The Kentucky Finance and Administration Cabinet has rejected a Louisville IT company’s formal protest lodged in September, which asserted that the Commonwealth Office of Technology had improperly amended a services contract with AT&T in violation of the state’s competitive bidding rules.

First reported by Insider Louisville, the protest filed by Tier3 Technologies with the cabinet asserted that the contract amendments worth $6.5 million violated the Kentucky Model Procurement Code in several respects, amounting to “a de facto sole source procurement” for AT&T.

Tier3 said the amendments duplicated services that it was already contracted to provide and increased purchases by an amount that required competitive bidding. The firm also accused Charles Grindle, chief information officer of the Commonwealth Office of Technology, of improperly sharing and incorporating Tier3’s confidential and proprietary information into several of AT&T’s new amendments.

Insider obtained the response from the cabinet’s chief of staff Melinda Hill through an open records request, which stated that Tier3 did not have the proper standing to dispute the amendments, and even if it did, its “provocative and misleading” claims did not have merit.

As for Tier3’s assertion that Grindle misused the firm’s confidential and proprietary information, Hill also dismissed this as “deceptive and inflammatory” in her response, which was sent to Tier3 on Dec. 20.

Tier3 CEO Michael Paynter told Insider Louisville that he had no comment at this time about the Finance Cabinet’s rejection of his protest.

Tier3 — a company that numerous state agencies have contracted with for network optimization services over the past decade — filed the protest over five amendments approved last year to a 2012 contract between the Commonwealth Office of Technology and AT&T related to the Kentucky Information Highway, an initiative to increase the bandwidth and reliability of internet services for state government agencies and school districts.

The protest was file the day before Grindle spoke to the annual business summit of AT&T in Dallas, where he touted the Commonwealth Office of Technology ability’s under his leadership to minimize unnecessary contracts and rely on “trusted partners” like AT&T for modern IT services.

While Tier3 sought for the Finance Cabinet to ensure that agencies already receiving services through its contract continue to do so and other agencies put such work out for competitive bidding, Hill thoroughly rejected each of its claims in her Dec. 20 response letter.

Hill stated that Tier3 lacked standing under state law to contest the amendments, as the company was not awarded the original contract that was competitively bid in 2012 and was not a prospective bidder on any amendments to it. Because it was not a party to the contract or amendments, Hill added that Tier3 could not say that it was aggrieved by last year’s amendments with AT&T.

The response from the Finance Cabinet also stated that Tier3 had waived its right to protest any of the AT&T amendments when it signed onto a new services contract with the Commonwealth Office of Technology last May, which stated that the office was permitted to “award other contracts for additional or related work, services, supplies, or commodities.”

Hill wrote that Tier3 “cannot, in good faith, claim (the May contract’s) benefits while ignoring its terms and conditions.”

Hill also contended that the amendments with AT&T last year encompassed “items and services contemplated” by the original RFP in 2012 that was won by AT&T and incorporated into the contract. Therefore, Hill added that Tier3’s protest is also untimely, as the company should have filed its protest within weeks of the RFP solicited in 2012.

Even if Tier3 did have legal standing, Hill stated that the protest would still fail, as its “arguments and allegations are invalid, inapplicable, or otherwise unsupported.”

Hill wrote that the Commonwealth Office of Technology did not have to do a competitive bid for services amending AT&T’s contract, as it did not establish a quantitative ceiling and the RFP “provided clear and unambiguous notice of its intent to contract with a singular awardee for as many stated services as the Commonwealth may require.”

As for Tier3’s assertions that several AT&T amendments duplicated services that it was already contracted to provide, Hill pointed to two of Tier3’s service contracts in 2016 and 2018 as merely offering “stopgap” services to meet the immediate needs of the state, which are “needs the Commonwealth’s principal, primary, and competitively bid contractor, AT&T now provides.”

Lastly, Hill’s letter addressed the charge from Tier3 that after Grindle requested and received information from the company marked confidential and proprietary, that information regarding its servicing model appeared to be pasted into AT&T new amendments with the Commonwealth Office of Technology, which Tier3’s protest stated “cannot be explained simply by coincidence.”

However, Hill said these contentions “lack credibility” and are “deceptive and inflammatory,” asserting that site addresses identified by Tier3 were already included within an appendix to the original RFP issued in 2012.

While the Tier3 protest contended that the Commonwealth Office of Technology amendments with AT&T contributed to “undermining public confidence in the procedures followed in public procurement,” Hill’s response countered that Tier3’s “provocative and misleading” protest was guilty of the same, as it “intentionally and unnecessarily undermines public confidence (in) its institutions.”

A local spokesman for AT&T did not comment on the Finance Cabinet response to Tier3, but told Insider last year that AT&T complies with the law and was “awarded this contract based on the services and capabilities we provide.”

Grindle finds a ‘trusted partner’ in AT&T

Hours before Insider published the story about Tier3’s protest with the Finance Cabinet last December, CIO Grindle was speaking on a panel at AT&T’s annual business summit in Dallas lauding how his agency has been empowered by the administration of Gov. Matt Bevin to “minimize contracts” and find a “trusted partner” in AT&T for IT services, according to a video of the event posted online by AT&T.

CIO Charles Grindle speaking on a panel at AT&T annual business summit in September 2018 | Screenshot from YouTube video

Speaking on the panel with AT&T Vice President Josh Goodell, Grindle noted that COT’s chief information officer used to be hamstrung by not having full authority over its contracting and spending. However, he stated that this changed soon after he came into office in 2017, as Bevin signed an executive order giving him such authority, which was later codified by the General Assembly in 2018.

Grindle mentioned that in October of 2017, AT&T “came to us and presented” what the company could do for Kentucky with some of its new technologies.

“For a long time the Commonwealth didn’t have, in my eyes, a trusted partner that could sit there and work with us,” said Grindle. “So we began to listen to what was going on in the industry, which – because now we were empowered – allowed us that opportunity. And we didn’t listen to other folks telling us what we needed to buy, whether that would be lobbyists, etc… we actually started to understand the technologies and bring that in-house. And so that became the start, as I see it, of our digital transformation and starting to work with our partners.”

Part of transforming the way the Commonwealth Office of Technology operated involved its contracting, which Grindle said “was out of control, as far as I was concerned. When we are not making good decisions, good business decisions and contracting appropriately and having multiple contracts for the same thing… it was just crazy.”

Grindle said as CIO he was now “able to do things like minimizing our contracts,” instead “going to trusted partners and then contracting for those enterprise services and knowing that they’re able to deliver on them, wherein the past they hadn’t been.”

Noting that the state had in the past purchased a lot of equipment and services, Grindle said, “we did that because of a lot of previous practices in the commonwealth that I won’t get into here… but things that are just not correct… politically correct I guess is the best way to say it.”

“So to cut that off and then work with a trusted partner that could partner with you through that experience was really kind of the steps,” said Grindle. “And obviously, this is one of them.”

Goodell of AT&T returned the praise to Grindle, calling him an IT strategy visionary.

“I speak to a lot of decision makers and I don’t know that I’ve come across anyone that has the crystallized vision of the strategic imperative and the framework for executing that strategic imperative like what Chuck has implemented,” said Goodell. “I’m not just saying this because Chuck has flown all the way out here from Kentucky.”

Grindle has attracted controversy over the $210,000 raise given to him last year by Bevin, a longtime friend and business partner. However, the governor has defended the high salary by saying that Grindle’s experience and expertise are such that he would make many times his $375,000 salary in the private sector, and suggested that he has implemented cost-saving measures in the Commonwealth Office of Technology that have more than made up for his raise.