A state arbitrator has awarded an IT contractor $310,689 in damages to be paid by the Belleville Board of Education, socking the already fiscally burdened board with another debt.
But even more alarming is the finding by arbitrator Barbara Byrd Wecker that the board essentially brought its catastrophic IT trouble – a 2014 Labor Day weekend computer system crash – on itself by ignoring the advice of the contractor, Clarity Technologies of Mine Hill.
And, further, Wecker concluded, the board’s state-appointed monitor Thomas Egan “exceeded his authority” in abruptly canceling the contractor’s contract and then “apparently entered into a multimillion dollar contract with another firm … apparently financing that undertaking with a very substantial loan from the state – a loan that was to allow payment on Clarity’s invoices ….”
News of the arbitrator’s decision, dated Dec. 9, 2015, was made available at last Monday’s school board meeting and The Observer obtained a copy last Friday. The arbitrator held hearings into disputed billings between the BOE and Clarity on May 27, June 3, Aug. 10 and Sept. 24, 2015.
Clarity previously received a single-bid contract from the board for nearly $1.2 million to provide security-related upgrades throughout the school campus. That contract was not the subject of the arbitration.
Schools Superintendent Richard Tomko told The Observer that Clarity had sought a total of $641,699 in damages, including interest. “This [arbitration] settles everything with Clarity. We’re done,” he said.
However, Tomko quickly added, there may be another non-fiscal issue involving Clarity upcoming as a result of the school board voting 5-1 last Monday to direct its general counsel “to have our lawyers (Schwartz Simon Edelstein & Celso) investigate for possible malfeasance with Clarity.”
Still, “because the monitor was unaware of this proposal [pitched by board member Ralph Vellon],” and since there was no provision for a retainer in the board resolution, the board may be asked to re-examine the issue, Tomko said.
At issue in the arbitration, filed by Clarity Sept. 30, 2014, and amended April 2, 2015, were two additional contracts given Clarity: an Enterprise User Service Agreement (EUSA) “to provide ongoing network telephony and broadband services” for three years at $123,828 a year ($10,319 per month) awarded March 13, 2013; and an Information Technology (IT) management services contract “to supply and install new equipment provide hardware support and repair throughout the district, including system administration, on site and remote support and regular reporting,” for five years at $20,000 per month.
Based on testimony heard during the hearings, Wecker wrote in her opinion that after Egan was appointed monitor in May 2014, “the district stopped paying Clarity’s invoices, which included the monthly EUSA and IT payments due, as well as overdue invoices for hardware and parts supplied under the IT agreement over the previous months.”
Egan told Clarity principal Bruce Kreeger “that when funds became available from an anticipated loan from the state, Clarity would receive some payments,” Wecker wrote; yet, after Kreeger cut off some services, the district managed to pay some of those outstanding bills, she noted.
During spring and early summer of 2014, Wecker observed, Clarity agents warned “that the district’s [security and communications] systems were at risk” because “certain disk drives, essential to keeping the district’s server running, were failing and needed replacement to avoid the risk of a catastrophic system failure.”
In response, Wecker noted, a district employee entrusted with IT responsibilities ordered replacement parts from an outside source “instead of purchasing the drives that Clarity had in stock for that purpose” and despite the fact that those drives “were not compatible with the ‘array’ that kept the server in operation and could not be installed to replace the failing drives.”
Nor, Wecker wrote, would the district approve purchase orders sought by Kreeger, or remedy “failing air-conditioning in the serving room required to keep the server safe” or bother to update its “license for certain Symantec software … thereby making certain stored information difficult or even impossible to restore in the event of a system failure.”
On Aug. 11, 2014, Egan advised Kreeger he was going to terminate Clarity’s services in 90 days as “too expensive,” although it is unclear whether the school board actually did follow through to do so, Wecker wrote, but in any case, she said, “neither [the board nor Egan] had that right” because they lacked “cause” to justify it, never having established a record of complaints about Clarity’s service.
Then, after the Labor Day weekend systems crash, Wecker noted that Egan “essentially dismissed Clarity from the recovery effort” and called in Pro Media to deal with it.
Writes Wecker: “The district attempts to use the crash itself, relying in part upon the testimony of Pro Media’s president … to discredit the quality of Clarity’s performance ….[even though] the district raised no significant performance issues with Clarity before its contracts were terminated.”
Wecker rejects the school board’s claim that Clarity failed to obtain an ‘e-rate’ government discount it says it should have received on the grounds that, “the evidence is clear that it was the district’s own responsibility” to seek that discount.
Although Clarity had asked for full payment on its multi-year agreements with Belleville, Wecker concluded that, “in light of the district’s troubled financial condition … it would be unreasonable to award Clarity damages for the three-year period described in the EUSA or the five-year period described in the IT agreement.”
Instead, Wecker ruled, Belleville must pay Clarity the unpaid balance owed on the EUSA contract for June 2014 to March 12, 2015, at $10,319 per month plus the unpaid fees owed on the IT contract at $20,000 per month, plus the unpaid balance for parts and materials through Feb. 21, 2015, totaling $305,196, plus $5,493 in interest from Feb. 21 to Dec. 10, 2015.
At the arbitration, Clarity was represented by Parsippany attorney Alan R. Ackerman.