Telmate Response to GTL

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 TO

PROTEST OF GLOBAL TEL*LINK CORPORATION

I. INTRODUCTION

Protestor Global Tel*Link (“GTL”) placed third under GDC’s 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 the 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 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 Todd Shields, Prison Phones Prove Captive Market for Private Equity, Bloomberg Businessweek (October 4, 2012), available at http://www.businessweek.com/news/2012-10-04/prison-phones-prove-captive-market-for-private-equity (last visited May 20, 2014), attached as Exhibit A. 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. See Telmate Provides Inmates with Free Phone Calls and Remote Video Visits, Yahoo!

Finance (December 30, 2013), available at http://finance.yahoo.com/news/telmate-provides-inmates-free-phone-160000456.html (last visited May 20, 2014), attached as Exhibit B. Thus, it is unsurprising that GTL and Securus have filed similar protests in an effort to retain their lion’s share of the market.

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GTL’s judgment) for that of the 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 protest should be rejected.

II. SUBSTANTIVE GROUNDS FOR PROTEST

A. TELMATE IS A QUALIFIED OFFEROR.

Mandatory Questions 1 and 2 of Attachment F sought information about the offerors’ current customers and their ability to provide telephone services to GDC’s inmates:

Contractor must currently be doing business with a State Department of Corrections customer and providing inmate telephone service to state prisons or similar correctional facilities for a minimum of 5 years. Please confirm this statement is applicable to your company.

Contractor must be capable of providing inmate telephone service to a customer with a similar scope as GDC's with 65 facilities that house over 60,000 inmates and have the capability to process over 180,000 calls and over 2,000,000 total minutes per month. Please confirm this statement is applicable to your company.

See RFP, Attachment F, M1 & M2. The RFP mandated “only yes or no answers” to these questions, and Telmate appropriately responded “Yes” to each. See Telmate Response, Attachment F, attached as Exhibit C, at M1 & M2.

GTL incorrectly claims that Telmate failed to satisfy these requirements, an argument which rests primarily on information about the respective inmate counts within GDC and within the facilities of (some of) Telmate’s current customers. See GTL Protest, p. 19. GTL’s argument ignores the fact that GDC expressly rejected this as a factor in this procurement. The RFP initially required vendors to give references where they provide services comparable “in size and scope” to those sought in the Georgia RFP, but GDC amended the RFP to remove the word “size” because “it caused confusion.”

See Transcript of Bidders’/Offerors’ Pre-Bid Conference (Aug. 1, 2013), attached as Exhibit D, at p. 34. GDC cares about the vendors’ demonstrated ability to provide the requested services, not the “size” of the offerors’ customers.

Without question, Telmate has that ability. The innovative technology employed by Telmate renders headcount largely irrelevant to Telmate’s delivery of services to GDC. Traditional switchboard technology (such as that predominantly used by GTL and

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Securus) segments calls based on facilities. Telmate does not use that antiquated system.

Instead, Telmate operates under a unified web-based infrastructure that uses voice over internet protocol (“VOIP”) technology. See Telmate Additional Scored Response, attached as Exhibit E, at p. 54. Because Telmate handles all its customers’ calls through this unified architecture, the size of any individual facility or is less important than the total volume of calls. Id. GDC’s monthly average is 187,887 calls. See RFP, Attachment A, § 1.1. That represents a very 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. See Exhibit E (Telmate Additional Scored Response), p. 100. Increased call volume is far more significant to GTL and Securus, by contrast, because of their reliance on antiquated systems.

The GDC properly determined based on all the information provided that Telmate was responsive. GTL has offered nothing to suggest that determination was an abuse of GDC’s considerable discretion.

B. 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 3 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 BAFO Clarification, attached as Exhibit F, at p. 1. GTL suggests that Telmate’s “proposal should be rejected as pure fantasy” because of this anticipated growth in call volume. See GTL Protest, p. 22. This is incorrect because: (1) Telmate’s projections were reasonable; (2) in any event, GDC’s interests are fully protected by the monthly minimum guarantee; and (3) call volume 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 were fully disclosed to GDC. First, the RFP stated that GDC was removing 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:

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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. Telmate explained in its response that it took these changes into account in making its projections:

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.

See Exhibit F, (Telmate BAFO Clarification), p. 1. In addition, Telmate’s response offered additional billing options and reduced rates which it reasonably expected to grow call volume. For example, “Telmate’s Preview Plus program allows calls to unbillable numbers,” which allows inmates to place calls that otherwise would not be able to be made because the numbers do not accept traditional collect billing. See Exhibit E (Telmate Additional Scored Response), 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. This 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%. See Exhibit 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 of 14 calls per month, so based partially on that, Telmate conservatively projected an average in Georgia of 12 calls per inmate per month. See Affidavit of Darren Wallace, attached as Exhibit G, at ¶ 5. 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.

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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 the GDC, it demonstrated the tools available to Telmate 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. See Exhibit E, (Telmate Additional Scored Response), p. 72 (describing Telmate’s numerous options for depositing money).

Telmate was not alone in predicting an increase in call volume due to expanded billing options, reduced calling rates, and new programs previously unavailable to inmates. The GDC issuing officer made this clear during the procurement process:

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.

But we’re actually hoping for expanded calling.

See Exhibit D (Transcript of Bidders’/Offerors’ Pre-Bid Conference (Aug. 1, 2013)), pp.

55-56.

Telmate was transparent with the GDC about the basis for its projections. This is more than can be said of GTL, which hypocritically accuses 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.

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. Telmate was candid with GDC about its projections, the assumptions it was

- 6 -making, and the factual basis for those assumptions. GDC reviewed the submissions and properly determined that Telmate’s was the most compelling offer. GTL cannot substitute its subjective opinions for the well-reasoned conclusions of GDC. This is especially true here, where GTL’s proffered scoring methodology focuses on the meaningless “Benefit to the State per Call Based on MMG.” See GTL Protest, p. 25 (Table 2). The MMG is a payment required to the State whether or not a single call is made, so dividing the MMG by the number of calls generates an entirely irrelevant number. It is unsurprising that GTL would advocate that approach given that its proposal becomes less and less competitive as call volume increases.

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 Exhibit F, (Telmate BAFO Clarification), p. 2;

Exhibit 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 terms of the RFP were clear: the successful vendor would pay the greater of either the monthly commission or the MMG. See RFP, Attachment R, § 1.1. Telmate agreed to that term. See Telmate Response, Attachment R, attached as Exhibit H, at § 1.1. GDC’s evaluation of the cost proposals made very clear that under the terms of each offerors’ submission, the guaranteed minimums were expected to far exceed the monthly commissions. See GDC’s Cost Proposal Evaluation for Best and Final Offers.

Therefore, in the unlikely event that Telmate’s projections are not reached, the GDC will still receive the MMG each month for the duration of the contract. Telmate is ready, willing, and able to pay its minimum guarantee to GDC regardless of actual call volume.

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

- 7 -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.

C. TELMATE DID NOT ATTEMPT TO HIDE FEES.

GTL’s claim that Telmate tried to “hide” unauthorized fees is groundless. The fees were explicitly addressed in Telmate’s response to the RFP. If they had been hidden, GDC could not have sought clarification about them. See Telmate Request for Clarification No. 3, attached as Exhibit I. In providing that clarification, Telmate unequivocally agreed to remove those all “fees, charges, penalties, etc. included in its response that were not specified as allowable in the RFP.” Id., p. 2. Telmate also agreed to absorb any additional costs that would otherwise have been covered by those fees, as made clear by its certification that removal of the fees would not affect its cost proposal.

Id.

GDC had the discretion to seek clarification on this point. This happens in most procurements and is expressly authorized by statute:

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).

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 with the terms of the RFP, and it used the request for clarification procedure to allow GTL to remedy those errors. See GTL Request for Clarification No. 2, attached as Exhibit J. GDC did not exceed its considerable discretion in allowing Telmate or GTL to clarify their proposals.

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D. THERE WERE NO SCORING ERRORS THAT IN ANY WAY AFFECTED

GDC’S ANALYSIS.

GTL’s final argument claims “apparent irregularities and miscalculations” during the scoring process that justify a different result. See GTL Protest, p. 30. There appears to have been a one-point discrepancy between the initial score given to GTL by the evaluators (332.68) and the initial score as reflected on the Master Technical Evaluation spreadsheet (331.25). See GTL Protest, p. 30, and Exhibits 43(a)-(f) and 44 attached thereto. GTL contends that this miniscule error in an early evaluation stage is indicative of other unspecified errors which somehow tainted the entire evaluation process and somehow moved GTL from first to third place. GTL cannot point to a single scoring error in the final, validated scoring upon which GDC’s decision rests. 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.)).

GTL then assumes, “it is likely that these errors continued” because its score continued to go down throughout the validation process. See GTL Protest, p. 30. The validation process contemplates that the evaluation team will have the chance to thoroughly review and thoughtfully consider each response. See DOAS Validation Meeting Presentation, attached as Exhibit K, at p. 4. The purpose of this process is to allow the team to gain a deeper understanding of the proposals, whether through the request for clarification process, or through group discussion. See Georgia Procurement Manual, Table 5.6 (authorizing changes to scoring based on discussion among evaluators), § 5.6.4 (allowing for written clarifications). It is expected that scores may change during this process.

GTL finished 33 points out of first place. It has not even attempted to prove a 33-point scoring error (nor any scoring error at all with respect to its final score). Instead, it claims that a 1.4 point error (out of 1,000 points) in a pre-final tally sheet (that was irrelevant and corrected) should result in extending their incumbent system and its corresponding preferential commission percentage. This conclusion would result in unjust harm to the Citizens of the State of Georgia.

III. CONCLUSION

GTL has failed to bring forth any reason for DOAS to discount the decision of GDC. For all the reasons above, GTL’s protest should be denied, and GDC should be permitted to proceed with awarding the contract to Telmate.

[Signature Next Page]

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Respectfully submitted this 23rd day of May, 2014.

J. Matthew Maguire, Jr.

Georgia Bar No. 372670 Jennifer K. Coalson Georgia Bar No. 266989

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 jcoalson@pcwlawfirm.com

ATTORNEYS FOR TELMATE, LLC