Actually, we did read the Smart Cities contract … and so should everyone
This is the first part of a two-part article on critical aspects of the signed Smart Cities contract.
Keys points in this article:
- We have posted the entire signed Smart Cities contract so each reader can compare for themselves which analysis is correct.
- The signed Smart Cities contract addresses only installation and does not deal with Internet connection “to every home and business” as Commissioner Madigan suggests in her reply.
- The definition of Substantial Completion (when the contractor can claim they are done) does not require the contractor to deliver a working system, only to have spent at least 4 years trying.
- If the City wants to terminate the contract, even if the contractor doesn’t deliver, they can only do so only by paying all investments, expenses, plus 10%.
We thank Commissioner Madigan for responding to our Common Sense post titled “Did anyone read the contract?” You can see her full response here. In her post, Commissioner Madigan accused our analysis of “purposeful misrepresentation” and found humor in our analysis “so clearly showing [we] did not, in fact, ‘read the contract’.” We’ve had lawyers and business people review the contract and we stand by our analysis. But saying this just puts us into a position of firing blog salvos back-and-forth.
Therefore, we have posted the entire contract so you can read and review it for yourself. It’s written in legal language, so be prepared. In this response, we will insert the relevant contract clauses numbers into the paragraphs so you can check our analysis. Look for square brackets containing these references.
In her post our Finance Commissioner spends quite a bit of time talking about the technology choices made in the Smart Cities contract and we encourage our readers to review the Common Sense post titled “Can City Council predict the future?”
Commissioner Madigan also states that the selected contractor, SiFi, will “design, install, and maintain a citywide fiber-optic network that will reach every home and business in Saratoga Springs at no cost to the city!” She is correct that installation of the fiber optic network is free to the city [2.4]. She is wrong, however, to give the impression that the operation of the network will be free to the city. The signed contract is for installation only [see Recitals]. There are no clauses that discuss how SiFi will provide connectivity and Internet connections after installation, or the monthly fees city must pay to use the network, once installed. In addition, the contract gives no guarantee that Internet service will ever be available “to every home and business” [9.10]. Finally, while the contract refers to SiFi’s obligation to maintain the system, it provides no definition of what constitutes maintenance or what it will cost [6.3 (vi)].
A follow-on article focuses on what happens if SiFi doesn’t deliver a working system. The short answer is nothing, unless the city pays SiFi a lot of money. But before we dive into details that support this statement, we need to highlight one important definition: Substantial Completion [found in Section 1]. Once the contract gets started, Substantial Completion defines when SiFi can say they fulfilled their responsibilities to install the network. Substantial Completion is defined as that time when “the System is capable of providing Service to each such Primary Premises or four (4) years post Construction being commenced, whichever event comes first” (Primary Premises are the buildings the City lists in a future, currently undefined attachment to the contract). This definition means that if SiFi delivers nothing, as long as 4 years have elapsed, they can declare that they have met their obligations as defined by Substantial Completion. There is no clause that allows the City to accept the system or to decide whether the system meets the City’s needs.
Our next article will analyze the details of what options the City has if SiFi spends 4 years and doesn’t deliver a working system. It’s pretty scary…