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P O Box 783
Brea, California 92822-0783
(714)671-1597 Voice
(714)255-9775 Facsimile
April 3, 2016
Ms. LaTonda Simmons, Oakland City Clerk (lSimmons@oaklandnet.com)
1 Frank Ogawa Plaza #1
Oakland, CA 94612
Phone: (510) 238-3226
RE: RESPONSE TO FORMAL BUSINESS LICENSE BID PROTEST (via Certified Mail 7012 2920 0002 0508
1456 & Email)
Subject: City Council Agenda item No. 8; For City Council meeting, April 12, 2016
To: Oakland City Clerk and Members of the Oakland City Council,
Please accept this letter as formal notification of our intent to file a claim against the city for wrongful procurement process regarding the
subject procurement of the Citys local tax software system.
We are alleging that the procurement process was corrupt because it appears that the decision to award this contract to Hdl was predetermined, even before the subject RFQ was issued. The bidding process was started by a Mr. David McPherson, the now former
head of the Citys Revenue Administration department. Mr. McPherson, after being accused of violating city law, left the City and is now
working for Hdl. All during the bidding process the City staff refused to provide adequate answers to direct questions. The bidding
process was rushed and not done in an open or transparent manner. In fact when we attempted to obtain supporting documentation for
this agenda item, we were informed that it was only available from Margaret Obrien and not from the city clerk (i.e. you may be voting to
approve over one million dollars without supporting facts and figures; further the citizenry is unable to review any supporting detail and is
totally in the dark.). All of these facts support a conclusion that the entire RFQ process was rigged to produce a result quite apart from
the merits of the individual software offerings, and specifically, to make an award to the company that would become Mr. McPhersons
new employer.
This software is responsible for so much revenue that it is important that the City gets it right. Procuring software systems such as the
subject are very complex and simply cannot be purchased off the shelf (such as those from a store) as Staff claims they are attempting
to do here unless licensed from Progressive Solutions who currently meets all stated requirements. Right now and for the past decade,
Oakland utilizes Progressive Solutions software to bill for and collect over $150 million in annual revenue from local taxes, or about 30
percent of the Citys general purpose fund revenues. Progressive Solutions' proprietary licensed software is often adapted to meet each
client's particular needs. Over the last decade, as Oaklands needs changed, PSI's software was also changed and enhanced. Thus
meeting all of Oakland's needs, making it as easy and efficient as possible for its revenue department to collect all the taxes due the City
and making sure nothing falls through the cracks. It is no exaggeration to say that every Oakland business, and every local business tax
dollar that comes into the Citys funds, is billed and tracked by PSI software. This is the system that provides critical dollars to the Citys
programs, and which programs would falter if there were any termination, or even any interruption in that revenue stream, caused by an
imprudent purchasing decision. Oakland was so successful with PSIs software that it continued for several years and in fact additional
complementary services were ordered to expand upon that success. Then suddenly after many promises to renew the existing
agreement for reasons we believe to be self-evident, city staff failed to renew.
As further evidence of a corrupt procurement process, PSIs was rated as the least experienced vendor of all the vendors who had
submitted a bid. This rating is patently absurd because PSI is the ONLY vendor who has direct experience providing this sort of software
to the City of Oakland. As the above example makes clear, PSI knows better what Oakland's requirements are than the City itself. It is
PSIs software, and only PSIs software, that the City is using, and has been using. Even McPherson himself has been quoted in the
EastBay Express, that in 2015 alone, [PSIs software] processed over 80,000 renewals and 40,000 license certificates without a hick up
[sic]. (See, East Bay Express, June 03, 2015.) Previously, Margaret OBrian has testified to Oakland City Council that PSI is the only
company with the experience and capability to handle the Citys local business tax software. It just does not make sense that after all
that, PSI could be fairly rated as being the least experienced provider for this software. Instead, it must be considered the most
experienced provider, and would have been, if the process were fair and not pre-determined.
We do not see how the City could possibly expect anything like its present revenue stream if it substituted PSIs software to another
vendor, based upon the Citys specifications and the approach used in this bidding process. The specifications issued by the City are
simply inadequate and do not include all the features and functionality presently available in PSI software and which features have been
determined to be necessary by the Citys own staff in doing their jobs. Furthermore, the software is very comprehensive because it
serves so many different types of businesses and also is responsible for tracking both large and relatively small amounts from many
different sources and under many different circumstances.

Innovative Software, Outstanding Software, Tailored to Fit

The Citys procurement process was defective from the start when the City issued a RFQ (Request for Quote) instead of a RFP (Request
for Proposal). The distinction is important. A RFQ means that the product is more like a commodity and the purchasing decision is
based primarily on price, assuming a select number of commonly available and generally understood specifications are met. A RFP, on
the other hand, should be used when the product is so complex that the buyer is unsure of all the specifications and the buyer would
benefit from reviewing proposals. Here, the City pointedly stated it was seeking, an off the shelf solution, for a product that must be
custom made. Just as PSIs proprietary licensed software was custom tailored to the citys needs and must be continually upgraded to
accommodate changing local and societal needs.
After the RFQ process, over 50 questions were submitted by vendors (including PSI) who attempted to clarify the Citys requirements
and its bidding process, including its process for protesting awards. The answers showed the City was not interested in a transparent,
verifiable and fair bidding process. Example:
PSIs Question: I understand the city desires an off the shelf solution and the advantages that come with such a solution. I also
understand that the city has unique requirements that may not be available in off the shelf solutions. Just how much customization will
[the city] allow before the project moves from a commercial office the shelf system to become a custom solution?
Citys Answer: This is subject to future determination by the City and to negotiations with the selected vendor [Italics added for
In other words, the City was already preparing to conduct negotiations with its selected vendor after the purchase to determine what its
final requirements would be. Citys answer shows it knew it couldnt rely on its specifications. It shows the City was seeking to sneak
past the public laws requiring open bidding and just get to the post issuance phase where it could negotiate with its pre-determined
In about 2006, when PSI was first selected to provide business license and local tax software to the City, the evaluation of the RFP
process at that time took nearly two years. Here, not only is the procurement process not being done properly, and was rushed, but the
award to Hdl doesn't even have the safeguard of delayed payment until validation or a full refund clause that was required of PSI in
2006. An award to Hdl under those circumstances would leave the City open to possibly interrupted and/or lost revenue while an
inexperienced vendor learns Oakland's requirements, all on Oakland's dime. Here, the City is completing an evaluation for an award in
less than 6 months, in spite of the fact that over the last decade, the citys requirements and the complexities of the Citys revenues has
increased. Even after that extensive negotiation and proposal period, the City insisted on a contract that allowed it to defer payment until
the City had completed its full evaluation of all the functionality of PSIs softwarePSI waited almost 2 years for the city to make their
first software payment.
We believe, and intend to prove as part of our lawsuit against the City, that PSI was terminated and Hdl is being selected for corrupt
reasons. We believe that PSIs unexpected termination under mysterious circumstances and this sudden need for new software is a
ruse to provide a kickback or some other benefit to person, or persons, involved in the selection process. We believe that the conflict
of interest that McPherson publically stated he had with Hdl was related to his being sudden hiring by that firm so soon after he left the
Citys employment.
Further as requested via Records Request 14469 submitted on March 12th (almost a month ago), per 2.04.040 of the Oakland municipal
code, the city administrator shall institute informal and formal contracting procedures. Such mandatory contracting procedures have yet
to be produced and if none were available at the time of the procurement, this procurement was invalid per Oakland city code.
That is why we intend to proceed to seek an injunction against the Citys award of this contract. We intend to ask the court to enjoin the
City from issuing the contract unless and until the City re-starts the whole evaluation from the beginning using an appropriate, open,
transparent and fair RFP process. And then let the best company win, whoever that might be, but based upon the best value to the City
and to its taxpayers, and not on cronyism or some corrupt reason.
Meanwhile, we are also requesting that the City Council respect the rule of law and cooperate with the legal processes currently
underway and not complicate or delay justice by letting a contract that will likely be found to be void ab initio anyways.
Respectfully Submitted,

Glenn R. Vodhanel, President

Progressive Solutions Inc.
Mr. David Pereda, Supervising Deputy City Attorney (dpereda@oaklandcityattorney.org)
Margaret Obrien, Acting Revenue Manager (mobrien@oaklandnet.com)

Protest to the Oakland City Council from Progressive Solutions

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