Kansas City government enjoys nothing more than polishing its image as a professionally run city where facts and data — not political calculations — drive critical decisions.
But it doesn’t take its own advice.
A 2008 report by Kansas City’s auditor lists 20 best practices for finding vendors for city projects and services. The first one: Make a public announcement about it.
Kansas City Mayor Sly James and other city officials ignored that when they met privately last March to discuss a plan to give a no-bid $1 billion contract to Burns & McDonnell for a new KCI terminal. They continued discussing that plan in secret until The Star revealed it in May.
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“That beginning has kind of poisoned this to some degree so that there’s always a level of distrust, there’s always a level of trying to figure out what’s really going on,” Kansas City Councilman Scott Wagner said Thursday, when the council finally gave a narrow 8-5 majority to a memorandum of understanding with Edgemoor Infrastructure & Real Estate.
“I think that continues to play out.”
Residents and other observers over the last year said City Hall’s pursuit of a transformed KCI resembled something out of another age, larded with old-school politics. An embarrassment. A black eye. A mess.
Even among the genteel business community, there’s a sense that the Kansas City Council’s handling of the complex project had grown tiresome.
“I think oftentimes there’s discord that can create different types of politics and ultimately this probably took longer than any one would have liked and probably was not done as effectively you wanted it to be,” said Cerner president Zane Burke, who watched Thursday’s council debate from the second row. “But ultimately they came to the right result.”
Yes, the right result may be in hand, but the wrong process was taken to get there. After Kansas City started by ignoring its own procurement best practices, it seemed to make it up as it went along.
Crucially, best practices would have forbidden the city from pressing ahead with the sole source, or no-bid, contract with Burns & McDonnell.
Such arrangements are generally only acceptable if there’s an emergency or the contract is going to a company that offers a service so specialized or narrow that it doesn’t make sense to try and find other bidders.
KCI was a long-coveted municipal project, but not an emergency. And Burns & McDonnell wasn’t the only company that could build and finance an airport, something that became apparent when AECOM wrote a letter to council members expressing its interest in bidding.
The process was further complicated by the fact that Burns & McDonnell originally suggested a public-private partnership. It said it could finance the project with private equity and debt rather than the traditional method of cities selling bonds.
The complexities of navigating a public-private partnership was why the Kansas City Council voted to hire outside legal counsel, which included Husch Blackwell’s Charles Renner, generally regarded as a prominent public-private partnership attorney.
The city has spent $1.4 million on attorneys so far.
AECOM’s interest in KCI forced the city’s hand to open up the project for bidding.
Initially, James suggested having what’s referred to as a “Swiss challenge” where Burns & McDonnell, by virtue of presenting the original offer, could match the best offer. But there’s nothing in Kansas City’s procurement best practices that allow such an arrangement, and City Hall backed away from the idea the following week.
The following misstep in the KCI procurement process was a short, truncated time line of only a few weeks to accept bids.
Procurement experts told The Star at the time that a process like KCI should take nine to 12 months. The city relented once again and extended the period during which it would accept offers through August 2017. Eventually, Edgemoor won.
As Thursday’s vote approached, all the missteps added up to obvious worry about what would happen if Edgemoor was discarded.
How would the public take it?
“Most of all, it would breach the trust with 76 percent of the voters who are watching us and saying, ‘what the heck are you doing?’” said James in a fiery floor speech, imploring council members to keep working with Edgemoor and resisting the idea of negotiating with AECOM and Burns & McDonnell.
Jolie Justus, a councilwoman deeply involved in KCI discussions as chair of the Airport Committee, resists labeling the process as an embarrassment.
“The process was not smooth, without questions,” she said.
Kevin Koster, a Northland marketing executive who served on James’ Airport Terminal Advisory Group, is more blunt.
“I would agree that it started out as being a very dishonest and poorly represented process in the first place,” Koster said. “Very quickly nobody trusted anything.”
Justus said a factor was the nature and size of the KCI project.
Jan Marcason, who served eight years as a councilwoman, agrees that Kansas City may not have been ready for the difficulty of pulling off the type of procurement necessary for an airport project.
Marcason was a key council member involved in a much bigger infrastructure project: Kansas City’s federal mandate to replace its sewer systems to the tune of $4.5 billion.
She points out that planning for the sewer overhaul started during the Kay Barnes administration, five years before the federal government required sewer replacements to begin in 2010.
“It is a little difficult when you have a deadline,” Marcason said.
For all the hue and cry about the messiness of the KCI pursuit, voters did approve a new terminal, stunning city leaders who for years said they were heeding residents who said they loved KCI.
And the city has the framework of an agreement with Edgemoor.
And to some, there were real signs of progress and improvement in the deal along the way.
“A lot of people have been very critical about our process, of how it started and where we are today,” said Alissia Canady, a council member who rejected the initial Edgemoor MOU but approved it on Thursday. “This process, as convoluted as it has been...saved the city of Kansas City $766 million.”
The $766 million comes from a City Hall analysis of the costs of Edgemoor’s debt-only financing proposal compared to the original no-bid Burns & McDonnell offer that contemplated using private equity and a blend of tax-exempt and taxable debt.
Justus said it is important that City Hall review how big procurement projects can be improved, especially as public-private ventures become more common in the absence of state and federal funding for infrastructure projects.
That starts, she said, with keeping elected officials at arms length from the process.
“What would be embarrassing is if we did this again,” Justus said.