From the beginning, one man's deal to corner the market on the Official Florida Driver's Handbook should have drawn red flags at the Department of Highway Safety and Motor Vehicles. Instead, the state agency made a colossal headache for itself by allowing a clever, politically connected entrepreneur to create a government-backed scheme that gave his traffic school business an extraordinary competitive advantage. The 1st District Court of Appeal has now ruled the DMV can cut ties with Kenneth Underwood's National Safety Commission Inc. In the name of fair competition and government transparency, the state should hope the ruling sticks so it can get out of this mess.
The episode, as detailed earlier this month by the St. Petersburg Times' Susan Taylor Martin and Dan Sullivan, is a lesson in how not to privatize a government service. It was Underwood who first approached the DMV in 2003 with his brainstorm to print the driving handbook for free in exchange for the exclusive right to advertise in it.
When competitors of Underwood's traffic school learned of the plan, the agency was forced to put the contract out for bid. Then it bungled that process. The invitation to negotiate required the winning vendor to secure a $1 million bond — a bar so high Underwood's competitors didn't bother to respond. Only Underwood did, but he submitted a "best final offer" reducing the bond amount to $200,000.
The agency should have restarted the process. Instead, it signed an overly permissive contract that gave Underwood a monopoly to reach teenage Floridians that ultimately drove many other traffic schools out of business. Adding to the stink was the fact that one of Underwood's lobbyists, Sherry Dickinson, was married to the DMV's then-executive director, Fred Dickinson. State auditors in 2006 said they found no evidence of "direct influence" in the deal but acknowledged the relationship could undermine public confidence in the agency's dealings.
Even when state Sen. Mike Fasano, R-New Port Richey, tried to scuttle the contract in 2007 through proviso budget language, then-Gov. Charlie Crist, one of several recipients of Underwood's political donations, vetoed it.
Now Underwood is unwilling to go quietly. He filed suit after the agency declined a five-year renewal, claiming he had unilateral authority under the contract to decide whether to extend it. A trial court agreed. But the appeals court reversed that decision earlier this month in a 2-1 decision. Underwood is now asking for a rehearing by the appeals court.
Highway safety officials never went shopping for a deal like Underwood proposed, nor did they seriously vet it once they embraced it. Outsourcing government services can make sense, but not when the gatekeepers are asleep at the switch.