One of the province’s biggest private business investments is in hot water, just weeks after being awarded a half-a-million dollar standing offer by the Halifax Regional Municipality.
At today’s city council meeting, staff recommended deferring decisions on planning telephone and electronic voting in next year’s municipal and school board elections due to new information HRM has learned about the financial health of Intelivote Systems Inc.
Clerk Cathy Mellett told council the municipality “was advised very informally that Intelivote was engaged in the sale” of their company. Advised informally
by me [Elliott says another person independently advised the city about Intelivote's sale before I mentioned it], when I asked HRM about it on Friday.
On Monday, city staff met with procurement and legal services wherein HRM apparently learned that ACOA has filed a notice of intended action against Intelivote.
The federal body has invested $1.82 million into Intelivote Systems Inc. since 2004, offering $50,000 in assistance as late as last year. Nova Scotia currently has $2.8 million invested in Intelivote Systems through NSBI, which last handed out $800,000 in 2012.
The Dartmouth company was recently awarded a multi-year, $495,402 standing offer from HRM to handle electronic and telephone voting in municipal and school board elections through to 2020.
Mellett recommended council defer any decisions on electronic and telephone voting—which would have activated that standing offer—“so we can make sure the best interests of the municipality are protected.”
According to Intelivote owner and founder Dean Smith, the company has laid-off employees in the last several months and they’re looking for an exit strategy.
“I guess what we’re doing is looking to actually sell the company,” Smith says. “There’s some bidding going on between two individuals.”
The electronic voting business, he admits, has become a lot more competitive. Smith says there are now five Canadian companies offering the same service as his own.
“The market is so competitive now. I guess we have to prepare for the inevitable.”
Smith says they’ve been working on selling the company for a year-and-a-half, though states Intelivote could continue for the next two years with no change in their operations.
The company is expecting to have a “really good” year in 2016, according to Smith. He says the multi-year HRM tender could also be an attractive value for potential buyers.
Meanwhile, a former Intelivote employee who wished to remain nameless says the company has numerous outstanding debts to suppliers.
“They’ve been perpetually out of money for many years,” he says.
Smith believes a potential sale wouldn’t change much in terms of operations.
“It’s going to be the same people, the same system. The interested party that buys the company, it’d be crazy to do anything but carry on with the system.”
But he does admit an asset sale is possible, which wouldn't include NSBI’s investment (held in common shares) and leave Nova Scotia with little to show for its $2.8 million.
“It depends on which form the sale takes, obviously,” Smith says. “Those are options.”
The company has restructured its board several times over the last few years, with now only Smith and Janet Hood listed as directors. Peter MacNeil, an NSBI board representative, stepped down as an Intelivote director back in June.
Mel Rusinak, spokesperson for NSBI, writes in an email that the province continues to manage its investment in the company, “but no longer does so through holding a board position.”
Intelivote has previously handled local municipal and union elections, along with several elections in Ontario municipalities and the United Kingdom. It bills itself as the “most experienced company in the world conducting eVoting for municipal elections.”
That experience is part of why HRM awarded Intelivote the nearly-$500,000 standing offer, despite coming in with a higher bid than their competitor. Intelivote’s $495,402 bid was roughly $100,000 more than the bid made by runner-up Sytl (Secure Electronic Voting). Staff believed Intelivote’s additional services and experience brought the cost-differential down closer to $63,800.
The municipality's tender required no proof of financial stability or any kind of bid surity that the company would be in business in six months, let alone five years.
“Intelivote is not a publicly traded company so they aren’t obligated (nor would we expect them) to provide audited financial statements,” HRM spokesperson Brendan Elliott wrote to The Coast in an email. “I should also point out that having financial statements would not add anything to the evaluation process.”
That evaluation, Elliott writes, is based on past experience and references, “not on rumour or speculation about the future.” Intelivote, he says, came with excellent references, including one from the Federation of Canadian Municipalities.
Elliott also states the standard RFP has “extensive provisions to protect the interest of the municipality.”
The municipality can ask for a bid surity on tenders; either worth 50 percent on tenders below $500,000 or 100 percent on tenders above. It’s an insurance bond, to use so the work can be completed should the original company involved do a poor job or go out of business during the contract.
In this case, as Intelivote was only given a standing offer dependent on what council was to decide today, a bid surity wasn’t activated. It may very well be in the future, given that the municipality is now aware of the company’s financial state.
Dean Smith won’t say who specifically Intelivote has had discussions with in selling the company, “as it is confidential.” He only states in an email that over the past 18 months they’ve been approached by or talked to seven different election-services companies.
Other companies who bid on HRM’s tender include Dominion Voting Services, Everyone Counts and Scytl.
Ironically, if Sytle does purchase Intelivote then HRM could end up paying a much higher cost for their second choice.
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