Firm hired to assess state broadband scored low

Cables connecting phone, cable and Internet service come out of a wall connector in the home office of Mike Loucks of Friday Harbor, Wash., in this March 2015 file photo.
Cables connecting phone, cable and Internet service come out of a wall connector in the home office of Mike Loucks of Friday Harbor, Wash., in this March 2015 file photo.

The job of assessing Arkansas' broadband needs and developing a master plan for expanding coverage has been assigned to a company providing high-speed broadband service to about 2,100 customers in apartment and large commercial properties in Pulaski County and Northwest Arkansas.

Broadband Development Group of Little Rock, which is led by CEO Lou McAlister, also serves several hundred people at properties in Mississippi and Texas.

The company's previous work in studying broadband needs in Grant County, financed through a state Rural Broadband ID grant to Kick Start Sheridan, attracted the attention of some lawmakers before state officials hired the firm to develop the statewide plan.

Those lawmakers liked what they called the company's "boots on the ground" approach of holding town hall meetings to gather public input and determine service needs. They said the state needs a master plan to ensure that it efficiently uses federal and state funds to expand high-speed broadband coverage as widely as possible.

Officials serving under Gov. Asa Hutchinson awarded the contract to the Broadband Development Group despite the company making the highest monetary bid, yet scoring the lowest on a technical basis compared with its two competitors. A legislative panel eventually signed off on the $2.2 million contract.

Interviews and documents obtained under the state Freedom of Information Act show how Broadband Development Group ended up with the contract.

The Broadband Development Group is contracting with Boston-based Altman Solon to assist the company in its work developing the master plan, McAlister said Thursday. He said the plan will be completed in April, and the company already has held town hall meetings in Batesville, Salem in Fulton County and Fayetteville.

According to the state, the final broadband master plan for Arkansas must include:

• Data collection and analysis of current broadband availability.

• Recommendation for broadband deployment throughout the state with an analysis of the current efforts in the public and private sector.

• Detailed recommendations on technology, equipment type, staffing and program administration, and a proposed community outreach plan that could be used in the deployment of broadband.

• Recommendations to increase affordability of internet service for residents and guidance on a reasonable timeline for deployment and recommendations that can be implemented and funded with the use of federal funds from the American Rescue Plan.

"Our state's economic future is riding on access to reliable and affordable internet," McAlister said Thursday in a written statement.

"The Broadband Development Group will combine decades of experience, extensive community input and accountability to develop a data-driven master plan that ensures all residents, regardless of their locations, have coverage."

So far, the Arkansas Rural Connect program has awarded $279 million in broadband grants to provide high-speed internet service. The 132 projects have been financed with $157.5 million in American Rescue Plan funds; $118.1 million in federal Coronavirus, Aid, Relief, and Economic Security Act funds; and $4 million in state funds, according to state records. (Editor's note: Some companies that received these grants are owned by WEHCO Media Inc., which also owns the Arkansas Democrat-Gazette, Inc. through the subsidiary WEHCO Newspapers, Inc.)

On Sept. 8, Hutchinson set a goal for the Arkansas Rural Connect broadband grant program to award $250 million more in grants financed with federal American Rescue Plan funds by the end of this year.

When reviewing applications for these grants, the state broadband office will look at data to determine if the proposed area is served and, if it determines that an area is not served, it will review applications for conflicts, compliance with the rules and compliance with federal guidance, said Department of Commerce spokeswoman Alisha Curtis.

After that internal review, applications are sent to University of Arkansas for Medical Sciences' Institute of Digital Health and Innovation for a technical review, she said. If that technical review is approved, the state broadband office will recommend the project for funding to the secretary of commerce and the governor for approval, subject to an available appropriation approved by the Legislative Council, she said.

Broadband, according to the Federal Communications Commission, "commonly refers to high-speed Internet access that is always on and faster than the traditional dial-up access. Broadband includes several high-speed transmission technologies such as: Digital Subscriber Line (DSL), Cable Modem, Fiber, Wireless, Satellite, Broadband over Powerlines (BPL)".

According to the website broadbandnow.com, Arkansas ranks 41st in broadband coverage.

The Arkansas Rural Connect program requires fiber or a wireline connection that will produce symmetrical download and upload speeds of 100Mbps (megabits per second).

JUNE RADIO SHOW

Sen. Missy Irvin, a Republican from Mountain View, said she first met McAlister when she and McAlister appeared on Sen. Kim Hammer 's radio show on June 19. The show, which airs at noon Saturdays, addresses topics of interest to all Arkansans, according to the show's website.

[BROADBAND BIDS » Comparison chart not appearing above? Click here » arkansasonline.com/1024broadband/]

Hammer, a Republican from Benton, said he became acquainted with McAlister because McAlister was doing "a boots on the ground" assessment of broadband coverage in Grant County. Hammer also said he attended McAlister's presentation in Tull, where Hammer is a pastor.

"We met [McAlister] through his work with Kick Start Sheridan and Grant County through the Rural ID Broadband Grant program," Irvin said.

In the 2020 fiscal session, the Legislature created the Rural ID Broadband Grant program proposed by Irvin. The program is administered through UAMS' Institute of Digital Health and Innovation. The Rural ID program provides grants of up to $75,000 per proposal for local entities to conduct business due-diligence studies needed to seek federal broadband grants. Eighteen applicants have been awarded a total of $1.1 million through the program.

McAlister said his firm's study for Kick Start Sheridan helped pave the way for an Arkansas Rural Connect grant to Windstream to expand broadband service in Grant County. The state will contribute $10.8 million to the project, and Windstream will invest $7.2 million.

"We were engaged for UAMS Rural Broadband ID studies and grants, including by Winrock International; the city of Beebe; Kick Start Sheridan, an initiative led by the Grant County Chamber of Commerce; Pulaski County; and the Little Rock Port Authority," he said.

Irvin said, "We liked Mr. McAlister's proposal and the work he did for Grant County and Kick Start Sheridan, and were interested in expanding that into a statewide proposal.

"This was a very organic process based on actual work done by these individuals with Grant County and UAMS' Office of Digital Innovation."

Irvin said her legislative working group included Sens. Jane English, R-North Little Rock; Ronald Caldwell, R-Wynne; and Hammer.

She said state officials are essentially asking Broadband Development Group to conduct these types of studies in all 75 counties to develop the broadband master plan.

Broadband Development Group's $2.2 million cost of developing a statewide broadband master plan is less than half of the $5.625 million cost of doing $75,00o studies in each of the state's 75 counties, she said.

Irvin said she is passionate about expanding broadband coverage because she and her husband have dedicated their lives to improving rural health care, and "we have seen missed opportunities for so many people" because they didn't have access to the same education, health care and business opportunities.

Broadband "is the game changer for that for rural Arkansans."

FIRST STATEWIDE PLANS

Before the state issued a request for proposals in mid-August in its search for a statewide master plan for broadband, it had two proposed plans in hand.

The Broadband Development Group submitted a proposal to the Department of Commerce to create a broadband/connectivity master plan for Arkansas, and its work would take six months, according to records of Hutchinson's broadband working group dated July 30. The group is comprised of three secretaries in his Cabinet, is chaired by Parks, Heritage and Tourism Secretary Stacy Hurst.

McAlister said his company submitted that first proposal on June 18.

CostQuest Associates of Cincinnati also submitted a proposal on June 30 to the Department of Commerce, said Commerce spokeswoman Alisha Curtis.

Commerce Secretary Mike Preston noted differences in the proposals submitted by the two companies.

On Aug. 2, Preston wrote in an email to several state officials, including Hurst and Finance and Administration Secretary Larry Walther; and officials in the governor's office:

"It feels like everyone is pretty committed to the consultant [Broadband Development Group] the Legislature has recommended.

"However, I want to make sure you saw the proposal we received from CostQuest who the state and the FCC have used for mapping and is recognized as a leading firm in the country with regard to broadband.

"The total for their project is approximately $1.38M, much lower than the proposal from BDG," Preston wrote in his email. "Additionally, we already have a history of working with them so they are familiar with our existing programs and have a deep knowledge of the federal programs available to the states."

The state Department of Education had a $447,000 contract in fiscal 2021 with CostQuest to provide broadband mapping services, according to department records.

Regarding Broadband Development Group, Hurst said in a written statement to the Democrat-Gazette, "Our thinking at the time is that they are an Arkansas company, they've done well-received work in the broadband arena.

"As we moved forward, we quickly decided a competitive process was the best way to go," she said. "While Broadband Development Group had worked with a few members of the Legislature – I think primarily through the Rural Broadband ID program – there were other existing relationships and other companies that could do the work. The MAP [most advantageous proposal] procurement provided a route to reach a decision and enter into a contract fairly quickly."

LAWMAKERS' INPUT

On Aug. 11, Hurst asked several lawmakers for feedback about a proposed scope of work for hiring a consultant to develop the statewide broadband master plan.

Hurst said in a written statement to the Democrat-Gazette, "I don't know if it's routine or not. I make it a practice to communicate and gather input from legislators, especially when it's an issue of great interest to them or when they have a role in the approval process. Their input was valuable."

Other state officials said state agencies don't often ask lawmakers for their opinions about a proposed scope of work for hiring a consultant, but that depends on the circumstances.

On Aug. 11, Irvin advised Hurst in an email, "We need to make sure the statement of work is broad and asks for a snapshot of what deployment looks like now and what it will look like when all the fed and [state] money is implemented for deployment.

"Then a plan forward with strategic State assets [emphasizing] key segments of the economy -- healthcare, education, agriculture, tourist destinations (the Buffalo) and tourism, state parks, etc. Deployment of fiber backbone to reach places not yet reached," she wrote.

"Lou's proposal included these points," Irvin said.

The state's executive broadband manager, Steven Porch, and Preston "called Lou first" and then Hammer connected with him through McAlister's work with Grant County and "arranged for him to meet with us and discuss ideas," Irvin wrote in her Aug. 11 email to Hurst.

Curtis said McAlister "reached out to our broadband office initially inquiring about his interest in performing a statewide case study" and "he then sent a draft proposal."

McAlister said he was contacted by the state broadband office about submitting the initial proposal and then he did so.

REQUEST FOR PROPOSALS

The state on Aug. 16 issued a request for proposals to hire a broadband consultant and by the Aug. 23 deadline received submissions from Broadband Development Group; Deloitte Consulting of Austin, Texas; and CostQuest Associates.

Broadband Development initially submitted a proposal with a $2.75 million price tag, while CostQuest Associates submitted a proposal with a cost of $533,600, and Deloitte Consulting proposed to do the work for $489,273, according to state records.

The proposals were scored by state officials based on cost and a technical review by one information technology employee apiece from the Commerce; Finance and Administration; and Parks, Heritage and Tourism departments.

CostQuest Associates' proposal received the highest score at 881.7; Deloitte Consulting's proposal got the second-highest score at 801.7; and Broadband Development's proposal was scored at 461.3, according to state records.

After the technical and cost scoring was completed, Hurst told lawmakers that the three department secretaries started further evaluation of the three proposals, and the vendors provided more documentation and more detail.

The state's information technology experts and American Rescue Plan consultant, the Center for Toxicology and Environmental Health, also were involved in these discussions, she said.

Hurst told lawmakers Sept. 29 that a state agency generally states what it wants through this "most advantageous procurement" process, and the vendors paint a picture of what they recommend based on their expertise, their method or their business model.

"The MAP [most advantageous proposal process] is not a straight invitation for bids where the scope of work must be very defined and then the low bidder is selected in that process," Hurst told lawmakers Sept. 29.

On Sept. 21, Leslie Fisken, chief of legislative affairs for the Department of Parks, Heritage and Tourism, wrote an email to Statewide Procurement Coordinator Brandi Schroeder that Hurst, Walther and Preston believed that the Broadband Development Group's proposal best fits the needs of the state in developing the comprehensive master plan.

Broadband Development Group agreed to lower its bid from $2.75 million to $2.24 million, she said.

"Although the bids from the other vendors were lower than Broadband Development Group, those proposals were deficient and did not provide for a multifaceted and comprehensive plan for gathering data and assessment of connectivity in the state," Fisken wrote.

In addition, "we considered the additional options provided within their proposals," but these additional options added considerable cost to the proposals, didn't meet the expectations for a master plan and were not robust enough to provide a complete vision and set of goals for a statewide plan, she said.

Hurst said in a written statement that CostQuest and Deloitte's proposals both relied heavily on mapping and analyzing publicly available data to access the current broadband availability landscape.

ACTION DELAYED

On Sept. 23, the Legislative Council's eight-member executive subcommittee delayed action on its review of the proposed contract after Porch, the state's executive broadband manager, surprised lawmakers by suggesting the department should issue a new request for proposals.

Porch's suggestion to issue a new request for proposals was made after Hurst said she, Walther and Preston selected the Broadband Development Group as the consultant.

Porch testified that Broadband Development's proposal has "a better boots on the ground approach" among the three proposals, but his concern is the company hasn't previously done a statewide broadband implementation plan.

"I think they need to become more robust in what they were doing," he said.

Before Porch testified on Sept. 23, he texted Preston: "Mike, Secretary Hurst asked Jim [Hudson] to come to the table with her. I would be hard pressed to support BDG [Broadband Development Group]. I'm concerned about being asked that question. Your thoughts?

"Secretary Hurst knows my strong opinion about BDG."

Preston replied in a text message to Porch, "Just be honest. Tell them how you feel."

Hudson is the legal counsel and deputy director of operations at the Arkansas Economic Development Commission and the Department of Commerce's director of strategy and operations. The commission is part of the Department of Commerce.

During the Legislative Council's executive subcommittee's Sept. 23 meeting, Sen. Charles Beckham, R-McNeil, asked Preston in a text: "You agree that Broadband Development is the best option?"

Preston replied, "They did not have the best proposal or price, but [were the] only one that hit on the 'boots on the ground' that the Legislature was requesting."

Asked what Hutchinson thought about Porch's suggestion that another request for proposals should have been issued, Hutchinson spokeswoman Shealyn Sowers said in a written statement, "The governor was happy with the recommendation from the leaders of the working groups in the Cabinet.

"Secretary Hurst, Secretary Preston, and Secretary Walther all agreed Broadband Development Group was the most qualified applicant," Sowers said, referring to the governor's broadband working group.

Asked about Porch's suggestion for another request for proposals and concern that Broadband Development group hasn't previously done a statewide plan, McAlister said in a written statement, "Our county-by-county approach will ensure a deeper and more thorough understanding of Arkansas's internet connectivity, so we can develop a robust and representative state broadband plan."

CONTRACT APPROVED

On Sept. 29, the Legislative Council's executive subcommittee signed off on the Department of Commerce's proposed $2.2 million, one-year contract with the Broadband Development Group.

Hurst said in a recent written statement, "I want to reiterate that the scope of work was not written with any particular vendor in mind."

Irvin, Hammer and several other state lawmakers from whom Hurst requested feedback about the draft scope of work said they didn't aim to steer the contract to Broadband Development Group.

Hammer said he urged state officials to issue a request for proposals rather than issue a sole-source contract to avoid the appearance of directing state business to a particular vendor.

Jim Stegeman, president of CostQuest, said in an interview that the request for proposal process "was rushed," and the state didn't provide CostQuest sufficient time to respond to its requests.

Hurst countered, "We disagree with this characterization of the process.

"Under our process, each vendor had the same amount of time to respond, answer questions and prepare discussion documents," she said. "This assertion regarding their proposal is somewhat surprising since this vendor had provided a quote for a similar project to AEDC prior to the issuance of the RFP."

Stegeman asserted that the state asked for "a county road show" that wasn't part of the request for proposal and CostQuest wasn't given the option to ask for more money to provide that option.

Hurst answered, "This is another mischaracterization.

"The scope of work for the RFP, which we were instructed to keep general, required a proposal for data collection and analysis of current broadband availability, as well as a 'community outreach plan' as components of the statewide broadband master plan," she said. "Each vendor had the same RFP and requirements, but each proposed a different approach.

"We were instructed by [the Office of State Purchasing] that state procurement law does not allow a vendor to amend its proposal to increase its offer or make changes after the RFP deadline," Hurst said.

Stegeman said in a written statement to this newspaper, "Based on your reporting of the facts, there appears to have been a preferred vendor, given that our score was at the top and the budget was near the bottom."

Hurst disputed Stegeman's suggestion that there was a preferred vendor.

"The RFP process was utilized for the specific reason that we wanted a fair, competitive and transparent process," she said. "As mentioned previously, members of our group had heard from some potential vendors prior to the RFP, including CostQuest. But the final decision was made based upon the RFP process and its rules and procedures."

Stegeman said CostQuest decided not to appeal the contract award because "based on the outcome, it was our opinion we needed to move on."

Deloitte spokesman Daniel Jacobs declined to comment when asked if the company had any comments about the selection of Broadband Development Group.

Hurst said in a written statement that she didn't ask lawmakers which company that they wanted the state to hire as the broadband consultant.

"There were several opinions from various angles regarding what contractor should be selected to create a master plan," she said.

"That's why we ultimately chose, with the governor's support, to pursue a procurement that allowed for competitive bids and created a structured process," Hurst said. "Some legislators shared their opinion about what was needed as part of the master plan, and the working group did take that into account."

CONSULTANT'S OWNERS

The Broadband Development Group was founded in 2015, according to its website.

The company's board of directors includes Aaron Bragg, son of Rep. Ken Bragg, R-Sheridan, and Ryan Holder, the husband of Arkansas Highway Commissioner Marie Holder, according to state records. The records show that Aaron Bragg has a 10% ownership interest and Ryan Holder has a 5% ownership interest.

Asked who owns the rest of the company, McAlister said in a written statement, "Three founders -- James Hendren, Lou McAlister and Tom Flak -- own the majority of the company, with additional support from angel investors and local entrepreneurs.

"These minority owners are not involved in the company's day-to-day operations," he said. "James Hendren, PhD is not related to Senator Jim Hendren or Governor Hutchinson."

James Hendren has been a founder or co-founder of technology ventures, including Arkansas Systems Inc., according to Broadband Development Group's website.

Sen. Jim Hendren is an independent from Sulphur Springs. Hutchinson is a Republican from Rogers and is Hendren's uncle.

Attorney Martha Hill is a registered lobbyist for the Broadband Development Group. She is married to U.S. Rep. French Hill, R-Ark.

The Gilmore Strategy Group -- led by Hutchinson's chief political strategist and former deputy chief of staff, Jon Gilmore -- is a registered lobbying firm for Deloitte Consulting, according to the secretary of state's website.

CostQuest Associates doesn't have a registered lobbyist in Arkansas, based on a search through the secretary of state's website.

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