No-bid gas is legal, W-B says
One critic complains, but the purchase of fuel is a professional service, the mayor contends.
Last Modified: April 22. 2013 1:50PM
WILKES-BARRE – A local fuel company has repeatedly been awarded a no-bid agreement to provide hundreds of thousands of dollars worth of product to the city each year, despite city charter provisions that require bids for purchases over $10,000.
Petroleum Service Company of Wilkes-Barre has had a lock on the sales for decades, according to city officials. Since 2009, the company has received a total of $921,292 in no-bid sales, a review of city records shows. City officials said there is no written contract with the company.
Although the sales clearly exceeded the $10,000 bidding threshold, city officials contend the purchases did not violate the city’s charter because they believe PSC is offering a “professional service,” one of the exemptions that do not require bids.
Questions regarding the fuel purchases were raised by city resident Karen Ceppa Hirko, a taxpayer advocate who monitors city expenditures. Records obtained by Ceppa Hirko show the city paid PSC $253,863 in 2009, $287,023 in 2010 and $380,406 in 2011.
Ceppa Hirko said she considers the no-bid, no-contract sales an example of how Mayor Tom Leighton is “taking care of” friends who donate to his campaigns. The chief executive officer of PSC, Ronald Simms, and his wife, Rhea, were among the top contributors to Leighton’s campaign for mayor last year, donating $2,800.
“If you look at the finances for his campaign, you will see the majority of people on there either work for the city, are vendors for the city or are some way associated with a vendor,” Ceppa Hirko said.
Leighton adamantly denied the Simms’ contribution played any role in the company getting the fuel sales. He noted PSC has provided fuel to the city for about 50 years.
“This is not someone I brought in new. They were here for many previous administrations,” Leighton said. “If we fired ‘XYZ’ fuel company and brought them in without a bid, you might have a legitimate concern, but not when they’ve been doing this so many years.”
Barry Kauffman, executive director of Common Cause Pennsylvania, a statewide taxpayer watchdog group, said bidding procedures are in place for a reason: to ensure government bodies get the best deal and to protect against cronyism.
“If they don’t bid it out, they don’t know if they are getting anything competitive,” he said. “Taxpayer dollars are very scarce. The public deserves to know they’re getting the biggest bang for their buck.”
Leighton and Drew McLaughlin, the city’s administrative coordinator, said the city has stuck with PSC because it provides superior service that cannot be duplicated by any other supplier.
For instance, PSC can dispatch a fuel tanker to the scene of a major fire, like the one that engulfed the Murray complex a few years ago, to refill fire trucks, allowing them to stay at the scene, they said.
The city owns gas pumps located at the public works department, but vehicles have the option of filling at a PSC-owned station at the same price. That’s been invaluable during emergencies, like the evacuation for 20,000 people during the floods in September, they said.
Leighton said the ability to provide that service is the basis upon which he considers the PSC purchases to be a “professional service” that exempts it from bidding requirements.
Professional services are typically defined as those provided by lawyers, engineers, architects and others with specialized training, according to a purchasing guide published by the governor’s office. The courts have held it can include other services, such as ambulance service.
Leighton said he believes PSC fits that category because other suppliers do not have the specialized ability to service city vehicles as PSC.
“It comes under professional service. They are providing a professional service,” Leighton said.
Activist: Bidding essential
Ceppa Hirko said she doesn’t think the sale of fuel, regardless of the service, comes close to fitting the definition of a professional service.
“The bottom line is they are supposed to bid this out,” she said. “How do we know we are getting a reasonable rate? They spent over $900,000 the last three years. How do we know we could not have gotten a better price and paid $700,000?”
Kauffman also said the city’s interpretation “sounds like a bit of a stretch.”
“They are providing a product they service. If you buy a refrigerator and you have a service contract . . . the service contract can be valuable, but what you’re really buying is a refrigerator,” he said.
It’s not clear how good, or bad, of a deal the city is getting from PSC. The Times Leader attempted to get examples of pricing from several other municipalities, but complete records could not be immediately obtained to conduct a complete analysis.
McLaughlin said even if a comparison were to show the city paid more, that’s not the only factor that needs to be considered.
“We must emphasize that the quality of service provided by Petroleum Services encompasses more than simply providing fuel,” McLaughlin said. “We are confident that the quality of service is consistent with the price.”
Leighton also questioned why Wilkes-Barre is being singled out for scrutiny. He said PSC officials told him they sell gasoline to other municipalities through no-bid contracts as well. Simms, the CEO of PSC, did not return a phone message Thursday seeking the identity of those communities.
A reporter attempted to contact several similarly sized communities to determine their policy on bidding fuel. Only two, Paul Keating, administrator for Kingston, and Mary Ellen Lieb, acting director of administration for Hazleton, responded.
Lieb said Hazleton does bid out its fuel purchases. The contract, which runs to Jan. 31, 2013, was awarded to Superior Plus Energy.
Keating said Kingston, which expects to spend roughly $105,000 for gas and diesel this year, also gets its fuel from Superior Plus, but the contract was not bid out.
Keating said the municipality sought bids in the past, but stopped the practice several years ago – even though its charter requires bids for anything over $20,000 -- because it got only one bid each year, and that was from Superior Plus.
“Every single year for maybe five, six or seven years straight we received only one bid, so we remained with them,” he said.
Keating acknowledged it was possible the municipality might get a lower rate if it bid out the purchase, but said any price difference would likely be negligible.
“When you are buying wholesale fuel, there is not a big margin for flexibility in pricing,” Keating said. “I’m not saying somebody may not be able to give a better price, but it’s not going to a material amount.”
Keating said he’s confident the municipality is getting a good price, but, based on questions raised about the no-bid practice, he would consider revisiting the issue.
“Due to the fact you brought this to my attention, when we cross next year’s budget, I will reconsider bidding fuel,” he said.