The New York Office for Technology said last Thursday that it has terminated a contract with M/A-Com Inc., a Massachusetts company that was tasked with building and leasing a wireless network worth $2 billion. This was the largest contract ever awarded by this office and the cancellation will severely hamper progress toward a goal of building a statewide wireless emergency network.
The contract was canceled as the state tries to resolve a combined, record-high deficit of $15.4 billion over the next 15 months. The state warned M/A-Com in August 2008 that it was in default of its contract because internal tests and independent audits found 19 flaws in initial systems installed in western New York. Problems ranged from radio equipment failures and outages to “unreliable” and “inconsistent” infrastructure and coverage areas. Subsequent testing in November 2008 revealed that 15 of the 19 flaws had not been fixed.
“We are extremely disappointed,” said Melodie Mayberry-Stewart, director of the state Office for Technology. “We have given M/A-Com every opportunity to remediate existing deficiencies. However, the state’s testing concluded that M/A-Com is unable to deliver a system that meets the needs of New York state’s first responders.”
The state has spent $59.2 million on the project, including equipment purchases. Tyco Electronics has spent $51 million to date, and was expected to spend up to $75 million in its 2008 fiscal year, according to a filing with the U.S. Securities and Exchange Commission.
The state is in line to recover much, if not all, of its investment through a $100 million credit line that M/A-Com established, per the terms of the contract. Half of that money is in escrow. The state has already sent a letter demanding payment to the financial institution managing the credit line.
M/A-Com, a division of Tyco Electronics Ltd. (NYSE: TEL; BSX: TEL), outbid Motorola Inc. (NYSE: MOT) for the 20-year contract in early 2004. The deal is reportedly the largest high-tech project ever undertaken in the state’s history, and the largest statewide, public-safety communications project ever.