Ole Miss awards no-bid contract in spite of outside interest

• Ole Miss’s most recent contract with Nike was from July 1, 2007 to June 30, 2012
  
  
• This contract prohibited Ole Miss from negotiating with any other vendors until January 1, 2012, at which time Ole Miss could take outside bids
  
  
• Ole Miss, without the input of an Athletic Director, and with no deadlines, renewed with Nike on December 15, 2011, fifteen days before Ole Miss could take outside bids
  
  
• As a result, Ole Miss is bound for seven more years, and the next time Ole Miss can take outside bids is now January 1, 2019

The response given by the University for this inexplicable choice was given by a non-athletic department official who said, “The athletics department researched the marketplace, and it was clear that Nike gives us a competitive advantage.” A “competitive advantage”?

There are four or five major vendors in athletic apparel, and various successful athletic programs across the nation use each of these vendors.  Surely no one would claim that a team will perform better or worse based on the clothes its players are wearing.  The real “competitive advantage” comes in how much revenue the organization receives in return for exclusively wearing one vendor’s brand.

However, Ole Miss has unilaterally eliminated the opportunity to derive the financial benefits from this highly competitive market and simply awarded Nike a no-bid contract saying, “Well, this is good enough for Ole Miss.”

Why?

The Last Stand of the Old Guard

While the University is now going to greater lengths to distance itself from Pete Boone, this latest contract was executed by Boone’s Assistant John Hartwell, just as the previous contract was executed when Boone was in full power.  Notably, the University Press Release stated, “University Vice Chancellor for Administration and Finance Larry Sparks formally signed the agreement,” omitting the fact that Boone’s Assistant’s name was, in fact, the top name on the agreement.

Regardless of who our next AD is, imagine the message this sends him.  “Thanks for coming, during Pete’s lame duck tenure, we tied you into some major things for almost a decade.  Hope you like that!”  There is no reason to make multi-million dollar, seven-year agreements with a lame duck AD on the verge of being replaced by our new leader.  But, the old guard will not go down easily.

Secondly, Nike’s director of NCAA marketing is an Ole Miss graduate named Kit Morris.  Morris played baseball at Ole Miss and graduated in 1973, a year after Boone played football and graduated from Ole Miss.  Nike is famous for the perks it gives to potential contractees, and Pete Boone has generously partaken of the goods.

In early 2010, Morris arranged for Boone to take an all-expenses-paid ten day tour of China.  Here’s an excerpt from Boone’s “work trip” written by Boone himself:

“The director of Collegiate Marketing, Kit Morris, had indeed called to invite me to take a tour of the Asian manufacturing facilities Nike used to produce their product.  I was told it would be an experience of a lifetime.  It was. … The Nike Vietnamese delegation invited us on a Saigon River boat tour dinner.  Yes, they still call the big river Saigon even though there is no Saigon City to pass by.  Such is war.  The victors get to call the shots.  Be that as it may, the dinner boat event was enjoyable.  The boat was small and only held one dinner party at a time.

Flying into the Beijing airport, which is about the size of Oxford, offered me the opportunity to see a little of the land usage.  Needless to say it was all about farming, with communities arranged every 20 miles or so.  They all had the same look from 10,000 feet high. … We headed directly to the Great Wall. … My expectations of the Great Wall of China were pretty high.  We have all seen National Geographic pictures, etc., depicting its beauty, size and magnificence.  It was everything I had imagined and more, because I was actually standing there looking over the vastness of the mountain ranges and valleys that wall protected.  It took over 2,000 years and six dynasties to erect. Over one million workers were needed to complete the task, and in fact it was never fully completed. … Fur-lined, green hats with a red star seemed to be a hot commodity as were local trinkets, postcards and pictures.  Capitalism at its best (or worst).”

I think it is safe to say that a ten day tour of Asia is more than is needed to view labor standards at Nike factories.  However, it certainly did sound, as Boone said it, like “an experience of a lifetime.”  It is impossible to separate these massive gifts from Nike to our AD and the fact that we subsequently awarded Nike a repeat, no-bid contract despite other vendors aggressively desiring to bid for our contract.

More University Double-Talk

In response to this brewing controversy, rebelgrove.com's Chase Parham asked Ole Miss's MIchael Thompson, point blank, "Were there talks or bids with other apparel companies (Adidas, Under Armour) before renewing this contract? If not, why not?"  Notice that Thompson cannot answer this question directly.

Thompson attempted to rationalize a no-bid deal, but that's a tough task.  Thompson said, " It's very common in agreements like this to have a 'Rights of First Dealing' followed by a 'Rights of First Refusal.' To put it simply: there is considerable risk in letting the offer expire and begin negotiating.  If another offer (higher OR LOWER) is presented, Nike has the right to match it.  That gives 'money left on the table' a whole new meaning.  Especially given the fact that research of other agreements showed our Nike offer was solid and fair."

That answers nothing.  Obviously, we are aware that Nike made an offer in 2011, prior to Ole Miss being contractually allowed to take outside bids.  Thompson is claiming that it was in the best interest of Ole Miss to accept that bid, without even considering what anyone else had to offer, for fear of that bid being rescinded by Nike.  That is an untenable explanation.

Accepting an offer prior to even considering the competitions' offers is totally contrary to even the most basic business practices, and it does nothing to justify this bad deal.  Nike made an offer; we blindly accepted.  This offer included zero cash compensation to the University.  Also, given the knowledge that other vendors were aggressively pursuing Ole Miss, this response is even more disingenuous.  Further, Thompson claims that "research of other agreements" made them feel Nike's first offer was fair.  How about researching offers made to Ole Miss?  This path is glaringly illogical.

Concerned Alumni Tried to Avert This

We have received correspondence sent by concerned alumni who emailed Chancellor Dan Jones and Pete Boone regarding this situation as early as last summer.  One letter asked why Ole Miss would not consider offers from other vendors, and, in response, Dan Jones defended Boone saying:

“I have looked into the matter, and your criticism of Mr. Boone is based upon incomplete information.  As with most sponsorship agreements, the current Nike agreement includes an exclusive dealing provision that prohibits us from negotiating with competitors until January 1, 2012.”  Dan Jones, August 8, 2011

That sounds like a reasonable response.  The concerned alum says, “Why aren’t y’all taking other bids for our contracts?”  Chancellor Jones allays the alum’s concerns by telling him that Ole Miss wouldn’t consider other offers until January 1, 2012.  That would remain a good response and would lead one to believe that Jones has the best of intentions, but, contrary to Jones’s response, Ole Miss subsequently renewed the Nike contract before even entering the open negotiation period.

Click here to view the timeline:

Further, this same alum sent us correspondence that he sent to Chancellor Jones on December 9, 2011 in which he said, “If the Nike contract has not been renewed, I presume that Ole Miss will not renew prior to the open negotiation period so as to benefit from the competition between vendors.”

As we now know, Ole Miss renewed its contract with Nike six days later.  It only produced the Nike contracts, including the no-bid renewed contract on January 6, 2012, almost a month after the alum reiterated his concerns.

Even more telling, Ole Miss’s first public admission to this no-bid Nike contract, its press release, came not on the day of the signing of the Nike deal, but instead came on the very same day that University Attorney Lee Tyner first produced the documents requested by the concerned alum in his open records request.  One could easily deduce  that, but for this alum’s diligent efforts, the University had no intention of revealing the fact that it had awarded this no-bid contract to Nike.

If Ole Miss is only announcing seven-year, multi-million dollar contracts which affect all sports in response to open records requests, not as an announcement of the deal itself, you can throw the word “transparency” right out the window.  Our leaders can claim that they are committed to transparency all they want, but their actions prove otherwise.

The University press release for this Nike renewal attributed the decision to the Athletics Committee and Vice Chancellor for Finance Larry Sparks.  We have spoken to numerous members of the Athletics Committee, and it is well known to be an advisory committee that often serves only to rubber stamp Athletic Department decisions.  Thus, is the University claiming that this decision was made by the University Vice Chancellor for Administration and Finance?  If so, why would a non-athletic personnel member be negotiating multi-year, multi-million dollar athletic apparel contracts?  The reality is that the University press release left out an important fact.

As stated above, the top signature on the Nike renewal was that of Boone’s assistant, John Hartwell.  This is the exact same person who signed the 2007 Nike contract when Boone was openly in power. 

Click below to view the signature lines from the 2007 contract and the new contract:

At least when Boone was publicly running things, the public understood who was guiding the ship.  Now, however, the University has retained Boone as Athletic Director but is cloaking his leadership (or lack thereof?) behind layers of bureaucracy and press releases containing partial information.

In August, Chancellor Jones responded to a concerned alum by saying, “I have looked into the matter, and your criticism of Mr. Boone is based upon incomplete information.”  Now, we can say, “We have looked into the matter, the University’s official statement on the Nike contract is based upon incomplete information.”  This is not good.

Under this intentionally obfuscated power structure, Ole Miss has gone from little accountability to impossible accountability.  If we are going to make such enormous and questionable decisions, someone should at least say, “Yes, that was my decision.”  Public governance and its intended transparency is the only vehicle by which taxpayers know who should receive the credit or the blame for poor decisions.

ü  Who decided to renew the Nike contract prior to the open negotiation period?

ü  Who decided it was in Ole Miss’s best interest to take no other bids?

ü  Who decided to renew this contract immediately prior to a new AD?

ü  Who negotiated the final terms of this deal and decided they were good for Ole Miss?

The public doesn’t and can’t know, and that is by design at Ole Miss.  This has gone from lack of transparency to intentional muddying.  This must stop, and someone or some group should be held accountable.  At least admit it!

While the public has put much blame on Pete Boone, and rightfully so, the buck stops with Chancellor Jones, and he either knew of and approved this poor decision or he does not have a grasp on the goings on in athletics.  In common terms, Dr. Jones either knew, or he should have known.  There are no other excuses.

Ole Miss is desperately in need of new strong leadership in athletics, and this change will go beyond just Pete Boone.  We look forward to our new AD bringing in his own staff who will be just as surprised at this culture as we are.  It’s time to cut the fat.

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This is not about the style of uniforms Ole Miss will wear.  This is not about which brand you like.  This is not about obscure facts and assumptions.  If Ole Miss looked at all the options, took competing offers and chose Nike, great.  However, that did not happen.

This is about facts laid out in contracts, and this is about the University, its culture of secrecy, and the fact that our leaders continue to make decisions that do not move Ole Miss forward.

Hopefully, our new Athletic Director will take back the reigns and lead Ole Miss out of the old, and away from the controlling old guard, and into the future.

We are looking forward to this leader.  He has his work cut out for him.

UPDATES
1. Although the post above addresses the University's offered rationalization, some clarification on the law appears to be necessary.

"If another company bid lower than what Nike offered then Nike only has to match the lower amount by law" - This comment displays a glaring misunderstanding of contracts.  Nike has no obligation at any time to offer Ole Miss anything before, after, or during bids.  The University has claimed that Nike made an offer and said, "You have to take this without taking any other bids."  The logical answer to that, especially with numerous aggressive suitors, is to say, "We will take bids and then choose the top bidder."  More offers drives prices up, not down, as the University oddly has tried to state.  The public is not that dumb.  Trying to defend a no-bid contract award is a losing game.

2. Some have said, "If we took other bids, Nike may have rescinded their bid."  Take a second and think.  If Ole Miss opened negotiations with, say, Reebok, do you see any reason we would have an obligation to tell Nike, "Hey, guys, we are also talking to Reebok."  Of course not.  Obviously we wouldn't share negotiations between vendors, so, obviously, once January 1 rolled around, we could test the waters safely.  Nike would have no way, reason, or even ethical right to know how other negotiations were going.  These are nonsensical arguments from a business perspective.  Now, if we liked how things were going with another company, we could ask them to their offer in writing.  Once they did, our existing contract would have required us to share that bid with Nike; however, we obviously would only ask for a formal bid if it were higher than Nike's offer.  Once Nike saw the higher bid, they could either beat it, or we would have the option to go with the other vendor.  This would have produced more options and, importantly, more revenue.