Minneapolis schools awarded no-bid contracts to Memphis IT company

Minneapolis public schools awarded up to $1 million in no-bid contracts to a Memphis technology company that has no website or listed phone number.

The contracts to Mango LLC were for basic programming, database upkeep and technology support, including Mango's hiring of 15 temporary employees. The company was awarded contracts from April to October of 2014 for amounts ranging from $40,000 to $650,000.

The contracts came at a time of widespread turmoil and turnover within the district's technology operations that left important systems at risk. Now there is fresh skepticism over how school officials passed over the Twin Cities' vast number of technology companies and instead hired one from Memphis with no record of success locally.

"It does appear at first glance to be a very generous contract for the work being requested," said John Fox, chief operating officer of local technology company NG2, who reviewed the contract for the Star Tribune.

"One thing that is clear, though, is that several companies in the Twin Cities area could easily perform this type of work," Fox said.

So far, the district has paid the company just over $337,000 and officials say the final bill could be less than $1 million.

District officials say they went with the Memphis company after it had been selected by then-chief information officer Richard Valerga, who worked in Memphis previously. Valerga had hired the company to work for him when he was the chief executive at a Memphis school district from 2010 to 2013. Valerga resigned from Minneapolis district in November, after barely a year in the role.

"We would have preferred to use a local company, but we needed services immediately," said Stan Alleyne, the district's chief communications officer. "Right or wrong, the CIO chose to go with a company that he knew could do the work. He chose to go with a company that he had history with."

In an interview, Valerga disputed the district's characterization, saying he never recommended the company for the larger contract to keep the district functioning. He said he followed the district's procedures to get the contract approved.

Valerga said the district couldn't perform its basic technology functions when he arrived, despite having a $13.7 million annual technology budget and 68 employees.

When Valerga came in, many employees were either let go or resigned. That meant that at the beginning of the school year, crucial enrollment systems were falling apart. District employees were unable to get their computers and other hardware serviced. So the district needed to hire outside help to "keep the lights on."

In October, the district's staff included a $650,000 contract with Mango along with a bunch of housekeeping measures that the board approved without any discussion.

Valerga said he takes no responsibility for the turmoil that the district was already in. When he came aboard, he was the third chief information officer in three years.

Valerga said he helped save the department millions of dollars. His initial assessment was that his department had way too many supervisors.

"It doesn't make sense to have three managers over 13 people," Valerga said.

He also said there were already a number of vacancies in the department before he arrived in August and eliminated unnecessary positions. "In consolidating, people did leave," he said.

Valerga said he initially hired Mango when he first came to the district to perform a software audit. He identified a lack of trust among employees and staffers who did not want to share key information with him, such as the location of vital software applications. He said the audit cost his department less than $35,000, so he didn't need board approval.

But when the district decided they needed outside help, Valerga said he never personally recommended Mango for the larger $650,000 contract. He also said he has no personal relationship with the company.

Mango has no functioning website. Owner Rinu Agarwal said she gets contracts by referrals and local networking in Memphis. She said her company has worked with other school districts in Tennessee and Mississippi. When called on by Minneapolis, Agarwal said, she hired local temporary workers.

District officials say they are winding down the contract and have released the majority of the temporary employees, except three programmers while the district hires permanent workers.

The University of Minnesota has been called on by district officials to create an assessment of the IT department. The U will closely examine the district's classroom services, finance, governance, and technology infrastructure at no cost to the district. Based on its assessment, the U will then make recommendations for changes.

Meanwhile, the district is again looking for a new chief information officer, which pays from $127,000 to $172,000. Alleyne said the district is slowly rebuilding its department and trying to learn from its mistakes.