Was No-Bid Telephone Contract in Lower Illegal?

VILLAS — Should a $30,720 annual contract, signed June 13 by Lower Township Manager Joe Jackson to switch the township’s phone service from Verizon to Magellan Hill Technologies of Haddonfield, including the police department, been put out for competitive bids and approved by township council?
Resident and Lower Township Taxpayers Association member Joe Winters raised that question at Monday’s council meeting.
As of last week, the consent agenda for the Oct. 20 township council meeting had a resolution authorizing Jackson to execute a contract between Magellan Hill and the township for local exchange and inter-exchange phone services, but the agenda was revised and the resolution removed before Monday’s meeting.
The same resolution had been scheduled for council’s Aug. 18 and Oct. 6 agendas but was pulled off those agendas before the meetings.
Winters questioned why the contract was not put out for bids.
Mayor Walter Craig said township Solicitor Paul Baldini determined Magellan Hill was a utility and not subject to any bid thresholds therefore the contract could be entered into without a bidding process.
Winters questioned if a three-year contract Jackson signed was legal.
Jackson said the contract was amended to two years on Oct. 6. He said there had been discussion if the Magellan Hill agreement should fall under contract law.
Jackson said initially he signed a three-year contract with Magellan Hill.
“Did members of council approve a three year contract?” asked Winters.
“They didn’t have to,” answered Jackson. “It’s treated as a utility.”
He said the township did not have contracts for electric or natural gas service.
Jackson said in conference with the state Department of Community Affairs and state Board of Public Utilities and two legal opinions, it was determined the Magellan Hill contract was not subject to the bidding process.
Documents from Lower Township, obtained through Open Public Records Act, show a June 6 letter authorizing Magellan Hill to become the new telephone service provider in place of Verizon for the township. It noted “that if I wish to return to my current local telephone company, I may be required to pay a reconnection charge to that company.”
Winters said for four months, the township has had a three-year contract with Magellan Hill without an approval from council.
In an Aug. 8 memo, Jim Strype, buyer-technology procurement, Division of Purchase and Property, New Jersey Department of the Treasury, stated, “long distance service is a competitive service and is not under the jurisdiction of the BPU. I believe Magellan Hull is not exempt from its public bidding requirements.”
An Aug. 12 memo from LaTisha Smith, consultant with Mid Atlantic Business Partnership Channel, Inbound Demand Center-Richmond, explained that Magellan Hill was a reseller of Verizon services, using their facilities.
An Aug. 26 memo from Lower Township Purchasing Agent Margaret Vitelli to Jackson explained a lot of issues “may arise specifically with the police department’s telephone service including 9-1-1.” Vitelli asked if there was any resolution in canceling the contract with Magellan Hill.
She said a smooth reconnection back to Verizon could be made.
A Sept. 5 memo from Vitelli to Jason Brown of Verizon discussed the township signing an authorization to switch back to Verizon,
A Sept. 8 memo from Vitelli to Jackson indicated that if Jackson authorized switching phone service back to Verizon, she would begin a public bidding process for telephone service. She also informed Jackson that a Lower Township police dispatcher told her that some 9-1-1 calls were coming through without an address using Magellan Hill phone service.
Donna Stump, a customer care specialist with Magellan Hill in a Sept. 22 letter informed the township that Magellan Hill would disconnect all phone service effective Sept. 23. She said the township would be liable for termination penalties of $174,590 per the contract, which would be submitted to their attorney for collection.
Stump said the notice was based on nonpayment of service. She said Vitelli told her the township did not intend to pay for the phone service since the contract with Magellan Hill “was not signed in an appropriate manner, therefore she could not authorize payment.”
Stump said Magellan Hill had no recourse other than to suspend phone services. She said an outstanding balance of $5,617 must be received no later than Sept. 23.
On Sept. 22, Jackson issued a purchase order for outstanding invoices from Magellan Hill.
A Sept. 22 memo from Vitelli to Jackson said she had provided Magellan Hill with a check number for payment of services and service would not be terminated.
In the memo, Vitelli said she still believed the contract was well over the $29,000 threshold and was entered illegally since Magellan Hill was not a utility based on information from “both Mr. Valenti of the DCA and Mr. DeLuca from our BPU.” She closed the memo noting that the mayor and council are the only body that can award contracts and that a resolution was on the agenda to approve the contract for the Oct. 7 meeting.
In a Sept. 23 memo to the mayor and council, Township Chief Financial Officer Lauren Read said Magellan Hill did not have a tariff number assigned from the state and were not considered eligible for the utilities exemption under the local public contracts law. She said she based that on a conversation with John DeLuca of the state BPU.
Proposals from Magellan Hill covered phone service for the township swimming pool, department of public works, township hall, road department, emergency management, department of recreation, the Millman Center, court, fire department, police, township clerk. The proposal offered monthly savings from 5 to 34 percent varying from department to department.