seeking clarification on the fees. GTL ignores the fact that GDC was permitted by statute and the RFP itself to seek clarification and to allow Telmate to modify its proposal accordingly:

As provided in the request for proposals and under regulations to be developed by the Department of Administrative Services, discussions may be conducted with qualified offerors who submit proposals determined to be reasonably susceptible of being selected for award, for the purpose of clarification to assure full understanding of and responsiveness to the solicitation requirements. Offerors shall be accorded fair and equal treatment with respect to any opportunity for discussion and clarification of proposals.

After such clarifications, revisions may be permitted to technical proposals and price proposals prior to award for the purpose of obtaining best and final offers.

O.C.G.A. § 50-5-67(a)(6). See also Georgia Procurement Manual, § 5.6.4 (during evaluation, the state entity may seek written clarification from any supplier to resolve conflicting or ambiguous provisions in the proposal) and RFP, § 2.1.5 (State’s Right to Request Additional Information).

The Georgia Procurement Manual, on which GTL bases its argument, also allows GDC to accept Telmate’s clarification. As even GTL acknowledged, a bidder’s failure to note an exception to the contract “may be cause for rejection.” See GTL’s Appeal, p. 8 (quoting Georgia Procurement Manual, § 4.5.3) (emphasis added). The word “may” means that GDC was not required to disqualify Telmate.

GTL likewise benefitted from this clarification process. GDC noted that GTL’s response to at least three provisions of the RFP was non-responsive or did not comply

- 4 -with the terms of the RFP, and it used the request for clarification procedure to allow GTL to remedy those errors. See Telmate Response, p. 7, Ex. J.

The Deputy Commissioner correctly concluded that GDC was authorized to seek and obtain clarification from Telmate, to determine whether Telmate’s initial proposal was a major or minor deviation from the RFP requirements, and, if a minor deviation, to score the proposal as if there was no deviation at all. See Protest Decision, pp. 8-9.

C. TELMATE’S BID WAS REASONABLE AND TAILORED TO GDC’S NEEDS

AND EXPECTATIONS.

The RFP explained that GDC’s 60,000 inmates currently generate a monthly average of approximately 188,000 calls, or slightly more than three calls per inmate per month. See RFP, Attachment A, § 1.1. In its bid, Telmate explained that it anticipated a dramatic increase in call volume should it win the contract:

Telmate expects monthly call volume to be above 12 calls per offender per month with an average monthly spend to exceed $25 per offender using the Telmate platform. This would mean a drastic increase of call volume and call revenue.

See Telmate Response, p. 3, Ex. F (Telmate BAFO Clarification).

GTL suggests that Telmate’s “fantastical presumption” of growth in call volume is “wholly unrealistic,” and therefore proves that GDC’s evaluation must have been flawed. See GTL Appeal, p. 9. Given GDC’s high level of specialized expertise in the management of the ITS contract, its evaluation of Telmate’s proposal should not be disturbed barring an abuse of discretion. Bentley, 242 Ga. at 350-351.

As shown below, GDC properly exercised its discretion, and the Deputy

Commissioner properly deferred to that exercise of discretion, because: (1) Telmate’s projections were achievable and supported by objective data; (2) in the event Telmate’s projections prove too optimistic, GDC’s interests are fully protected by the monthly minimum guarantee; and (3) the projected call volume upon which Telmate’s projections are based was not a scored component of the RFP.

1. Telmate’s projections were rational and based on factors fully disclosed To GDC.

Far from fantasy, Telmate’s projections were rational and based on factors that it disclosed in its proposal. Telmate’s transparency is in sharp contrast to GTL, which hypocritically accused Telmate of hiding the basis for its projections while simultaneously admitting in a buried footnote that it “inadvertently omitted similar information” from its proposal. See GTL Protest, p. 24 and n.82.

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Telmate’s projected call volume increases are based upon changes to the RFP that removed certain restrictions on inmate calls, including restrictions that currently prohibit inmates from calling most mobile telephones and from using debit cards to pay for calls:

GDC’s current ITS is configured to process traditional collect calls with limited pre-paid collect/direct-remit for calls to cell phones with verified wireless contracts only. Under this RFP, and with the subsequent Contract, GDC plans to allow collect, debit, and traditional pre-paid collect to all unbillable numbers including the verification of contract wireless accounts.

See RFP, Attachment H, § 1.10. As Telmate explained in its response, it took these changes into account in making its projections. See Telmate Response, p. 4, Ex. F (Telmate BAFO Clarification), p. 1 (“Telmate assumptions are based upon allowing for additional call types of inmate debit and calls to cell phones as incremental to the call assumptions provided to GDC.”).

GDC’s issuing officer also understood that these changes to the RFP would likely increase call volume. See Telmate Response, p. 5, Ex. D (Transcript of Bidders’/Offerors’ Pre-Bid Conference (Aug. 1, 2013)), pp. 55-56. (“Well, we’re actually hoping that the number of phone calls expands and improves because we’re bringing in new calling rates. We’re bringing in new programs that we haven’t had before.”)

Additionally, Telmate’s proposal offered additional billing options and reduced rates, which it reasonably expected would grow call volume. For example, “Telmate’s Preview Plus program allows calls to unbillable numbers,” which allows inmates to place calls they could not otherwise make because the numbers do not accept traditional collect billing. Id., Ex. E, p. 104. When such a call is placed (for example, to a mobile phone, Skype, Google Voice number, VOIP number, or international number), the inmate is given a 1-2 minute free call after which the called party is given an opportunity to provide a live operator with credit card information to continue the call. See id. Telmate explained that in its experience, 62% of called parties opted to make the payment and continue the call. Id. These enhancements would account for an increase in call volume.

Telmate also relied upon the experience of its current and prior DOC and Department of Homeland Security customers. See id. In its response, Telmate explained that since taking over the Oklahoma County contract in 2009, call prices had dropped by up to $10 per call and gross revenues had increased by 158%, and since implementing its services for the Oregon DOC in July 2012, call volume had increased by 68%. Id., p. 4, Ex. E (Telmate Additional Scored Response), pp. 5-7. The Oregon DOC is particularly relevant, because its restrictions are very similar to the restrictions proposed by GDC in the RFP in this case. With those restrictions in place, Oregon’s inmates make an average

- 6 -of fourteen calls per month, so based partially on that, Telmate conservatively projected an average in Georgia of twelve calls per inmate per month. Id., Ex. G (Affidavit of Darren Wallace). Telmate has been very successful in increasing revenues upon assuming contracts previously managed by its competitors. Id., ¶ 8. For example, gross call revenue increased by a range of 10% to 150% when Telmate took over the following contracts:

• Boyle County, KY, replacing Securus.

• Whitley County, IN, replacing Securus.

• Clackamas County, OR, replacing GTL.

• Lake County, IN, replacing GTL.

• Oregon Department of Corrections, replacing a GTL subsidiary.

• Montana Department of Corrections, replacing GTL.

Id.

Finally, during Telmate’s live presentation to GDC, it demonstrated its ability to grow GDC’s call volume. In addition to offering reduced call prices and better customer service options to promptly resolve issues when they arise, Telmate emphasized its increased payment options, and its ability to implement payment options for called parties who do not have credit cards (which are traditionally required for collect calls).

By allowing non-carded individuals to make deposits at (by way of example) retail locations and lobby kiosks, inmates are able to place calls that they otherwise would not be able to make. Id., p. 5, Ex. E, p. 72 (describing Telmate’s numerous options for depositing money).

As noted by the Deputy Commissioner, the fact that Securus received the highest scores for both the monthly minimum guarantee and the monthly commission rate provides some confirmation that GTL – and not Telmate and Securus – is the outlier.

See Protest Decision, p. 3. GTL seeks to deflect that finding by attacking the Deputy Commissioner for not conducting a full blown evaluation of the Securus cost proposal.

See GTL Appeal, p. 11. Of course, it is the intended award to Telmate that is at issue in this protest. Given the limited relevance of the Securus proposal to this proceeding, the Deputy Commissioner reasonably based her conclusion upon GDC’s evaluation of the Securus proposal.

GDC has the discretion to use any reasonable method of scoring submissions, and GTL offers nothing to suggest that GDC acted outside the bounds of that discretion in this case.

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2. Even if Telmate’s projections do not materialize, the MMG fully protects GDC’s interests.

Telmate has never defaulted on a contract and has always met or exceeded its annualized guaranteed commission. See Telmate Response, p. 6, Ex. F (Telmate BAFO Clarification), p. 2; Ex. G (Affidavit of Darren Wallace), ¶ 7. In the unlikely event that Telmate’s projections in this case are woefully off-base for the first time in the company’s history, the RFP’s inclusion of the minimum monthly guarantee (“MMG”) protects the State from any material changes to total revenue under the contract. The Deputy Commissioner understood this concept:

The monthly commission rate, which GDC anticipated would be the main source of revenue, was allocated the most points (150 pts). The monthly minimum guarantee, which was included as a sort of “insurance policy”, and which GDC anticipated would be a fairly low dollar amount because of risk allocation, was allocated half of the points of the monthly minimum guarantee (75 pts).

See Protest Decision, p. 2, n.2.

Given the reasonableness of Telmate’s call projections, and the protection to GDC (in the form of the MMG) in the event those projections do not materialize, GDC cannot be said to have abused its discretion in accepting Telmate’s proposal.

3. Call volume was not a scored component of the RFP.

In urging for Telmate’s disqualification because of its call volume projections, GTL is asking DOAS to take into account factors that are not listed in the RFP. This is expressly prohibited under Georgia law, specifically O.C.G.A. § 50-5-67(a)(7), which provides that when evaluating bids, “no other factors or criteria” except those set forth in the RFP shall be relied on. See also Georgia Procurement Manual § 5.6 (“The state entity is bound by the terms of the solicitation as well as the established evaluation criteria. No changes to . . . the evaluation criteria may be made after the closing date and time of the solicitation.”).

The RFP did not ask vendors to project call volume or provide any anticipated growth rate. Because that was not an evaluation factor specified in the RFP, it would be improper to disqualify Telmate based on that factor. GDC properly took into account all the various factors – including the offerors’ projections – and determined that under all the circumstances, Telmate’s was the best offer. That was well within GDC’s discretion and should not be disturbed.

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D. GDC WAS NOT REQUIRED TO CONSIDER TIME-VALUE OF MONEY.

Telmate and GTL each offered $3,000,000 incentive payments to the State.

Telmate’s payments were spread out equally over three years. GTL offered to pay $2,000,000 in Year 1, $500,000 in Year 2 and $500,000 in Year 3. Because GDC scored both financial incentive components equally, GTL claims GDC abused its discretion by failing to consider the time value of money.

The selection of a scoring methodology is a classic exercise of agency discretion which should not be disturbed “unless fraud or corruption is shown or the power or discretion is being manifestly abused to the oppression of the citizen.” Nelson v.

Spalding County, 249 Ga. 334, 336, 290 S.E.2d 915 (1982). GTL offers no support for its remarkable claim that a failure to consider the time value of money is somehow fraudulent, corrupt, or manifestly abusive, nor does it show the extent of the alleged resulting prejudice. See Galen Med. Assocs., Inc. v. U.S., 369 F.3d 1324, 1330 (Fed.

Cir. 2004) (“To prevail in a protest the protester must show not only a significant error in the procurement process, but also that the error prejudiced it.” (Emphasis added.)).

As the Deputy Commissioner noted, GDC developed the cost proposal scoring methodology before proposals were submitted. See Protest Decision, pp. 2-3. It would have been unlawful for GDC to have gone back to modify its methodology after receiving the bids (and noting GTL’s front-loaded financial incentive). Section 3.5.8.3 of the Georgia Procurement Manual requires that the scoring matrix be finalized before bids are received so the agency is not tempted to tailor the scoring criteria to a favored bid.

Because GDC has not acted fraudulently, corruptly, or abusively in this instance, there is no justification for interfering with its selection of Telmate.

E. THE DEPUTY COMMISSIONER’S EX PARTE COMMUNICATIONS WITH

GDC AND ITS CONSULTANT DO NOT WARRANT REVERSAL.

GTL attacks the Deputy Commissioner for basing her decision upon “ex parte communications and evidence that is not in the record.” See GTL Appeal, p. 13. The Deputy Commissioner did exactly as she was authorized to do. Section 6.5.6 of the Georgia Procurement Manual provides as follows: “The [Deputy Commissioner] will review and issue a written decision on the protest as expeditiously as possible after receiving all relevant requested information from the state entity and/or issuing officer.”

In this case, the Deputy Commissioner obtained additional information from the issuing officer and from GDC’s consultant. The cases that GTL cites for the prohibition on ex parte communications all arose in the context of a judicial proceeding. The Deputy Commissioner is not a judge and she did not preside over a judicial (or even

- 9 -quasi-judicial) proceeding. A protest is an administrative proceeding that is subject to DOAS’s administrative rules. See Georgia Procurement Manual, § 1.1.1 (“The purpose of the GPM is to officially publish the administrative rules issued by [the State Purchasing Division]”).

The Deputy Commissioner acted responsibly and within the scope of her authority when she solicited information from GDC’s consultant and issuing officer, providing no basis for reversal of her decision.

F. THE COMMISSIONER SHOULD CONDEMN GTL’S DELAY TACTICS.

GTL seeks to delay the inevitable termination of its lucrative contract with GDC by claiming Open Records Act violations have somehow deprived GTL of information that it needs for its protest. The NOIA was posted on May 1, 2014, so GTL had over three months to secure, through open records requests or litigation, the records that it thinks it needs. This appeal is ripe for the Commissioner’s final decision so that Telmate and GDC can proceed with their contract.

III. CONCLUSION

For all the reasons above, GTL’s Request for Review should be denied, and GDC should be permitted to award the Inmate Telephone Services contract to Telmate.

Respectfully submitted, this 27th day of August, 2014.

J. Matthew Maguire, Jr.

Georgia Bar No. 372670

PARKS, CHESIN & WALBERT, P.C.

75 Fourteenth St., Suite 2600 Atlanta, GA 30309 Phone: (404) 873-8000 Fax: (404) 873-8050 Emails: mmaguire@pcwlawfirm.com

ATTORNEY FOR TELMATE, LLC

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