Anatomy of a corrupt $125 million city contract

Hearing reveals explosive data on how JCDecaux was in a filthy deal with the city — a deal that now may be going down the toilet.

In a remarkable and highly unusual hearing today, the Government Audit and Oversight Committee dug into the anatomy of a multimillion contract that Sup. Aaron Peskin said could well have been “fixed.”

The issue was a Peskin resolution seeking to end the city’s deal with JCDecaux for public toilets and ad kiosks, which has been worth $125 million to the French company but just $7.2 million has gone to the city.

JCDecaux got a sweet deal to make money off public toilets.

During the course of the hearing, some dramatic information came out:

  • The contract was issued with only one bidder – JCDecaux – although at least one other company wanted to bid.
  • That company, Clear Channel Outdoor, saw the contract as a lucrative opportunity but decided not to bid because “it wasn’t a level playing field.”
  • Although a DPW official said that former Director Mohammed Nuru wasn’t personally involved, he ran the initial meetings with possible vendors.
  • The first Request for Proposals in 2015 got three responses, but they were all rejected and a new RFP was issued in 2016, which only JCDecaux responded to.

While Julia Dawson, deputy director for finance and administration, said that she didn’t think anyone other companies wanted the contact, Peskin said that “the word on the street was that it was put out [by DPW] that nobody should bother because it was going to JCDecaux anyway.”

The whole sordid story goes back to 1994, when Frank Jordan was mayor and JCDecaux was offering to install public toilets – free – all over downtown San Francisco. The city would then allow the company to put up ad kiosks, sell ads on them, and keep most of the money.

The contract was approved by the supes, and when Willie Brown became mayor, he expanded and extended it.

Eventually, the 20-year deal ended, and under normal city contracting processes, DPW would have put out an RFP and looked around to see if anyone else wanted to bid on the next contact.

JCDecaux clearly had an inside line, since they already owned the equipment, and it would be expensive and time-consuming for another company to replace it.

DPW, Dawson said, issued an RFP and three companies responded. But somehow, DPW staff had screwed up the language in the request.

The city several years earlier had limited the number of new billboards in town – and the RFP never mentioned that fact. So some of the companies responded with plans to build a lot more kiosks.

The responses, Dawson said, “were wildly different and imcomparable.” So DPW rejected all of them and started over with a new RPF.

This time, Clear Channel and JCDecaux both expressed interest, and came to the preliminary meetings. In the end, Dawson said, Clear Channel decided not to bid, she said, so JCDecaux’s proposal won the day.

Peskin pointed out that the bid documents required a transition period of just 90 days – which would make it almost impossible for anyone other than the existing vendor to acquire and install the toilets and kiosks. “I wish the other vendors had brought that up at the time,” Dawson said, adding that DPW would have been willing to negotiate the time frame.

Then, when the committee opened the lines for public comment, one call came in.

The caller introduced himself as Bob Schmitt – the regional president of Clear Channel Outdoor for Northern California.

He was the one who put together the Clear Channel bid.

Peskin said he hadn’t talked to Schmitt in advance of the meeting, and couldn’t remember ever meeting him. So this wasn’t set up.

Schmitt said he was listening to the hearing, and wanted to set the record straight. He directly contradicted Dawson’s story.

When the first RFP was issued, “we went back [to DPW] with questions.” Among the issues he raised: Because of the language in the RFP, there were likely to be widely disparate responses. “We were told that was the intention of the DPW at the time,” he said.

When the second RFP came out, it included the 90-day requirement – and “we said it would be onerous.” He asked whether it might be possible to seek to buy JCDecaux’s equipment as part of the bid.

“We got negative responses,” he said.

“We chose not to bid because we thought it was not a level playing field.” Schmitt had to send a detailed memo to his boss explaining why he would decline to seek such a lucrative deal.

Peskin asked if he could keep Schmitt on the line for a few questions. Committee Chair Gordon Mar agreed.

“You did indeed inform DPW” about the issues with the RFP,” Peskin said. “Was that documented?”

Schmitt said it was done verbally – at a meeting with Nuru.

Peskin asked if Clear Channel informed DPW about the onerousness of the 90-day transition. “We made our proposals in writing,” he said.

Peskin asked Dawson to provide all those records. I’ve asked for them, too.

If it turns out that Clear Channel did, indeed seek to bid, and did, indeed communicate the issues with the RFP to the city, “if that is the case, the fix was in,” Peskin said.

The whole thing gets more screwy.

So after the 2016 bid was approved, Nuru put (in Peskin’s words) “a lot of pressure” to update the contract in 2019. That contract, he said, was a bit better than the previous one – it included a provision that JCDecaux would pay for attendants at 11 of the public toilets.

The company was supposed to pay the city $1.5 million last fall to cover those costs.

There are already attendants at the toilets; they are provided (under a DPW contract) by three nonprofits – Urban Alchemy, Hunter Point Family Services, and Mission Neighborhood Centers.

But for reasons that remain a bit unclear, DPW – on its own authority – declined to take the check, and instead gave JCDecaux the opportunity to pay that money with “in-kind” services – that is, the company would do its own RFP and find another outfit to provide the attendants.

Which would mean, presumably, that those three community nonprofits would lose their contracts, and their workers would be out of a job.

That was in the contract anyway, starting in March, 2021. DPW gave the company the choice of starting six months earlier – this fall – instead of paying the cash.

“If the entire cost of this project for a year is $200,000, and this would only be seven months,” Peskin asked, “how to you get to $1.5 million?”

There was a long, long pause in the hearing.

Finally, Dawson said she would have to look at the dates and get back to the panel.

Peskin kept asking: Why did DPW do this?

“It was an operational decision,” Dawson said.

The hearing moved into the next item – a discussion about the state of the corruption investigations. And while most of what we heard has already been public, a couple of things came up.

For one thing, with all of the clear and apparently corrupt contract management going on in DPW, why didn’t anyone notice until the FBI got involved? Could two mayors, Ed Lee and London Breed, have been so clueless that they just let this go on?

Why doesn’t anything happen to public employees who are found to have abused their positions, but simply leave the city’s workforce?

Peskin said that a lot of the supes had no idea this was going on, although Nuru has has ethics problems in the past –– and a lot of city officials (including Peskin) supported him.

Sups. Matt Haney and Gordon Mar both said that the outcome of the meeting was a clear endorsement for a commission to oversee DPW and a new Office of the Public Advocate.

Someone needs to be paying attention to public spending on contracts.