NEW ROCHELLE, NY -- Talk of the Sound has been raising issues concerning the contract between the City School District of New Rochelle and ARAMARK Management Services for several years now, urging the Board of Education to order the administration to terminate the ARMARK contract or, at the very least, exercise the District's option to replace the consultants ARAMARK has placed in the New Rochelle school district.
Through numerous stories, Talk of the Sound has exposed corruption endemic to the Buildings & Grounds Department under ARAMARK's watch and the lack of financial controls under John Quinn, the Assistant Superintendent for Business & Administration.
Over the past two years, the ARAMARK contract has been the subject of numerous Board meetings and executive session discussions. A "new" ARAMARK contract was supposedly put in place effective July 1, 2013. It was supposedly read from during a June 2013 school board meeting. It was referenced numerous times during a lengthy dispute over Talk of the Sound's efforts to obtain the "new" ARAMARK contract under a Freedom of Information request dating back to January 24, 2014.
This week, on April's Fools Day no less, Talk of the Sound learned that there was no "new" ARAMARK contract all.
Instead of receiving the "new" contract, on April 1st, 2014, Talk of the Sound was provided a draft version of an ARAMARK contract dated "March __, 2014" -- unsigned, never executed -- by the School District Clerk who states that the draft ARAMARK contract is only now being reviewed by the District's Counsel.
To fully appreciate the magnitude of this epic failure by the City School District of New Rochelle, some context is required.
In March 2012, John Quinn, the Assistant Superintendent for Business & Administration, and Richard Organisciak, the then-Superintendent, brought forward a resolution to pay three ARAMARK employees directly, a violation of the terms of the contract under which ARAMARK provides the City School District of New Rochelle Management Services for the Buildings & Grounds Department.
Resolution 12-266-1 was to pay ARAMARK employees John Gallagher, James Purdie and Anthony Rigos, for "additional work related to the one-time special film project by FTP Productions”. This work purportedly occurred over a weekend at Isaac E. Young Middle School when a TV show was filmed at the school. Neither Gallagher, Purdie or Rigos were present at all that weekend, sources told Talk of the Sound at the time.
Based on our reporting, Talk of the Sound believes that the purpose of this resolution — brought forward at the last minute at a Special Meeting where it was to be discussed and voted upon at the same meeting -- was an attempt by Quinn and Organisciak to put three ARAMARK employees on the District payroll just days before the deadline for New York State public sector employees to qualify for the more lucrative Tier 5 pension before the new Tier 6 pension went into effect. Board resolutions are rarely presented and voted on the same night except for situations where there is some looming statutory or contractual deadline.
Such a move only makes sense if Quinn and Organisciak were anticipating that Gallagher, Purdie and Rigos might someday leave the employ of ARAMARK and come to work directly for the New Rochelle Board of Education at which point their start date would be backdated prior to the Tier 5 cut-off date thus enabling them to claim the more lucrative pension.
Talk of the Sound believes that Quinn and Organisciak were concerned because Board members at the time were increasingly willing to terminate the ARAMARK contract due to reports of malfeasance and corruption within Buildings & Grounds on ARAMARK’s watch. In short, that Quinn and Organisciak were anticipating an “end around” on the Board to retain the services of Gallagher, Purdie and Rigos even if the board ordered the ARAMARK contract terminated.
At the time, the only contract in force was a "Management Services” contract which dated back to 1987 under the corporate name "SERVICEMASTER" which was subsequently acquired by ARAMARK. That contract was converted to ARMARK and extended in 1990. The same contract was regularly adjusted for inflation. The most recent adjustment, based on records obtained by Talk of the Sound, was a letter from Stephen Weiser an ARMARK Vice President, and John Quinn dated December 12, 2007.
In March 2012, Weiser told Talk of the Sound he was completely unaware of the New Rochelle Board of Education seeking to pay ARAMARK employees directly. The resolution was tabled and never re-introduced.
After the incident came to light, a majority of board members claimed to support getting rid of ARAMARK.
Yet, at every step of the way since, Quinn went to extraordinary lengths to protect the ARAMARK relationship and, in particular, John Gallagher.
As of June 2012, the District had no contractual obligation to continue to employ ARAMARK and a majority of board members told Talk of the Sound they supported terminating the ARAMARK contract.
Instead, the board was convinced by John Quinn to approve Resolution 12-352 extending the contract to June 30, 2013.
Board Member David Lacher, now President of the Board, told Talk of the Sound at the time that the extension was done because Mr. Quinn convinced the board to wait until the following year before putting the contract out to bid. Why it would take a year to complete an RFP process was never explained.
In the fall of 2013, Quinn had what he later described as a "very thorough review" of the Board's wishes regarding any future Management Services contract for Buildings & Grounds.
Subsequently, a Request for Proposal was put out with a deadline of March 15, 2013.
Seven companies were sent a copy of the Request for Proposal document. The RFP indicated that the winning bid would not be based on lowest price but rather Mr. Quinn's estimation of the winning bidder's knowledge of the needs of the District. In other words, Quinn could pick whoever he wanted regardless of price.
Not surprisingly, just two companies did "walk throughs" and only one submitted a bid.
In March 2013, that one bid, from ARAMARK, was opened in the Purchasing Department offices at City Hall.
On June 25, 2013, Mr. Quinn appeared before the Board of Education to answer questions about the Board resolution to formally approve awarding the Facilities Management contract to ARAMARK.
[EDITOR'S NOTE: Readers are advised to open the two Resolution documents linked below in order to follow along.]
What follows is a partial, excerpted transcript from the video of that meeting with notes and a link to Resolution 13-306 which was presented for a vote that night along with the Bid Award document. It begins with David Lacher asking a question of John Quinn.
DAVID LACHER: "What is the actual term of this contract going to be? Are you we going to be asked to renew it every year?”
In the meeting, Lacher goes on to say he does not to want to find the district in a position where the District did not bid out the contract for a very long time. Quinn adds that it was the first time the ARAMARK contract was rebid in 20 to 25 years. The contract was bid in 1987, 26 years earlier.
JOHN QUINN: "We are accepting the alternate on it which includes the supplies with the fee and its an annual contract. It can be extended but its for five years so we’re approving one year and then it would be with the annual extension up to five years"
LACHER: "Does that mean the minimum term is 5 years?"
QUINN: "The minimum is 1 year. The minimum pricing is for 1 year."
RFP 13-4 AWARD Sheet says “For the Full Term of the Contract” and lists prices from 2013-14 school year until 2017-2018 school year.
LACHER: "I see the prices were quoted for 5 years."
QUINN: [reading along with, but not precisely quoting, the language from NRBOE-Resolution-13-306]: "The prices firm June 30th, 2014 with option to extend term annually for additional periods subject to formal board approval. So, what you are doing is approving for one year and should the Board choose to extend it they can do it annually at these rates which are listed here and these rates which are listed here include supplies.”
This is not even a remotely accurate description of the draft ARAMARK contract provided to Talk of the Sound on March 31, 2014.
Section 2 of the The DRAFT ARAMARK Agreement addresses renewals:
Section 2 (Term: Renewals) states “The initial term of this Agreement will begin effective as of July 1, 2013 (the “Commencement Date”), and will continue for a period of five (5) years (the “Initial Term”)”.
Section 2 (Term: Renewals) continues “Thereafter…”
The word “thereafter” is used to indicate that after the Initial Term, which is five years, something happens. What?
Section 2 (Term: Renewals) continues “…this Agreement will renew upon mutual agreement of the Parties for consecutive terms of one (1) year each (individually, a “Renewal Term,” and collectively with the Initial Term, the “Term”)
So, what does that mean? It means that after 5 years, if neither party takes action to the contrary, the contract will automatically renew for a period of one year and continue to do so in perpetuity.
In other words, the ARAMARK contract is the exact opposite of what Quinn is telling Lacher. It is a FIVE YEAR contract which automatically rolls over for a year at a time, in perpetuity, starting in 2018. Put another way, Quinn is telling Lacher the contract is what Lacher wants when it is the exact opposite, it is precisely what Lacher is telling Quinn he wants to avoid.
Section 2 (Term: Renewals) continues “Either Party may elect not to renew this Agreement at the expiration of either the Initial Term or any Renewal Term by giving the other Party written notice to the effect not later than (90) days before the date on which the then current Initial Term or Renewal Term would otherwise end.”
This is a colossal deviation from what Quinn is telling Lacher.
Under the "Term: Renewals" section of the contract, the “new” ARAMARK contract is a five year contract with annual renewals after the fifth year not a one year contract that can be renewed annually for five years.
Why is it so important to Quinn that Lacher, the rest of the Board and the world at large believe that the five year contract is a one year contract that can be renewed annually at prices set for five years?
Under New York State General Municipal Law Section 103 and New York State Education Law subdivision 14 of Section 305, school districts in New York State are not allowed to enter into multi-year service contracts for more than one year.
The New York State Education Department Purchasing Handbook specifically prohibits contracts for "cleaning/maintenance, trash removal, maintenance of clock systems, care of grounds and snow plowing". Multi-year contracts are only allowed with specific legislative authority and Section 103 of the General Municipal Law allows only for multi-year transportation and cafeteria service contracts.
A contract for the purchase of management services for cleaning and maintenance of school buildings would also need to meet the above conditions, unless exempt as a professional service under General Municipal Law. In any case, where contracts include the purchase of supplies, materials and equipment, the one-year contract limitation and the bidding requirements of Section 103 of the General Municipal Law apply.
Under GML, professional services contracts are not required to be competitively bid and the ARAMARK contract was bid so Quinn is not disputing that the ARAMARK contract might qualify for an exemption.
When Quinn states "We are accepting the alternate on it which includes the supplies with the fee" he is confirming that the contract include the purchase of supplies, materials and equipment so even if he were to argue the contract was a professional services contract it would still be subject to the one-year contract limitation and the bidding requirements.
When Quinn states "its an annual contract" but "we’re approving one year and then it would be with the annual extension up to five years" he is seeking to stay within the confines of GML.
There is another section that addresses terminating the contract, the "Termination; Force Majeure" section:
7. Termination; Force Majeure
(a) If at any time during the term of this Agreement either Party considers terminating the Agreement such Party shall give the other Party written notice that it is considering such action, which notice shall set forth with sufficient specificity such Party’s reasons for contemplating termination. During the following thirty (30) day period the Parties shall discuss, in good faith, the Party’s reasons for considering termination in an effort to avoid the need for such action. Following the thirty (30) day discussion period, the Party considering termination, if not fully satisfied, may elect to terminate the Agreement by giving the other Party sixty (60) days’ written notice of its intention to terminate; provided, however, neither Party may give notice of its intention to terminate during the first (90) days of operation under this Agreement.
Within the scope of Lacher's questions, this section states that if the District wishes to terminate the contract during the initial five years, or during any year after the initial five years, the District would have to give notice of a desire to terminate the contract and then go through a process where it would have to justify its reasons for doing so and to enter into a discussion period during which the District would have to act in "good faith".
"Good faith" is a legal term which entails "a general presumption that the parties to a contract will deal with each other honestly, fairly, and in good faith, so as to not destroy the right of the other party or parties to receive the benefits of the contract."
This is standard boilerplate in contracts but does provide the basis for a cause of action. In other words, if the District sought to terminate the contract, ARAMARK could file a lawsuit claiming that the District was not acting in good faith, that they are trying to get out of the contract based on technical excuses.
Lacher continues to press Quinn. His instincts are correct that Quinn is not being clear in his answers.
LACHER: "If for whatever reason we didn’t want to do business with ARAMARK after two years or three years or four years could we get out of this arrangement or are we locked in for 5 years?"
QUINN:[reading along with, but not precisely quoting, the language from NRBOE-Resolution-13-306]: "It says 'with the option to extend term annually for additional periods' so as I would look at this I would say that you can you can get out at the end of one year or two years or three years.'
Quinn is being asked a simple and direct question about the ARAMARK contract by Lacher. Quinn is not answering the question. Instead he reads the resolution to award a contract to ARAMARK and says his reading of the resolution is that the District can get out of the contract at the end of any given year of the contract. This is preposterous. ARMARK does not sign Board Resolutions, they sign contracts. It does not matter to ARAMARK what a Board Resolution says; the contract between the District and ARAMARK will govern their relationship not a resolution of the New Rochelle Board of Education.
Quinn then shifts directions, trying to give himself an out.
QUINN: "Now I’m going to verify that because this is something which we did back in the fall with a lot of interaction with the Board but I’m gong to have to go back and just verify before I give you a firm answer…that’s my memory of our very thorough review."
This makes no sense either. Whatever discussion took place in the Fall of 2013, ARAMARK submitted its bid on March 15, 2013 so any contract negotiations would have taken place in the last 90 days not the last 9 months.
LACHER: "I just want to make sure the final contract as opposed to this resolution doesn’t bind us and then we find out that we are really bound for five years.”
Yet this is precisely what the "new" ARAMARK contract, the draft, proposes to do.
Chrisanne Petrone, Board President at the time, then suggests tabling the motion. Lacher thinks that might be a good idea since Quinn does not appear certain in answering his questions. Quinn then makes a bizarre suggestion to change the resolution on the fly. Apparently, this is how $3.5 million deals get done in New Rochelle -- make it up on the spot.
QUINN: “What you could do is vote on it for one year. Make it very clear that what you’re doing is voting on it for one year and each year thereafter requires Board vote as the resolution states."
LACHER: "Are we supposed to vote on this tonight?"
PETRONE: “We are voting on this tonight.” (she repeats this statement four times)
Lacher then asks about tabling the motion for “next week”.
Quinn wants no part of that; he wants the resolution passed that night. The then-current ARAMARK contract was set to expire 5 days later.
QUINN: “Well, I won’t be here next week, unfortunately you changed the date…and I had a family issue with…ummm...we had the generator…so I had to switch.”
It is hard to fathom what Quinn is saying here -- blaming the board, a family issue, a piece of electrical equipment? He is saved from his own ramblings by Chrisanne Petrone who again repeatedly states “We are voting on this tonight.”
Does this sound familiar?
An ARAMARK resolution brought forward at the last minute by Quinn at a Special Meeting that is to be discussed and voted upon at the same meeting. This is precisely what Quinn and Organisciak did in March 2012 when they attempted to put three ARAMARK employees on the District payroll just days before the deadline for New York State public sector employees to qualify for the more lucrative Tier 5 pension before the new Tier 6 pension went into effect.
Sensing the Board might just table the resolution, Quinn tries a different tack.
QUINN: “Why don’t you wait on it. I will go up to my office. Look at the file and come back.”
A District administrator leaving a board meeting to go back to their office to get information to answer a question from the Board is unprecedented. Quinn leaves and returns a short while later. Realize as Quinn is speaking that Talk of the Sound has since confirmed there is no contract.
QUINN: [purporting to read from the "new" ARAMARK contract] “On the facilities management contract the contract term, 'termination, the term of the contract will be for five years from Board of Education approval with an anticipated contract start date of July 1, 2013. Not withstanding the foregoing the District reserves the right to terminate the contract as follows…one…effective at the close of business on any June 30th for any reason and without penalty so long as written notice of termination shall have been given to the Facilities Manager no less than 120 days prior to the date of termination.' So that allows… that would mean…I think its...February, March [EDITOR'S NOTE: 120 days from June 30, 2014 is Sunday, March 2, 2014] we would have to discuss are we going to extended it and then when we look at the resolution its quite clear saying that it is with an option to extend term annually for additional period subject to formal board approval so it will require formal Board approval annually, if we are looking at doing a change we would have to have that discussion in the February time period but this was written so that we wouldn’t have the situation where we go extended periods without board review and approval."
PETRONE: "But John, we are locked in for five years, correct, that is what I just heard you say..."
QUINN: "A five year contract…"
PETRONE: "A five year contract and one year options every year after that..."
While Quinn is telling the Board that renewing the ARAMARK contract will "require formal Board approval annually" it is the opposite in what Quinn read to the Board. The contract will automatically renew unless the Board takes formal action not to renew and this will not occur in five years. In the actual contract, there is no such provision.
QUINN: "It is a five year contract but not withstanding the foregoing the District reserves the right to terminate the contract as follows, effective at the close of business on any June 30th for any reason and without penalty so long as written notice of termination shall have been given to the Facilities Manager no less than 120 days prior to the date of termination."
The contract provided to Talk of the Sound does not contain language that 120 days notice is required nor that notification under the contract occurs when written notice of termination is given to the Facilities Manager. The Facilities Manager is John Gallagher. In other words, Quinn is telling the Board that ARAMARK contract can be terminated with 4 months notice by sending an email to Gallagher. This is pure absurdity.
It would appear from the Draft ARMARK Contract, that the company contemplates a more formal notification process:
9. General Provisions
(a) Notice. Any notice under this Agreement must be in writing, and will be effective when delivered personally, delivered by a national overnight delivery service, or three (3) business days after being deposited in the United States mail (postage prepaid, registered or certified). All notices will be addressed to the receiving Party at the following address (or such other address of which the Party has given proper notice):
If to District
NEW ROCHELLE SCHOOL DISTRICT
Attn: Assistant Superintendent for Business & Administration
550 North Avenue
New Rochelle, NY 10801
If to ARMARK:
ARAMARK MANAGEMENT SERVICES LIMITED PARTNERSHIP
Attn: Vice President and Chief Financial Officer, ARMARK Education (K-12)
1101 Market Street
Philadelphia, PA 19107-2988
With a copy to:
ARAMARK MANAGEMENT SERVICES LIMITED PARTNERSHIP
Attn: Vice President and Associate General Counsel, ARMARK Education (K-12)
1101 Market Street
Philadelphia, PA 19107-2988
Nowhere in the Draft ARMARK contract does it say that written notification to an employee like John Gallagher constitutes formal notification to ARAMARK MANAGEMENT SERVICES.
Having asked all the right questions but never having asked to see a copy of the "contract" Quinn purports to be reading from (that would be "micro-managing" in Lacher's mind), Lacher gives up.
PETRONE: "Is that good David?"
LACHER: "Yes, that’s satisfactory."
PETRONE: "Thank you Mr. Quinn."
LIANNE MERCHANT: "We would just have to remember to make sure in March to have a…to queue ourselves."
LACHER: "If we miss our deadline of 120 days then we own each other for another full year..."
QUINN: "Actually, I think I’ll have to remember that that’s on me."
LACHER: "Yes sir, it is."
At this point the discussion is over and the Regular Meeting ends. The Resolution is then adopted by the Board during the Special Meeting which immediately follows the Regular Meeting.
So, what is Quinn reading during the meeting?
He is reading an excerpt from the Facilities Management RFP.
The RFP has a section called "Contract Terms" which states that "upon award of a contract to the successful Proposer, the following terms shall be deemed to constitute the Agreement between the successful Proposer (Facilities Manager) and the District"
This section includes a subsection on "Contract Term: Termination". The parts Quinn is reading to the Board is emphasized in bold.
Contract Term: Termination
The term of the contract will be for five (5) years from Board of Education approved, with an anticipated contract start date of July 1,2013.
Notwithstanding the foregoing, the District reserves the right to terminate the contract as follows:
1. Effective at the close of business on any June 30, for any reason and without penalty, so long as written notice of cancellation shall have been given to the Facilities Manager no less than 120 days prior to the date of termination.
2. On ninety (90) days' notice to the Facilities Manager, without penalty, for a material breach of the Facilities Manager's obligations, the nature of which breach shall be set forth in the notice of termination, if the Facilities Manager shall not have taken substantial steps to cure the breach within ten (10) days after receipt of such notice
3. Without notice and without penalty if the Facilities Manager shall have by act or omission, endangered the safety, health, morals or welfare of any District student, parent of a student, staff member, invitee or licenses.
Language elsewhere in the RFP appears to indicate Section 2 of the RFP is intended to be a precursor to a formal contract, signed by both parties.
Section 2.16 "Integration" states "...the terms of this document shall be deemed a part of every proposal submitted to the Board of Education, and shall be deemed a part of every contract entered between the Board of Education and successful bidders pursuant to the award of such bids".
Section 3.14 "Notice of Award" states that the the awarding of the contract "shall be contingent on the execution of a written agreement satisfactory in form and substance to the District, and which conforms to the contract terms set forth in Section 2 of this RFP."
In other words, the RFP states terms that the District will require to be contained in a formal, executed contract to follow, after the RFP process is completed and the bid award approved by resolution of the board and that until such time the terms in the RFP are deemed to be in force. What appears to have happened is that no one bothered to follow up to negotiate and sign such a formal contract.
The District has not provided any documentation to Talk of the Sound -- despite repeated requests under Freedom of Information laws -- that indicates that ARAMARK either formally agreed, in writing with a signature, to the terms in the RFP or prepared and executed a formal contract.
Further, there is no explanation as to how either the RFP or the draft ARAMARK agreement conform to New York State General Municipal Law -- both documents clearly state the term of the agreement is for five years when the law expressly prohibits multi-year service contracts.
What remains missing from this timeline is what happened (or did not happen) between June 2013 and January 2014 regarding the execution of a formal contract and from January 24, 2014 until March 31, 2014 when ARAMARK sent the District a draft agreement as a result of the Freedom of Information request filed by Talk of the Sound and what has happened since March 31, 2014 when the draft agreement was sent to the District's Counsel for review.
The bigger question is, what contract do the two parties consider to be in force at this time? Does the amended 1987 contract apply? Or, do the terms of the RFP apply despite their not specifying any sort of significant detail as is found in the draft Agreement sent by ARAMARK on March 31st? Or, does the draft agreement sent by ARAMARK on March 31st apply?
Whatever the case, the situation with ARAMARK is a tangled, muddled mess.
EDITOR'S NOTE: This article has been updated since original publication on April 2, 2014. The paragraphs towards the end of the article on the Facilities Management RFP have been added and the closing paragraphs changed to reflect the new material.