A rendering of Applegreen's proposed design concept for new Massachusetts service plaza buildings. Image courtesy of Applegreen
Inspector General Jeffrey Shapiro plans to release the detailed findings of his investigation into the Department of Transportation’s failed bidding process for a service plaza contract in the coming weeks, but he told lawmakers Tuesday afternoon that Massachusetts “is fortunate that the procurement was canceled.”
Shapiro’s comments, including what he said was a rare instance of his office confirming and discussing an investigation before it is complete, came during a hearing of the Senate Post Audit and Oversight Committee as that panel pursues its own inquiry of the failed procurement.
Chairman Mark Montigny said Tuesday that Interim Transportation Secretary Phil Eng is scheduled to appear before the committee on March 2. Eng is filling the vacancy left by the resignation of Transportation Secretary Monica Tibbits-Nutt, who led MassDOT during the contract procurement period.
The MassDOT board awarded a contract to redevelop and run 18 services plazas across the state to Irish retailer Applegreen and its partner, construction giant Suffolk, in June. The contract had a potential value of nearly $1 billion, Shapiro said, and was to last for 35 years. But Applegreen backed out of contract talks in September after rival bidder Global Partners waged media, legal and public relations offensives to block the MassDOT-Applegreen deal.
Montigny’s committee had also signaled that it would hold oversight hearings and raised questions about discrepancies between the rent amounts guaranteed by the Applegreen bid ($623 million to $994 million, according to a letter Montigny sent Tibbits-Nutt in September) and by Global (between $1.285 billion and $1.465 billion).
“Many factors likely contributed to the apparent successful bidder walking away before the contract was negotiated and executed, resulting in MassDOT’s decision to cancel the procurement. That many factors could have been the cause is troubling in unto itself,” Shapiro said Tuesday. “On the other side, had the bidder’s proposal resulted in a contract, that agreement would have been in place for decades. As inspector general, I believe that the commonwealth is fortunate that the procurement was canceled, simply because a contract of this size and for this duration should be done in a manner that mitigates such risk factors.”
Investigation Report Coming Soon
The IG said his “investigatory letter” would be released “within the coming weeks” and told lawmakers that it was rare for him to disclose an investigation before its completion.
“It won’t surprise anyone for me to say that there are plenty of lessons to be learned on how this procurement should be handled and how it can be done better next time. And to suggest, in its totality, that the procurement was a model procurement would simply be inaccurate,” Shapiro said.
Gov. Maura Healey has said that MassDOT “ran a transparent process” around the service plaza contract and that she was focused on getting the best services and deal for Bay Staters in the “major contract for the state.”
MassDOT did not respond Tuesday to a request for comment on Shapiro’s testimony.
On the last day of the previous service plaza contract, MassDOT finalized 18-month lease extensions with Gulf and McDonald’s to extend their existing master tenant leases through June 30, 2027, covering 14 of the state’s 18 service plazas. The remaining four plazas were already under lease through that same date.
MassDOT said in October that it will eventually rebid the service plaza contract. Shapiro said Tuesday that he sent Tibbits-Nutt a letter in August making recommendations for how MassDOT should handle long-term lease management based on his office’s review “of other MassDOT leases and the deficiencies our team identified in enforcement and management of lease terms.”
“We have seen overly complex contract terms that are difficult to enforce and manage, and then MassDOT not hold its business partners to the terms seemingly uncertain of the strength of their position,” he said. “This was of such a concern that I felt it warranted a letter directly to the secretary before the service plaza contract was finalized.”
IG Concerned About Payments on ‘Multiple’ Leases
Shapiro’s concerns stemmed from “two MassDOT leases that had outstanding balances due or missed payments on multiple leases.” He said his office brought the issue to MassDOT’s attention, and the department was able to recover $1.5 million from those leases.
“But that was hundreds of thousands of dollars less than what the [Office of the Inspector General] had calculated the leasees had owed,” he said.
Under questioning from Sen. Nick Collins, Shapiro disclosed that one of those contracts at issue “had to do with McDonald’s and service plazas.” The other was a complicated lease involving a company that ran fiber optic cables down the middle of the Mass Pike, he said.
“You know, my last breath, I will not believe that McDonald’s shouldn’t have paid us the full amount. You know, I’m not going to care about it. But you know what? They’re a Fortune – not only are they a Fortune 500, but I think there are Fortune 165,” Shapiro said.
Montigny said he agreed with the IG and throughout Tuesday’s hearing raised assorted complaints about the state’s array of procurement processes.
“I have to tell you, I sat in this same room and listened to a bunch of BS on things like the Big Dig […] And what I think, at the end of the day, is the overriding fact and fear for me is that we haven’t learned lessons,” Montigny said. “And perhaps [that’s] the one good thing that can come out of this — because we’re lucky, it imploded before money was spent or significant funds were spent.”
