Garbage Cans Teach a Hard Lesson in City Hall Politics : Bureaucracy: Catherine Bump offered the low bid and jobs for a riot-torn area. Then she ran into the lobbyists.

Garbage cans had been good to Catherine Bump and it looked as though the garbage can business was going to get a whole lot better.

Bump thought she had won a contract to supply the city of Los Angeles with $25 million worth of plastic cans suitable for pickup by the city’s new trucks with mechanical arms.

It would be a win-win deal, she figured: As low bidder, she would get the contract and the city would get a factory in an economically ailing part of South-Central represented by City Councilwoman Rita Walters.

So when Bump visited Walters’ office last spring to discuss prospects for the new factory that would lead to 37 jobs, she said she was surprised when the councilwoman’s staff told her that it would not lobby the city bureaucracy on her behalf, but instead put her in touch with a professional lobbyist to help her navigate the complexities of doing business with City Hall.

“I was a total City Hall virgin,” said Bump, who resisted hiring a lobbyist and whose bid was thrown out for procedural oversights spotted by a rival’s lobbyist.

Some at City Hall see her loss as evidence of an effective competitive bidding process that gives the job to the lowest priced, most qualified contractor. Others see it as a sign that the system depends too heavily on lobbyist-lawyer intermediaries whose fees cost bidders--and ultimately the public--too much.

Many bidders seeking major city contracts find it prudent to hire lobbyists or attorneys whose job is to make sure their clients’ bids are not rejected because they have violated some obscure rule. In addition to defending their clients’ bids, the lobbyists routinely attack the bids of competitors, asserting that they have discovered some technical violation or another.

The Riordan Administration, which says it is committed to making the city more “business-friendly,” is “trying to cut down the influence of lobbyists at City Hall,” said Deputy Mayor Michael Keeley. “We would prefer to talk to principals.”

But that will be difficult. The multimillion-dollar lobbying industry is an integral part of City Hall. More than 350 lobbyists are registered with the city Ethics Commission. Many others either do not register or report only a portion of their earnings because they say they are functioning as lawyers--not lobbyists. Those who register report earnings of more than $6 million a year, with the top 25 accounting for more than $4 million.

Bump said the recommendation that she hire a lobbyist was unsolicited and she was taken aback by it. As a lawyer and businesswoman, she said she felt qualified to handle whatever problems came up. “We didn’t think we needed a lobbyist,” she said. “We were the low bidder.”

However, Walters’ legislative deputy, Ernie Delgado, said that Bump asked him for names of some lobbyists, and that he responded by meeting with a superior in the office, then calling Dave Cunningham, a former Los Angeles city councilman, and a second lobbyist, and passing along Bump’s name.

Either way, Bump didn’t even have to call Cunningham; he called her.

Cunningham said in an interview that he told her he would want a retainer and a trip to the headquarters of Bump’s firm’s parent company in Germany. Then he would talk to people, get points of view across.

If Bump actually were awarded the contract, she recalled, he said he would expect to be paid 25 cents for every garbage can she produced, a fee that would have worked out to $145,000. Cunningham did not dispute her recollections.

Bump said no thanks, remaining committed to the idea that she could do it herself. But Bump was soon disqualified from the contract competition because of alleged technical deficiencies in her bid.

Arthur K. Snyder, a former city councilman who represents Bump’s closest competitor, alleged two flaws in Bump’s bid--an improper bid bond and a faulty corporate signature.

Bump’s biggest problem appeared to be the bond--in effect, a required insurance policy promising to pay the city $2.5 million if her firm, Plastopan, withdrew its bid.

The bond, issued by a German bank, the Westdeutsche Landesbank Girozentrale, was in a form city officials were unaccustomed to.

Assistant City Atty. Myrtle Dankers issued an opinion that Plastopan’s bond was credit-worthy and commercially acceptable but did not meet the City Charter requirement that it be issued “by a responsible corporate surety company.”

Since Westdeutsche Landesbank is Germany’s third-largest bank and was promising to pay the city “upon your first written demand,” Plastopan officials were perplexed.

But the city attorney’s office was interpreting “a responsible corporate surety company” as one licensed by the state of California.

Plastopan officials did not panic, however, because Dankers then advised city purchasing agents that it would be OK to accept a substitute.

Bump scrambled to arrange for one and the city’s purchasing agent informed her in writing that it was acceptable. Thus, when she set off for Walters’ office, Bump said she thought that the bond controversy was behind her.

Bump said she figured Walters for a natural ally in surmounting whatever obstacles lay ahead because of Plastopan’s desire to build a factory in Walters’ district. Snyder’s client, Zarn Inc., would have produced the garbage cans in Madera, Calif.

After the 1992 riots, Walters had proposed a law that gives bidders like Plastopan an advantage if they agree to locate their plant in areas hardest hit by the riots. For the purposes of the bid, their prices are considered 10% lower than they really are. In Plastopan’s case, the 10% preference made its bid the lowest.

But Walters said in an interview that the integrity of the competitive bidding process was even more important than getting a badly needed plant and so, as a matter of principle, she kept her hands off. “The idea of the bid is that it’s supposed to be (conducted on) a level playing field,” she said. “I wasn’t going to lobby for anybody.”

Walters said she was upset when she heard that her staff had referred Bump to Cunningham. “I understand my staff was attempting to be of service . . . because they knew how much we need this plant.” But Walters said it was improper to refer a specific “expediter, if that’s the right word,” when there are “a lot . . . who do a very good job.”

When she passed on hiring Cunningham, Bump was still so confident that she could get the contract that in mid-May she placed an irrevocable order for a $2-million machine for the factory. She said it was necessary if the factory were to open on time.

But Bump--still acting without expert advice--was wrong.

The same day Bump said she placed her order for the machine, Snyder wrote to City Atty. James K. Hahn on behalf of his client and threatened to sue the city if Bump’s firm got the award.

In early June, Assistant City Atty. John F. Haggerty embraced Snyder’s point that Plastopan should be disqualified because its original bid bond had not met city standards.

Bump was flabbergasted. Haggerty did not even mention the substitute bid bond that other city officials had accepted.

She arranged to meet with Haggerty twice--once with members of Walters’ staff, she said, who asked Haggerty to try looking at the situation again. But although Haggerty admitted in another memo that he was “not free from doubt,” he would not budge. Haggerty, who has since retired, said the city officials who accepted the substitute bid bond were wrong to have done so.

“It is technical,” he said in an interview. But rules are rules.

Bump finally concluded she needed an intermediary of her own.

In asking around City Hall, Bump said she learned that different lobbyists were specialists in resolving problems with different city departments or officeholders. Since her problem was with the city attorney’s office, Bump hired Neil Papiano, who had successfully defended a top aide to City Atty. Hahn in a city Ethics Commission probe. He describes himself as an attorney, not a lobbyist.

Bump and her uncle, Barthel Bitsch, who owns Plastopan, said Papiano agreed to work for $25,000 down and 20 cents per garbage can, or $116,000, if Bump got the contract.

Bump said she was appalled at paying that much. “Here’s Papiano conceivably walking off with more money than I will,” she said, “But what are you going to do?”

Papiano disputed Bump’s and Bitsch’s version of his fee arrangements, but he said California State Bar rules would not allow him to be specific.

Snyder’s law firm, meanwhile, continued its offensive, charging that the bid submitted by Bump’s company was invalid for another reason.

Plastopan is actually a 30-year-old group of companies, headquartered in Germany. The entire Plastopan group made the bid, but the specific corporate entity on whose behalf Bump signed was Plastopan North America.

Although the Plastopan group had more than enough experience turning out garbage cans to qualify for the Los Angeles job, Plastopan North America had only been a distributor for the group and had no manufacturing experience.

Snyder contended that the lack of experience by Plastopan North America disqualified the bid.

Once again, Haggerty agreed. He said that if contract disputes arose, the city could face an unnecessarily difficult collection problem. Other corporate entities in the Plastopan group could argue that they were not bound by the contract and therefore were not liable, he said.

Papiano argued that this was nonsense; the entire Plastopan group was legally bound.

But acting on Haggerty’s advice, the public works staff tossed out their draft recommendation that the contract go to Plastopan and urged that it go instead to Snyder’s client, Zarn.

The Board of Public Works then decided to dodge the threat of lawsuits by either Zarn or Plastopan by throwing out all of the bids and extending a temporary contract that had earlier been awarded to Zarn.

When the new bids were opened in mid-December, Bump, to her horror, made another error.

No longer relying on Papiano and determined to shepherd her bid herself, Bump forgot to bring the original copy of her bid to the official bid opening in City Hall. When she realized she only had copies, she raced out and retrieved the original, but was 15 minutes late bringing it back.

Bump was apparently the low bidder again. That means Los Angeles still might get her factory.

But her failure to produce the original bid on time was immediately challenged by the representative of another bidder, who suggested she be disqualified.

That, the bidder was told, will be up to the Board of Public Works.