Doubts Cloud Ticket Contract for State Parks
California state parks officials were irked last summer when about a dozen people complained that they had trouble making reservations for campsites and Hearst Castle tours.
The campers were competing with fans of singer Bruce Springsteen for the attention of clerks at Ticketron outlets, and “there were complaints that the people wishing camping tickets were treated like, ‘Hey, come back next week,’ ” said parks official Clark Woy.
Parks officials had a solution. They were preparing to award a new five-year contract for a reservations system that would require the contractor to accept reservations at a toll-free telephone number for the first time, as well as at designated outlets and by mail.
In the course of evaluating potential contractors, parks officials decided to dump Ticketron--a longtime holder of the contract, even though its bid was the lowest received.
They also rejected the second-lowest bid, made by Ticketmaster, Ticketron’s chief competitor in the small, scrappy computerized ticketing industry.
They gave the contract to the highest bidder--a fledgling company called Mistix.
Officials said they chose Mistix because it was “the best, responsible bidder.” As such, they said, they believed it would provide better service to the million people a year who make reservations to use state parks.
But that conclusion was apparently based on little more than faith because Mistix had no track record, no ticketing clients and no outlets.
Ticketron filed an official protest, alleging that parks officials abused their discretion and made a “mockery” of the bidding process. That protest, supported by Ticketmaster, has resulted in disclosures that some parks officials were not fully informed when they chose Mistix to handle a system that brings in about one-sixth of the department’s revenue.
Some officials involved in the selection, for example, did not know just how fledgling a company Mistix was, according to testimony at ongoing protest hearings before an administrative law judge in Sacramento. Other officials withheld from them the information that Mistix, at the time, had no ticket-issuing capability.
Also withheld from them was information that Mistix’s organizer, Lee DeLay, had been president of a company that defaulted on the same Department of Parks and Recreation reservations contract nine years before.
In selecting the untried Mistix, parks department officials took a gamble. Signs are mixed as to whether it will pay off.
Late last month, three weeks after it had promised to be fully operational, Mistix had opened some outlets in Southern California, but walk-in customers in the northern part of the state were generally out of luck.
When a Mistix operator was asked if there were any outlets in Berkeley, as the contract required, she answered with another question: “Is that near Los Angeles?”
The closest outlet turned out to be in San Jose.
On the positive side, Mistix, which is headquartered in La Jolla, has set up a toll-free number for those willing to use credit cards to make reservations, and its officials say they have reached agreements with retail stores to open many more outlets than the 32 required by the parks department.
Parks officials say that only 21 outlets have been opened so far, but report that they are pleased with Mistix’s performance and that they have “not been overwhelmed” with complaints.
While it is too soon to say whether the selection of Mistix was wise, it is clear that there were some unusual aspects to the selection process.
For example, getting the best price was not very important to the parks department. Bidders’ proposals were scored on a scale that provided for a maximum of 14,700 points. Price accounted for only 350 of those points.
Officials charged with ranking bidders did not do the simple arithmetic necessary to make a thorough price comparison. As a result, these officials did not know how much revenue the state would lose by selecting Mistix as opposed to another bidder. One official testified that he did not realize the state would lose any money.
Bids Regarded as Same
Parks officials said that they could tell at a glance that Mistix’s bid--in the form of service charges for individual reservations--was a little higher than those of competing companies, but added that they regarded all bids as roughly the same.
Indeed, when looked at from the standpoint of the service charge an individual pays when making a reservation or canceling one, differences in proposals vary by insignificant amounts--20 cents to $1.
But when contractor’s charges to the state are multiplied by volume of tickets sold, differences become significant.
Looked at in this way, Mistix’s price over the course of the contract represented an approximate $2-million loss of revenue for the state when compared to Ticketron’s.
This kind of calculation was finally done by Woy, the parks official who manages the reservations system and who chaired the evaluation committee, after the committee settled on Mistix.
Woy testified that he made the calculation at the suggestion of his superior, Chief of Personnel Robert D. Cates, to show to the department director. He told the director, William S. Briner, that the department could lose $1.4 million over five years by selecting Mistix.
Woy did not count an additional $500,000 that Ticketron promised to give the department if it won the contract. Some evaluators, including Woy, expressed concern that the $500,000 sounded like a bribe. “The offer was not tied to anything specific,” Woy said, ". . . and the evaluation committee was uncomfortable with that.”
It was indeed unusual, if not unprecedented, for a contractor to offer to make a grant to the state, according to veterans of state government service. However, hearings disclosed that a former parks director had once asked Ticketron for a similar contribution to the department for promotional purposes.
Woy also summarized for Briner in a memo the reasons the evaluation committee recommended Mistix: Its software was state of the art, its hardware was reliable, and it was a small company, whose only client would be the department. As a result, it would pay attention to the department’s needs and service them better than Ticketron, which had many clients.
Briner approved the evaluation committee’s choice.
Evaluation committee members did not initially settle on Mistix, however. In a preliminary tally, Ticketmaster finished first--scoring the most points--Ticketron came in second and Mistix finished last. Those scores were compiled before evaluation committee members consulted with one another.
When the evaluators met as a group to share information and perceptions, the first and last place finishers swapped places. According to department figures, Mistix gained nearly 300 points, mostly in “subjective” categories, enough to boost it from last place to first. Ticketron lost about 200 points, also in subjective categories. It stayed in second place. Ticketmaster lost 600 points, mostly in “objective” categories. It plunged from first place to last.
Hearing testimony made it clear that some parks officials were disappointed in Ticketron, which had held the reservations system contract for most of the last 16 years. They said they felt Ticketron, which had many clients and handled reservations for many sports events and concerts, was not providing good service to the department.
But Ticketmaster had no parks department experience, so there was nothing to account for bad feelings toward it.
At the meeting, the evaluation committee heard an oral report from two of its members, Woy and John R. Vogelsang, head of the department’s accounting section, who had visited offices of each of the bidders. Of note was what was omitted from their report.
- On their tour of Mistix facilities, Woy and Vogelsang saw mainly empty space. Mistix had no main frame computer, no functioning telephone room and no outlets. Whether it had access to ticketing software was in question.
But some evaluation committee members were left with the impression that Mistix was ready to crank out tickets at a moment’s notice.
According to testimony, Vogelsang told evaluators that he was particularly impressed with Mistix’s software. But he did not tell them that the ticketing demonstration Mistix officials provided relied on software owned by another company.
“My understanding of his (Vogelsang’s) opinion was very favorable about the equipment and capabilities of the Mistix company,” said evaluator Deborah Weldon. “I did not know or understand that there was no computer at Mistix. . . . I guess I assumed there was, in the absence of anything to the contrary.”
Mistix was given maximum points for its ability to have its system operational by Jan. 30. Ticketmaster, an established concern, lost half the points in this category. The reason for the deduction could not be determined from evaluators’ testimony at the hearing.
- Vogelsang told a Mistix official that he regarded Mistix’s financial statement as weak--so weak that a bank might not lend it the money needed to execute the reservations contract.
However, in an apparent contradiction, Vogelsang said he “represented to the group (of evaluators), or if it was asked me I would have represented to the group, that I thought that they (Mistix) could do the job from a financial standpoint.”
The reason for the incongruity lay in what a Mistix official told Vogelsang and Woy privately: that Mistix was negotiating with a publicly held company, G-TECH, to provide financial backing through a merger or buy-out. G-TECH is an established firm that in February won a $121-million contract to run the California Lottery’s computerized lotto game.
Vogelsang recalled that he and Woy were asked to keep (G-TECH’s involvement) “a secret because there was a possibility of an insider trade via the Securities and Exchange Commission.”
They kept it a secret from their fellow evaluators.
Mistix was given maximum points for its financial ability.
Vogelsang suggested, however, that half the 350 points in this category be taken away from Ticketmaster. Other evaluators heeded Vogelsang’s suggestion.
Vogelsang said he regarded Ticketmaster as financially sound, but acted primarily because Ticketmaster had shown “a little bit of arrogance” in declining, as a privately held company, to fill out a financial statement--instead, providing a list of clients and bank references and a promise to supply more financial information if asked.
After the evaluation committee meeting, when it appeared Mistix would get the contract, Vogelsang said he thought he should get more information on Mistix’s financial wherewithal--namely confirmation from G-TECH that it was involved. A few days later, Woy received a letter from G-TECH’s president saying G-TECH was negotiating a merger or joint venture with Mistix, that it would provide the necessary financial backing and that it would help Mistix secure the $250,000 performance bond that the department required its contractor to have.
Funds for Software
In January, G-TECH provided funds for Mistix to acquire the ticketing software its officials had taken Woy and Vogelsang to see, according to an officer of the company that sold it. A tentative agreement under which G-TECH will acquire Mistix was reached Friday.
- Finally, Woy and Vogelsang learned that Mistix’s organizer, DeLay, had been been involved with Select-a-Seat of California, which defaulted on the parks department’s reservations contract in 1977.
DeLay had been president of the firm, which defaulted after creditors plunged its parent and namesake, an Arizona corporation also headed by DeLay, into involuntary bankruptcy.
Neither Woy nor Vogelsang mentioned DeLay to the other evaluators.
DeLay had been Mistix’s only officer, but had switched to serving as a consultant by the time Mistix made its bid. A computer expert served as Mistix’s president and accomplished software designers--including the designers of the ticketing software that had been demonstrated--were on staff. But there was no question that DeLay remained a key player.
In meetings, Vogelsang said, DeLay was Mistix’s “lead man.” And Mistix told the parks department that 80% of its stock was owned by the DeLay Children’s Trust.
DeLay is a colorful business promoter who has said he made a fortune in the 1950s and ‘60s, investing “primarily in water” in Arizona and accumulating thousands of acres of land and thousands of cattle. He has said he lost almost everything in a 1966 divorce.
But a few years later, he apparently had built up assets again. He cruised around Phoenix in a white Continental, license plate BEEF, as the head of Arizona National Cattle Co., which marketed tax shelters.
That company’s activities ultimately resulted in a $500,000 default judgment being entered against the company and DeLay on a complaint alleging fraud. And DeLay has other financial troubles: In the wake of the Select-a-Seat bankruptcy, the U.S. government filed tax liens against him and his wife for $284,000, and other tax liens for $218,000 against Fenix Cattle Co., which DeLay headed, but which was owned by a trust set up for his children.
Nonetheless, Mistix was given maximum points for “references and evidence of previous successful performance of similar projects.”
Thirty points were taken away from Ticketmaster in that category, although, according to testimony, no one checked its references.
Ticketmaster lost other points under curious circumstances.
For example, the department wanted a will-call ticket window set up in a trailer to relieve congestion at Hearst Castle. Ticketmaster promised to set one up and, it appears from computer printouts, was originally given 330 of a possible 350 points for its plan. However, Ticketmaster also said it wanted to remove the trailer if it proved superfluous. Ticketmaster official Robert Leonard said Woy told him that was acceptable. But when the evaluation committee met, it deducted 155 points from Ticketmaster’s score.
Also, the department wanted five outlets set up within 50 miles of Hearst Castle. Ticketmaster already had three such outlets. Leonard said he asked Woy if the 50-mile rule was hard and fast. Leonard said Ticketmaster had two outlets in mind that were between 60 and 70 miles of Hearst Castle. Woy acknowledged telling Ticketmaster that the rule was not hard and fast. But evaluators deducted 36 points from Ticketmaster’s score for failing to promise to have five outlets within 50 miles. Woy explained that the remaining two outlets “didn’t appear to be within the--close enough to the 50 miles.”
Mistix, which had no outlets, got full credit for promising to set them up.
The administrative hearings are expected to last several more weeks. If Ticketron convinces the judge that parks officials abused their discretion, the judge will notify the parks department, which could reopen the bidding or ignore the recommendation.