DOT chooses 'local' over 'experienced' for rest stops
Published 1:06 am, Thursday, April 15, 2010
When state officials last year were weighing two private proposals to operate Connecticut's highway rest stops, they had a choice between an international leader in service-plaza concessions and a local partnership with no track record in that arena.
The Legislature is delving into the ramifications of the 500-page agreement announced late last year by Gov. M. Jodi Rell's administration.
"That other bidder's a pro," Paul Landino, president of Project Services, said, referring to HMSHost Family Restaurants Inc. "But we brought innovation and a local flavor to it."
Internal Department of Transportation documents referred to HMSHost as "unquestionably the industry leader, with clearly experienced individuals who know the service plaza environment. ... So we pick the guys who never did it before," said state Sen. Andrew McDonald, D-Stamford, who is a vocal critic of the new rest-stop arrangement.
But DOT Commissioner Joseph Marie said his agency's decision was sound.
"It was very clear this group was just fundamentally hungrier to do this work in Connecticut than (HMS-Host) was," he said.
Internal score sheets of the two bids recognized that Project Service LLC "as a whole has not worked on a project like this before" and lacked "specific experience with service plaza facilities." The partnership received a 120-point score in the "qualifications/experience" category versus HMS-Host's 138 points. But the scoring document went on to say Project Service "team members have considerable experience with individual projects." And in four other scoring categories -- proposed solution, economics, environmental and added-value -- Project Service outranked the competition, winning with a total 817 points to 672.
"They weren't even close," Marie said.
Landino is president of Subcon Inc. and is Subway's development agent for parts of Connecticut and New York. He also owns and operates Subway franchises.
"I've run 500 Subway stores," Landino said. "Twenty-three rest stops is like running 23 little oases or shopping malls. ... Getting (visitors) in the door is the trick."
McDonald is not convinced.
"Running a Subway where you can get a 6-inch sandwich and running a service plaza are very different operations," he said. "Just because somebody tells you what you want to hear doesn't (make it) right."
Landino's brother Bob is president of Middletown-based Centerplan, the construction company that will be renovating the rest stops.
"They spoke often of `living here,' regularly driving by the facilities and willing to be held accountable," read a final report issued to Marie on the two rest stop bids.
In contrast, that same document criticized HMS-Host for submitting an incomplete and impersonal response with "canned commentary from other proposals." But the report also observed, "There are risks when various companies form a team to do something they have not done as a team before, and (in) the complex structure of the agreement and layers of agreements that will be necessary."
DeFronzo said he is impressed the partners are Connecticut-based. "That structure struck me as very appealing, and if they can pull that off and it works for Connecticut's economy, it's a good thing."
Carlyle's involvement seemed to assuage concerns about Project Service's lack of experience running rest stops.
"Benefit includes Carlyle having seat on board, skin in game and that they will make business and strategic knowledge resources available," read the DOT score sheet. "It's in their best interest ... to have this succeed."
At the same time Connecticut officials were weighing the deal, The Carlyle Group was entering into a settlement with the New York state attorney general, ending a high-profile inquiry into whether Carlyle had made improper payments to intermediaries in exchange for lucrative state pension fund investments.
The DOT said it performed its due diligence on Carlyle, including reviewing the settlement with New York.
"Carlyle has a 23-year track record of adding value to the investments we make and delivering on the partnerships we form," spokesman Chris Ullman said in a statement for this story. "We were pleased to resolve the matter with the state of New York, which included ... reforms that increase transparency and accountability."
McDonald also questioned the penalties should Project Service LLC break the contract.
If the company walked away before the 35 years were up, it would owe the state a $5 million performance bond.
"$5 million for an entity that has no track record and no guarantees," McDonald said.
But Landino and Marie noted the contract also requires Project Service LLC to fund the completion of any rest stop upgrades under way.
"With the majority of private investment coming in the first three to five years, it would behoove them to stick around," Marie said. "That's why we structured the deal the way we did. We wanted the investment up front, and we got it."
Marie concluded: "I think on the whole, when you look at the complete body of work of what's going to be done here (and) private money being brought into the state at a time of a severely depressed economy, a lot of people -- not everyone -- will say, `Everything's right here,' " Marie said.