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A Louisville-based IT company has filed a protest with the Kentucky Finance and Administration Cabinet, alleging that the Commonwealth Office of Technology (COT) improperly signed off on changes to an IT services contract with tech giant AT&T that were worth $6.5 million and not competitively bid.
The formal protest letter was filed Tuesday by an attorney for Tier3 Technologies, a family-owned business that has had contracts to provide network optimization services to numerous state agencies over the past decade.
Tier3’s protest letter states that several of the amendments to AT&T’s contract merely duplicate services already provided to state agencies by Tier3. The company also suggests that COT improperly used the company’s confidential and proprietary information, incorporating it into several of AT&T’s amendments after COT’s Chief Information Officer Charles Grindle requested the information from Tier3 earlier this year.
Grindle, who was hired last fall, is tasked with supporting IT services for state agencies and has recently attracted controversy for receiving a $210,000 raise last month, which lifted his annual salary to $375,000 — the highest of any state government CIO in the country. Although Grindle has personal and business ties to Gov. Matt Bevin dating back three decades, the Bevin administration and the finance cabinet, which COT is housed under, have defended his raise and cited cost-saving measures he has implemented as more than making up for that salary.
Pamela Trautner, the director of communications for the Finance and Administration Cabinet, did not reply to Insider’s requests for comment regarding the Tier3 protest or Grindle.
Joe Burgan, a local spokesman for AT&T, told Insider in a statement that “we were awarded this contract based on the services and capabilities we provide. We comply with the law and will review the complaint once we receive it.”
The amendments in question were to a six-year contract first signed in 2013 between COT and AT&T that was related to the third iteration of the Kentucky Information Highway, an initiative to increase the bandwidth and reliability of internet services for state government agencies and school districts.
The five amendments contested by Tier3 occurred between March and July of this year, with the protest letter from its attorney Mark Leach alleging that COT violated the Kentucky Model Procurement Code in several respects.
First, Tier3 alleges that the amendments to AT&T’s contract constituted significant material changes that were outside the scope of the original —specifically, the implementation of devices from San Francisco-based IT company Riverbed Technologies. The protest states that AT&T had never implemented such technology in its Kentucky Information Highway work before, whereas Tier3 already had a record of partnering with Riverbed on other contracted services for state government agencies.
Tier3 also claims that these amendments for AT&T to implement $6.5 million of Riverbed technology violate the Finance and Administration Cabinet’s regulation prohibiting contract modifications that increase purchases by over 10 percent unless there is a competitive bidding process. In the case of each of the five amendments, attachments to the protest letter show there was no open bidding, and they were signed by a representative of AT&T and COT Deputy Commissioner Jim Barnhart.
Without a competitive bidding process, Leach stated, these amendments amounted to “a de facto sole source procurement” for AT&T, which constituted “an arbitrary and capricious act” by a government agency under the state constitution.
The Tier3 protest also alleged that two amendments duplicated nearly $3 million in services that Tier3 already provides in a different contract, and three other amendments, totaling over $3.5 million, that duplicated Tier3’s model for implementing Riverbed technology.
Leach states in his letter that after Barnhart and Grindle rebuffed Tier3’s offer late last year to expand its Riverbed network optimization solutions across all state agencies, Grindle then requested Tier3’s full inventory and matrix for each agency it was serving as part of negotiations for the renewal of the company’s contract.
Tier3 CEO Michael Paynter sent this information marked confidential to COT, along with their full model for servicing all agencies with the Riverbed technology. Leach suggested that amendments COT later signed with AT&T appeared to crib from Tier3’s model, which “cannot be explained simply by coincidence.”
COT’s action “undermines and runs counter to the (Kentucky Model Procurement Code)’s purpose of fairly and equitably treating all persons who deal with the procurement system,” wrote Leach, “while simultaneously undermining public confidence in the procedures followed in public procurement.”
Leach added that Tier3 “has not been treated fairly or equitably by COT,” as the amendments in question “do not foster effective competition — indeed they prevent it.”
Tier3 is requesting that the Finance and Administration Cabinet affirm its protest, ensuring that agencies already receiving such services by Tier3 continue to do so, while agencies not currently served by Tier3 put such work out for a competitive bid.
