Idaho Broadband Contract in Limbo

The $60 million contract for a statewide school broadband network has been scrapped, affecting the 5-year-old broadband and video-conferencing system and tens of millions of dollars already spent on the project.

by Betsy Z. Russell, The Spokesman-Review (TNS) / November 12, 2014

The $60 million contract for a statewide school broadband network – one of Idaho Gov. Butch Otter’s proudest achievements – is in limbo after being scrapped by a judge who ruled it was improperly awarded.

The ruling late Monday affects the 5-year-old broadband and video-conferencing network along with the tens of millions of dollars already spent on the project linking Idaho high schools, dubbed the Idaho Education Network.

The “legal decision does not detract from the value of the IEN,” Otter said in a statement Tuesday. “I support the IEN and recognize the significance of this service for all of Idaho, especially our rural communities. I call upon all of the parties and stakeholders to commit to preserving this valuable service and unprecedented access to technology for Idaho’s students, teachers and communities while we work through the process.”

Otter has steadfastly defended the contract for the past five years, even after the Idaho Supreme Court ruled against it in 2013; the contract was awarded by Otter’s best friend, Mike Gwartney, who at the time was serving as the director of his state Department of Administration.

There were two bidders on the original $60 million contract: Education Networks of America, partnering with Syringa Networks; and Qwest, partnering with Verizon. Gwartney awarded the contract to both ENA and Qwest, with subsequent amendments dividing the work so all the parts that Syringa originally would have handled in its partnership with ENA – the technical network services, or “backbone” of the broadband network – instead would be done by Qwest. Syringa sued.

Syringa accused the state of wrongdoing, including breach of contract, tortious interference, and improper influence. The district court initially dismissed the case, but Syringa appealed to the Idaho Supreme Court, which resurrected the case on just a single count: that the contract was awarded illegally, in violation of Idaho law. The Supreme Court ruled that by splitting up the duties after the contract was awarded, the state Department of Administration was “in effect, changing the RFP (request for proposals) after the bids were opened.”

The Supreme Court sent the case back to the 4th District court, where the state has tried to fight it on multiple grounds, but Judge Patrick Owen found in favor of Syringa; the state still could appeal his ruling.

Sen. Dean Cameron, R-Rupert, co-chairman of the Legislature’s joint budget committee, said lawmakers on the panel strongly urged the Department of Administration to settle the case, to avoid just this outcome. The case went to mediation last month, but state officials said they were outraged that Syringa asked for damages, starting with a $17 million request, later dropped to roughly $5 million.

Otter said in a campaign statement Oct. 16 that Syringa has no right to any state payment. “It has no legitimate claim for monetary damages,” his statement said.

House Speaker Scott Bedke, R-Oakley, said he’s hopeful of a “do-over” on the contract to allow the network to continue operating. “To the extent we’re culpable, we’ll shoulder our responsibilities, I believe, collectively as a state,” he said, “but that doesn’t diminish the fact that this is a worthy effort.”

The state hired an outside lawyer, Merlyn Clark of Hawley Troxell, to represent it in the case; the Idaho Statesman reported last month that a public records request it filed showed the state has paid him more than $760,000 thus far. ENA is well-connected in Idaho; it has donated $18,250 to Otter’s campaign, including $5,000 on Sept. 26 of this year, and in 2012, it hired a former Idaho Republican Party executive director and then-state official, Garry Lough, as its Idaho sales chief. The firm also was awarded a second multimillion-dollar contract in July 2013 to provide Wi-Fi networks in Idaho high schools; state Superintendent of Schools Tom Luna awarded that contract. ENA also contributed $6,000 to Luna’s campaign since 2009.

But ENA and Qwest, now known as CenturyLink, could end up among the biggest losers in the contract deal. The judge cited an Idaho law that says when a state contract is issued illegally, all money paid by the state under the contract “shall be repaid forthwith.”

Spokesmen for both companies didn’t immediately respond to a request for comment Tuesday.

©2014 The Spokesman-Review (Spokane, Wash.)