Florida spent $3.6 million for a company to drop its SunPass bid. Is this normal?

A Tampa Bay state senator wants answers about a deal where the Florida Department of Transportation paid a company $3.6 million in 2015 to drop its protest over a lucrative contract to overhaul the SunPass system.

State Sen. Tom Lee, R-Thonotosassa, is asking the new transportation secretary why the deal was made, which ensured that Conduent State & Local Solutions would win the estimated $600 million contract despite concerns over the New Jersey company’s troubled history.

Those concerns were realized last year, when Conduent started processing state tolls and botched the job, leading to overbilling and a backlog of millions of unpaid tolls.

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“This vendor has given our state a black eye. They have cost elected officials and the Department of Transportation some significant goodwill impairment with the public,” said Lee, who chairs the Senate’s transportation committee. “Someone needs to be held accountable for that.”

Details about the $3.6 million haven’t been scrutinized until recently. Former employees involved in the bid protest said the payment to San Diego-based Cubic Transportation Systems was unprecedented.

“I’ve been in this business for 20 years, and I’ve never heard of anything like this,” said Jon Ramirez, a former Cubic executive, who said he was bothered by the entire bid process.

When Florida’s transportation agency was looking for a company to take over processing all of the state’s SunPass tolls in 2013, Conduent, then known as Xerox, was the leading contender, followed by Accenture and Cubic. All three are large corporations with operations around the world.

Both Accenture and Cubic filed formal protests. A judge recommended they be dismissed, however.

But Cubic appealed the decision, which complicated the state’s efforts to negotiate with Conduent.

That’s when agency officials reached out to Cubic about ending its appeal, according to Stephen Shewmaker, the former president of Cubic.

“They called us in to a meeting with the secretary of transportation,” Shewmaker said. “They said, ‘What would it take for you guys to stop this lawsuit?’”

It was an extraordinary request, he said. In his more than 40 years negotiating government contracts around the world, he had never been paid to drop out of a bid protest.

“It’s the only time I’ve ever heard of it happening,” Shewmaker said.

Cubic’s former worldwide director of tolling operations, Ramirez, was in the room with Shewmaker and confirmed the account.

Shewmaker eventually agreed to the settlement because, he said, he doubted Cubic would ultimately win the bid.

“It was evident that they had made up their minds: they wanted Conduent, no matter what,” he said. “At some point, you have to stop banging your head against the wall.”

Under the settlement terms, Florida’s transportation department paid $1.6 million for some of Cubic’s intellectual property in the form of software and data the company had used in its bid. Another $2 million was paid simply to get Cubic to drop its protest, records show.

Lee wonders whether the whole payment was “just cover for trying to pay someone off to go away, as has been alleged by other people.”

“And so we’re asking the department,” Lee said.

The department’s former secretary, Ananth Prasad, met with the two Cubic executives and said the reason for the settlement was simple: he didn’t want to wait for the protest process to finish before upgrading the SunPass system.

Prasad said it’s common to negotiate with losing bidders who file formal protests, and it sometimes leads to the department reopening the bid process.

But he also said it’s not unusual for the department to pay for presentations and ideas from losing bidders. However, he could not think of another example of paying a bidder to drop its protest.

Prasad left before the agreement was complete. He’s now president of the Florida Transportation and Builders Association, which lobbies on behalf of road builders.

In a statement, the Florida Department of Transportation echoed Prasad’s reasoning for the settlement: Cubic’s appeal would have cost the department at least another six months in delays.

“The department determined that the settlement was in the best interest of the State given the ongoing delays and the continuing stress on the old 1999 SunPass system,” said the statement, which was sent by spokeswoman Ann Howard. “Bid protest litigation is often settled.”

According to the Florida Department of Transportation, Cubic initially wanted $5.6 million, and department officials then came up with the lower $3.6 million figure. Shewmaker and Ramirez dispute that they asked for anything more than $3.6 million.

“I don’t recall giving them a higher number,” Shewmaker said. “It wasn’t that kind of negotiation.”

Ramirez said he remembers it clearly.

“There was no negotiation,” Ramirez said. “There was no discussion, even internally, about a 5.6 number.”

Senior Times researcher Caryn Baird contributed to this report.