$40 million DISD technology contract questioned

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by BRETT SHIPP

WFAA

Posted on December 1, 2011 at 11:40 PM

DALLAS - One of the largest technology contracts ever awarded at Dallas ISD is at the center of a growing legal battle.

A $40 million deal, awarded to one company, was stripped away and given to another. And at the center of the fight, allegations of improper contact, questionable behavior and a convicted felon.

The Delcom Group bills itself as one of the premier technology integration companies in Texas. A business partner with DISD for the past eight years, Delcom was the unanimous favorite this past May to outfit hundreds of classrooms with state-of-the-art computer technology. The four-year contract was worth $40 million.

But two months after being awarded the bid, DISD officials stripped the contract from Delcom and awarded it to the second-best bidder, a Houston company called Prime Systems.

The reason given, the divorced husband of Delcom's owner had a felony conviction for receiving stolen fishing equipment in 1997. State law requires potential vendors to give notice that the owner has been convicted of a felony.

But according to Delcom’s attorney, Michael Hurst, the contract award was wrongly removed from his client.

"First of all, he's not the owner of the company,” Hurst said. “Second of all, he's not an operator even though we asked what the definition is, he is a salesman at the company.”

The State of Texas has also certified Delcom as a minority business owned by the felons ex-wife. The tip about the felony conviction came to DISD through former school board member Ron Price. Price tells News 8 he was merely passing along an anonymous tip, and has no connection to Prime Systems.

Delcom's attorney says Price's involvement is curious.

"We don't know why Ron Price is involved,” Hurst said. “But we do know he worked very hard to lobby administration officials as well as trustees, both prior to, and even harder after the contract was awarded to Delcom to get the contract pulled from Delcom."

The contract was then awarded to the Prime Systems, an online computer components company based in Houston in a building occupied by a sister company, called Directron.

Prime Systems does have a contract with Austin ISD to provide technology to what is planned for DISD. News 8 has also learned of three lawsuits against Prime's owner, Michael Chang, alleging copyright infringement, trademark infringement and for allegedly selling counterfeit software out of their headquarters in Houston.

What’s more, in its lawsuit against DISD and Prime Systems, Delcom alleges Prime had multiple improper contacts with DISD officials during the bid process. An assertion that appears to be bolstered in videotaped depositions, first of DISD Purchasing Director Gary Kerbow in the following exchange between Kerbow and attorney Hurst:

Hurst: "So this, would you agree with me, is yet a third inappropriate contact of DISD during the RFP period?”

Kerbow: “Yes.”

Hurst: “OK, and if you look at the last sentence on his e-mail there, it says 'Would that be possible to get a copy of the price tabulation as well?' That's certainly out-of-bounds and off-limits isn't it?”

Kerbow: “At this particular time, yes, it would be."

The same questions were later asked of DISD interim Superintendent Alan King.

Hurst: “And was this contact ever reported to you?”

King: “No sir.”

Hurst: “Do you believe it should have been?”

King: “I believe it should have been reported to Gary Kerbow for further investigation, then he should have reported it to me, if he felt it was necessary."

Delcom says it feels Prime Systems should have been disqualified from the bidding process. But according to Prime System's attorney, his clients never violated any rules.

"The bid review and ranking period had been completed and posted on DISD's web site,” said Jerry Young, Prime’s attorney. “Only then did Prime contact DISD. DISD has never alleged or accused Prime of having any inappropriate contact with DISD during the bid process."

DISD officials have declined to comment on our story, citing pending litigation.

A judge has already ruled in favor of DISD, saying the contract with Delcom was never signed and not official. Delcom is appealing the ruling and continues to sue Prime Systems for trade secret infringement.

Prime Systems denies the allegation, and two weeks ago, Trustees formally awarded them the $40 million classroom technology contract.

E-mail bshipp@wfaa.com

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